by John McCarthy Consulting Ltd. | Nov 5, 2024 | Blog, News
Since Statutory Instrument SI 110 came into effect in July 2019, certain entities mainly companies and Industrial & Provident Societies) are obliged to register their beneficial ownership details with the Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (the RBO).
Since April 2021 a further leg of this AML legislation was enacted under the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 (the Act). The Act requires accountants (among others) to inspect the RBO as part of their Customer Due Diligence (CDD) before establishing a business relationship with a customer, and to report any:
- discrepancies (as defined) and
- non-compliance (as separately defined) to the Registrar.
Some of the statistics from the RBO’s latest Annual Report for 2023 are shown below.
Companies
These statistics indicate that Companies’ compliance rate with this legislation has improved by 1% from 85% in 2022 to 86% in 2023, still leaving almost 42,000 companies (14%) that are not fully compliant with their RBO obligations by 31 December 2023.
| |
31/12/2023 |
31/12/2022 |
| Live companies required to file with the RBO |
299,496 |
280,721 |
| Companies which had registered beneficial owners with RBO |
258,241 |
239,444 |
| Compliance rate in % terms |
86% |
85% |
Societies
Likewise Industrial &Provident Societies also improved their compliance rate by 1% from 74% in 2022 to 75% in 2023, still leaving 239 societies (or 25%) that are not fully compliant with their RBO obligations at the end of 2023.
| |
31/12/2023 |
31/12/2022 |
| Live societies required to file with the RBO |
941 |
949 |
| Societies which had registered beneficial owners with RBO |
702 |
698 |
| Compliance rate in % terms |
75% |
74% |
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Oct 29, 2024 | Blog, News
The 2023 annual report of the Corporate Enforcement Authority (CEA at www.cea.gov.ie) was published in June 2024, covering the 18 month period from the commencement of the office in July 2022 until 31 December 2023.
During 2022/2023 the CEA received 239 indictable offence reports from companies’ auditors in Republic of Ireland. The nature of the indictable offence reports received by the CEA was quite varied as follows:
- Directors loan breach
- Unqualified auditor
- Inadequate accounting records
- Group accounting standards section 294
- Accounting standards section 291
- False statements in returns
- Approval of financial statements.
Breaches of Section 291 of the Companies Act 2014 had the biggest single concentration of reports which were to do with accounting standards breaches in relation to the preparation and presentation of financial statements in accordance with Irish GAAP and company law.
Indictable offence reports were filed by auditors from the following types of firms:
| Firm |
Number |
% |
| Big 4 |
189 |
79 |
| Mid-Tier |
17 |
7 |
| Smaller firms |
33 |
14 |
| Total |
239 |
100 |
The CEA commented in its report that (our bold text inserted) ‘one significant contributory factor in the context of auditor reporting is a change of auditor. Specifically, it is not unusual, where there has been a change in statutory auditor for a new auditor, having taken a different interpretation of an accounting treatment to their predecessor, to take the view that the submission of a report is necessary’.
During 2022/2023, the sectors with the greatest volume of reports were:
- the aircraft leasing sector, followed by
- the investment and technology sectors
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Oct 22, 2024 | Blog, News
As first reported by Business & Accountancy Daily, scammers are targeting ACCA members in the UK and Ireland, asking members for immediate payment of membership fees in order to renew their practicing certificates and licenses.
The scammers are taking advantage of a very busy period for accountants, especially in Ireland, when more of their concentration is on their clients’ Income Tax and company CRO returns.
Aidan Clifford Advisory Services Manager Ireland at ACCA Ireland said “this one was poorly executed, but it serves to warn people that the next one will be executed better and to be wary. It was circulated in the UK first and then in the Republic of Ireland.
As Aidan said, “there were several give-away signs in the message that it was a fake.
- The e-mail “from” field is not an ACCA address.
- The physical address in the message for ACCA is not a real address. Queen Street is in Glasgow and not in Dublin.
- The named ACCA staff person is not a real ACCA employee; and
- the ACCA logo was wrong.”
“Accountants in public practice will always have public contact information available and will therefore be subject to more frequent phishing. They just need to remain more vigilant”, he said.
We would advise members of the professional accountancy and tax bodies, Chartered Accountants Ireland and the Irish Tax Institute, to be extra vigilant for this and similar scams in the run-up to the New Year when many membership subscriptions fall due for renewal.
For additional guidance, technical documents and CPD on money laundering and other accounting/audit related topics, please go to our website for:
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by John McCarthy Consulting Ltd. | Oct 1, 2024 | Blog, News
If you would like to expand your AML knowledge with relevant, interesting and up to date views on the world of money laundering and its prevention, you could do worse than subscribe to the podcast hosted by Graham Barrow and his colleague Ray Blake. It’s called the ‘Dark Money Files’.
The latest episode (from 10 September 2024) deals with the potential problems caused by outsourcing any of your AML obligations, as highlighted in a recent publication by the Australian AML regulator, Austrac. They point out that outsourcing can trigger at least two types of risk:
- MLTF (money laundering and terrorist) risk – i.e. the risk that outsourcing could create vulnerabilities that criminals could exploit and
- AMLCTF Compliance Risk – i.e. the risk that your firm fails, through the outsourcing, to meet its regulatory obligations.
Also Austrac recommends that firms carry out due diligence on the outsourcing provider and suggests there may be data privacy laws that may apply.
For additional guidance, technical documents and CPD on money laundering and other accounting/audit related topics, please go to our website for:
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by John McCarthy Consulting Ltd. | Sep 12, 2024 | Blog, News
As we saw in last week’s blog money laundering is a sophisticated process where illicit funds are made to seem legal, concealing their criminal origin to infiltrate the legitimate financial system and avoid detection.
In this third and final blog in a series of three, we explore the fundamental stages of money laundering, which are:
- Placement
- Layering
- Integration
The three stages—placement, layering, and integration—can overlap, occur simultaneously, or occur separately, making detection difficult.
The last stage is known as ‘integration’, and this is where the illicit funds are introduced back into the financial system as ‘Cleaned’ Money.
Integration: Reintroducing the ‘Cleaned’ Money into the Economy
- Final Stage Explained
- In the integration phase, the laundered money is reintroduced into the economy, appearing as legitimate business revenue.
- Integration Techniques
- Property Dealing: Buying and selling property to integrate funds into the legitimate property market.
- Front Companies: Businesses that mix illicit money with legitimate sales and services – often these are cash businesses.
- Investments: Illicit funds are invested in legitimate business ventures and financial markets.
- The Role of Legal and Financial Advisors
- Professionals in the accounting, legal and financial sectors (among others) play a critical role in either enabling or preventing the integration of laundered money and must remain alert to the possibility that by their inaction they are helping perpetrate such criminality.
The maxim prison sentence in Ireland at the moment for committing money laundering offence is 14 years.
Combating Money Laundering
- Global Efforts and Regulations
- International organizations like the Financial Action Task Force establish standards and promote the effective implementation of legal, regulatory, and operational measures across the world.
- Technological Advances in AML
- The use of AI and machine learning (especially in the banking sector) helps in detecting patterns consistent with money laundering activities, given the much higher volume of transactions in the financial services sector.
- Public and Private Sector Cooperation
- Enhanced collaboration between governments, financial institutions, and the accountancy bodies, along with other stakeholders is essential in the fight against money laundering.
The Importance of Awareness and Training – the Implementing thorough training programs for all employees in your firm will help them recognize and report suspicious activities.
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by John McCarthy Consulting Ltd. | Sep 12, 2024 | Blog, News
As we saw in last week’s blog money laundering (ML) is a sophisticated process where illicit funds are made to seem legal, concealing their criminal origin to infiltrate the legitimate financial system and avoid detection.
In this second blog in a series of three, we explore the fundamental stages of ML, which are:
- Placement
- Layering
- Integration
The three stages—placement, layering, and integration—can overlap, occur simultaneously, or separately, making detection difficult.
The middle stage is known as ‘layering’, and this is where the so-called gatekeepers (accountants, solicitors, estate agents, trust and company service providers, to name but some) can become ensnared in criminal efforts that aim to disguise and distance the illicit funds from their original criminal sources.
Layering: Disguising the Trail
- The Complexity of Layering
- Layering involves creating a complex series of financial transactions to obfuscate the audit trail and sever the link with the original crime.
- Techniques Employed – among the varied techniques used in this stage are the use of:
- Shell Companies: Establishing companies and similar entities that act as a front to hold and move illegitimate funds legally. Accountants can be involved in approving such entities’ activities by signing off on the audited and unaudited financial statements and tax returns of such entities.
- Electronic Transfers: Frequently moving funds between accounts across international borders.
- Investment in High-Value Assets: Buying luxury items like Rolex watches, super expensive handbags, yachts, jewellery, antiques or real estate to help alter the form of the money.
- Use of a legitimate business to act as a front: Legitimate cash businesses (like coffee shops, nail salons, cash for gold shops, mobile technology, or corner stores etc.), may be used to act as a ‘funnel’ for illegitimate cash (e.g. from drug sales) that is mixed in with genuine bank lodgements from the business so as not to draw unwarranted attention to the real size and nature of the business. Tell-tale red flags will include a lack of attention to important details by the proprietors such as:
- Not having up to date business licences
- Lack of staff training
- Not seriously promoting the business
- Being disinterested about staff theft or customer shoplifting.
The Importance of Awareness and Training
- Educational Training Programs
- Implementing thorough training programs for all accounting firm employees at all levels to show them how to recognise and report suspicious activities is essential to preventing money laundering.
- This training must include even back-office staff who may never meet clients, but who may see evidence of unusual patterns in the business through the transactions they process.
- The penalties for not carrying out (and documenting) such training regularly include a 5-year prison sentence.
- Staff Awareness Campaigns
- Increasing awareness about the ethics and the wider implications of ML (including the negative societal side-effects of ML such as human trafficking) among staff generally, can be most helpful.
- In the end your firm’s reputation is what’s at stake, so keeping staff updated is one of the most important steps to secure that reputation.
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