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Emerging AML Risks for the Accountancy Sector

Emerging AML Risks for the Accountancy Sector

The Chartered Accountants Ireland issued their AML Supervision Report for 2023/24 recently. The Institute supervises almost 1,700 firms, of which 72% (1,222 firms) are in the RoI.

It is apparent from the report that some of the future emerging risks arising from the 2023/24 AML supervision cycle include:

  • Crypto currency – a very limited number of firms have exposure to this risk;
  • The increasing prevalence of artificial intelligence – there is so much that is unknown about how AI may be used to facilitate money laundering;
  • Money laundering or investment scams associated with green finance;
  • The continued potential for post-Covid fraud such as that arising from the Restart/Bounce Back loans and Income Support Schemes continues to exist, and it remains a continuing risk especially for the insolvency profession;
  • Issues arising from the Ukraine crisis also remain in focus – although media interest in the ongoing war has waned, there is still the concern of displacement activity relating to sanctioned individuals and entities.

The Report identifies various risk factors to which accountancy firms may be exposed, including but not limited to the following:

  • Higher risk services;
  • Higher risk clients;
  • Exposure to high-risk jurisdictions;
  • Complex firm structures; and
  • Poor regulatory history.

There will be more extracts from this interesting report in the coming weeks.

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.

Rate of DN2 and NCN Notices Falls

Rate of DN2 and NCN Notices Falls

As we saw in last week’s blog almost 42,000 companies (14%) and 239 Societies (25%) were non-compliant with their RBO registration requirements at the end of 2023 – the latest date reported on by the Registrar of Beneficial Ownership.

This position is in stark contrast to the numbers of Discrepancy and Non-Compliance Notices (see more below) that are being filed. One would expect such notices to be increasing when the rate of non-compliance is so high, but in fact the rate of these reports fell by up to 67% between 2022 and 2023! This may be only a temporary phenomenon (see more below), but penalties may follow unless the situation improves.

The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 (the Act) requires ‘designated persons’ (defined in Regulation 20(3)(b) of SI 110 of 2019) such as accountants, law firms, banks and certain other service providers to inspect the RBO register as part of their Customer Due Diligence (CDD) processes before establishing a business relationship with a customer, and to report to the Registrar any:

    • discrepancies and
  • non-compliance.

There are also reporting requirements for what are called ‘relevant persons’ (defined in Regulation 26(1) of SI 110 of 2019) (i.e. regulatory authorities and the Revenue Commissioners, Criminal Assets Bureau and Garda reporting using the DN1 form) but it’s not the purpose of this blog to deal with these.

A ‘discrepancy’ (as defined in legislation) is where:

‘A designated person carrying out customer due diligence on an entity, or otherwise, forms the opinion that there is a discrepancy between the information in the central register (RBO) and the information the entity must hold in its internal register of beneficial ownership, then the designated person shall deliver, in a timely manner, to the Registrar notice of that opinion, specifying the particulars as respects which the foregoing discrepancy exists.’

Non-compliance’ (as defined in legislation) is:

‘An official notification to the Registrar stating that, having searched in the RBO Online Portal for the beneficial ownership details of a relevant entity, the person searching has found no beneficial ownership details in the RBO for the particular entity, and is reporting to the Registrar that the entity in question appears to have failed to comply with its obligations under Regulations 20 and 21 of SI 110/2019

Notices filed in 2023 v 2022

  2023 2022 % change
 

Discrepancy Notices (DN 2) filed

 

2,168

 

3,420

 

-37%

 

Non-Compliance Notices (NCN) filed

 

787

 

2,387

 

-67%

 

Potential Cause of the Drop in Reporting

The drop in reporting in both the DN2 and the NCN notices between 2023 and 2022 may be something to do with the lack of access that accountants had to the RBO register after the ECJ decision on November 2022. This problem has since been resolved so one would expect the rate of DN2 and NCN notices to increase in 2024/2025.

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.

Non-Compliance with the RBO

Non-Compliance with the RBO

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.

Indictable Offences Reported to the CEA

Indictable Offences Reported to the CEA

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.

Scam Targets ACCA Members

Scam Targets ACCA Members

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.

  1. The e-mail “from” field is not an ACCA address.
  2. The physical address in the message for ACCA is not a real address. Queen Street is in Glasgow and not in Dublin.
  3. The named ACCA staff person is not a real ACCA employee; and
  4. 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:

Please go to our website for: