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.
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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.