AML – The ever-growing monster

Last week I received an email from my Institute which contained, among other things, an anti-money laundering (AML) update, described as the “essentials” needed to inform one’s AML risk assessment, policies and procedures.

Looking for a quick update on the subject, I drilled down to the guidance notes issued only to find that these ran to a staggering 73 pages! Perhaps in another life I might have the time to read such a tome but I suspect, like most other accountants, we have too much else to do with our days (and nights), and cannot afford the luxury of ploughing through such texts.

It also occurred to me that AML has become a monster that keeps growing, showing no signs of stopping, This begs a few supplementary questions. Are we placing too much of a burden on sole practitioners and small accounting firms to stop money laundering? And should governing bodies start tailoring their advice to individual constituents, and stop assuming everybody works for a big firm which can afford compliance officers and extensive risk assessment procedures?

Back when I trained and first qualified as an accountant, money laundering was rarely discussed, if ever, more the stuff of movie scripts than an everyday concern. Perhaps it can be argued that controls back then were too lax and needed to be tightened-up, but, at the same time, is the world really more corrupt and dangerous than it was 30 years ago?

Seen from the prism of today possibly, but, if the lens is slightly adjusted, it can be argued not. The threat of terrorism obviously dominates many political and news agendas now, but the 7os and 80s had their own share of terrorist activity, both in the Middle East and elsewhere – Northern Ireland, Spain and South America to name but a few.

Then there is the so-called war on drugs which is often cited as the starting point for money laundering regulation, as lawmakers attempted to seize the proceeds of crime. But illegal smuggling of contraband or banned substances has been going on from time immemorial, be it tobacco, alcohol, tea or even salt. There is nothing new under the sun.

What has changed is the attitude of governments and legislators to such matters. Gone is the presumption of innocence which used to form the basis of the legal systems of most developed countries. Now accountants, lawyers and other professionals are required to assume clients are guilty unless proved otherwise. In other words, until proper due diligence is carried out, a new – or even existing client – should be regarded with suspicion.

Furthermore, professionals are now required to report any suspicious activity or face criminal and regulatory sanctions. In  the UK, for example, the Proceeds of Crime Act (POCA) legally obliges accountants, and other professionals, to know their clients and submit a suspicious activity report (SAR) to the National Crime Agency if they have any reason to suspect that money laundering or terrorist activity is taking place.

Gone are the days when the relationship between accountant and client was almost as sacrosanct as the confessional or as guarded as that between doctor and patient. Now the accountant has been press-ganged into the role of informant, with the threat of criminal penalties if they fail to comply. And much AML legislation rides roughshod over personal privacy rights and data protection laws, in the same way that the requirement by banks to report on their own customers has been described by the American Civil Liberties Union as the coercion of private businesses “into agents of the surveillance state”.

This is not to abdicate the responsibility of the accountant or any  other professional to prevent money laundering or other criminal activity taking place. Rather it is a plea to regulators to trust more in the integrity and personal ethics of the professionals in the front-line. Old-fashioned as such notions might be, many people practicing a profession have worked long and hard to get to where they are now, and are proud to be able to add their qualifications after their name. They do not want to risk their reputations by working with a dodgy client, or one whose business practices they dislike. Simply put, they have too much to lose.

Equally, this is a plea to the accounting bodies and other regulators to issue guidance that is sensible and appropriate to its audience. Sending out 73 pages of guidance is too much because people just do not have the time to read and absorb this volume of material. Practical advice could be condensed to twenty pages or less, which means that practitioners would be able to digest it easily, Brevity is not only the soul of wit, it is also the key to effective communication.

Unfortunately, I suspect that my objections may fall on deaf ears, and that I may be like King Canute fighting against the tide. Nevertheless it is worth asserting that the world is not inherently a more dangerous or corrupt place than it used to be, that most clients are honest, hardworking people just trying to make a living, and that they do not deserve to be treated with suspicion from the get-go. And it should also be said that most accountants and other professionals do have their own moral code, and do not want, or need, to be involved with criminals, and their activity.


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