In last week’s blog we looked at higher risk clients and PEPs in particular, who might present a higher ML risk to the accountancy sector.
One of the most reliable sources to help identify such risk, especially in the case of new clients is the Accountancy AML Supervisors Group Risk Outlook (updated July 2024) which outlines some circumstances where there might be higher risk of money laundering or terrorist financing in the accountancy sector.
This week our focus is on other client sectors that might present particular risks over and above other clients. According to the AASG, these include:
- arms dealers;
- property transactions with unclear source of funds (including remote sales);
- transport/logistics businesses;
- legal services;
- art market participants;
- financial services; and the
- luxury goods market.
Sectors such as the arms trade can be linked with corruption, money laundering or terrorism. Large property transactions, where the source of funds is unclear, have also been linked to laundering the proceeds of crime.
There is existing HMRC guidance on Understanding risks and taking action for estate agency and letting agency businesses provides further red flag indicators. Firms should also ensure that where overseas entities own UK property, the beneficial owner must be properly recorded on the Overseas Entities Register and assess the risk that a client may try to transfer ownership to avoid registering their beneficial ownership.
There has been a rise in cases reported in the press where transport and logistics businesses have been involved in modern slavery and human trafficking cases. These businesses have the potential to be involved in smuggling (e.g. alcohol, fuel, tobacco etc.).
Legal services, art market participants and financial services are ranked as being at higher risk of money laundering, along with luxury goods markets (high value goods sold for, cash exceeding €10,000 in a single or linked series of financial transactions) which can provide a route to transfer value or assets from sanctioned individuals to avoid international sanctions.
Firms should employ sufficient professional scepticism when performing services or analysing the books and records of clients in the above 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:
- Our latest CPD Webinar on The Main Changes in Irish GAAP (recorded July 2024)
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion you receive a CPD certificate for attendance in your inbox.
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
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.
