Thanks Mum! – Careless Due Diligence

Thanks Mum! – Careless Due Diligence

 

The Financial Times reported in late February 2023 on a classic example of CDD (Client Due Diligence) gone wrong, or more likely ‘Careless Due Diligence’.

As part of the required anti-money laundering (AML) checks, before taking their new client in 2021, the London Law firm, Discreet Law, requested identification documents from Yevgeny Prigozhin, who is the founder of the Wagner mercenary group. His name is on the sanctions lists of individuals accused of human rights abuses since 2018.

In response, Mr Prigozhin’s Russian lawyers forwarded a copy of his passport and a gas bill in the name of his then 81 year old mother, Violetta, for an address in St Petersburg, Russia.

Apparently the law firm were happy with the explanation that the bill was issued in the name of the claimant’s mother (Violetta Prigozhin) who actually lives at the client’s residential address and pays the bills. Her name has been added to the list of sanctioned individuals for her support of her mercenary son.

In March 2022, one month after Russia’s full-scale invasion of Ukraine, the firm applied to stop representing him.

The moral of the story is that each firm when carrying out CDD must ‘take reasonable steps’ as set out in Section 33 (5) of the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2021which includes verifying that the utility bill is correctly in the name of the individual concerned and that the address is their normal residential address.

PS – the above image is a stock photo and not known to resemble Mrs. Prigozhina.

Have you sourced all the Supplier Quality Statements you need? In case you ask, here is the one from John McCarthy Consulting Ltd.

ISQM Toolkit training

The ISQM TOOLKIT 2022 is self-explanatory and is available to purchase here.

This is the first time for adoption of this new standard and the various professional bodies have already commenced carrying out spot checks on firms and their implementation of this standard.

We are running a series of one to one private Zoom sessions to explain how it all works in a structured 1hour CPD session on Zoom with a free recording.

In addition, there is a half-day follow-up where we go through the actual Toolkit itself in a 4-hour session to document your risks and responses. We can also proof your final toolkit with suggestions for improvements. Contact john@jmcc.ie for more details.

  • See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
  • To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
The Latest Sanctions

The Latest Sanctions

As of 4 June 2022, (under EU sanctions) it is prohibited to provide, directly or indirectly, accounting, auditing, including statutory audit, bookkeeping and tax consulting services, as well as business and management consulting or public relations services (Article 5n of Council Regulation 833/2014) to the Russian government, as well as to legal persons such as companies and other entities or bodies established in Russia.

Trying to assess the implications of the increasingly complex and varied sanctions regimes imposed on Russia (and on certain other countries/individuals and entities around the world) is already a huge headache. Some would say it’s not worth the effort. The compliance cost alone, plus the potential for getting the risk assessment wrong, versus the benefit of taking on a ‘risky’ client is too high.

It’s highly recommended that each firm carry out a complete sweep of all existing clients including those clients’ suppliers/customers (not just with the firm’s new clients) to verify whether there are any connections with Russia or with individuals/entities resident there.

Commencing in March 2022 the Big 4 accounting firms announced their withdrawal from Russia and with the war with Ukraine passing its first anniversary, it doesn’t look like this conflict will be resolved any time soon.

For quick access to the main Sanctions lists, please click on the following links:

Have you sourced all the Supplier Quality Statements you need? In case you ask, here is the one from John McCarthy Consulting Ltd

ISQM Toolkit training

The ISQM TOOLKIT 2022 is self-explanatory and is available to purchase here.

This is the first time for adoption of this new standard and the various professional bodies have already commenced carrying out spot checks on firms and their implementation of this standard.

We are running a series of one to one private Zoom sessions to explain how it all works in a structured 1hour CPD session on Zoom with a free recording.

In addition, there is a half-day follow-up where we go through the actual Toolkit itself in a 4-hour session to document your risks and responses. We can also proof your final toolkit with suggestions for improvements. Contact john@jmcc.ie for more details.

  • See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
  • To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
CCAB Joint Statement on Sanctions

CCAB Joint Statement on Sanctions

Following the recent CCAB-I Joint Statement to the Profession about sanctions, accountants must carry out checks on their clients’ potential exposure to sanctions, as part of AML processes and procedures. An important part of this process will be to check whether the accountant holds or controls any funds/economic resources for people or institutions affected by the sanctions.

The CCAB-I is the umbrella group for the accountancy bodies in Ireland and its latest pronouncement (only 5 pages long) emphasises that that these measures are directly relevant to both members in business and practice and the public sector as well as the charity and not for profit sectors. The Guidance contains links to the relevant sanctions lists and websites where further guidance is available.

Many of the sanctions will affect PEPs (Politically Exposed Persons) and people closely connected to them (including family members and business associates). Accountants need to have appropriate training and AML procedures for staff so that prior to approval of the business relationship they obtain senior management sign-off and then take sufficient measures to establish the source of wealth and funds; and perform enhanced ongoing monitoring (called Enhanced Due Diligence of EDD) of the relationship.

If funds connected to sanctioned institutions or individuals are held (e.g. in a clients’ money account), accountants are legally obliged to freeze such funds and any funds owned/controlled by such persons and must refrain from dealing with these assets or making them available (directly or indirectly) to persons/institutions on the sanctions list.

There is also an increased potential risk of money laundering among every client on an accountants’ client base, as individuals and businesses (directly or indirectly connected to such sanctions) try to evade the sanctions regimes and perhaps disperse funds/assets to other persons/institutions not currently on the sanction lists.

Another important matter in the Guidance is the potential impact the sanctions may have on the operation of exclusion clauses (if any) in professional indemnity arrangements. CCAB-I recommends that accountants check the current position with their providers.

The Joint Statement is available here.

The latest EU Sanctions list as of 15 March 202 is available here. Because this is a fast evolving situation, readers are advised to check the websites of your appropriate professional body and the European Union for further sanctions updates.

We have an up to date Anti-Money Laundering Procedures Manual (September 2021) – View the Table of Contents click here.

To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.

For our latest Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control) click here. View the Table of Contents here.