Higher Risk Clients for AML Purposes
This week we are continuing our series on what is a higher risk client for AML purposes?
There are a number of answers that we could come up with, but one of the most reliable sources to help identify such clients can be taken from the Accountancy AML Supervisors Group Risk Outlook (updated July 2024) which sets out the circumstances where there might be higher risk of money laundering or terrorist financing in the accountancy sector.
In the coming weeks we will look at extracts from this report to assist readers in improving their AML compliance approach.
As the report says ‘firms will need to identify the type of clients that they serve, considering the risks posed by these clients and identifying whether they present any of the following risks and associated red flag indicators. The presence of one or more red flag indicators may suggest a high risk of money laundering or terrorist financing (MLTF). Red flags are not exclusive to the risk areas identified here’.
|
Risk |
Red-Flag Indicators |
Why? |
| Clients seeking anonymity or undue secrecy | · Undue client secrecy (e.g. reluctance to provide requested information)
· Unnecessarily complex ownership structures, including nominee shareholders or bearer shares · Uncooperative clients incorrect or misleading information on the register (Companies House) and/or reluctance to correct. |
· Clients may try to hide who they are, or produce unusual forms of identity verification, if they are involved in criminal activity or money laundering.
· Clients who are seeking anonymity on behalf of themselves, a third party or beneficial owner may be seeking to launder money. · Complex structures are attractive to criminals as they may enable the integration of illicit funds into the legitimate economy. |
| Clients with a history of criminal activity | · Clients with criminal convictions relating to the proceeds of crime
· Clients who are on the terrorist list · Clients on the sanctions lists. |
· Clients with a history of criminal activity would most likely pose a very high risk of money laundering to your firm.
· If you find out that a person or organisation you’re dealing with is subject to financial sanctions, you must immediately: · stop dealing with them · freeze any assets you’re holding for them · Clients may use accountancy firms to seek advice on restructuring their assets to avoid financial sanctions. · money laundering legislation in Ireland requires firms to put in place enhanced due diligence (EDD) measures in dealing with countries subject to sanctions, embargos or similar measures · contact your legal advisers for further advice to deal with the Irish Sanctions |
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.
