Facebook  Twitter  Youtube  ISSUU  RSS  Email
Friday 14 December 2018
A View from the Inside
By Michael Izza

Michael Izza is Chief Executive of ICAEW, the professional body that represents and regulates over 150,000 chartered accountants worldwide
There is no argument that the scale of money laundering internationally is vast. Home office estimates – and they err on the conservative – suggest that around £90bn a year is laundered through the UK. Hundreds of billions are laundered worldwide, and Transparency International estimates that over £4bn of UK property has been acquired from suspicious money.


At some point, this dirty money will come into contact with professionals – it could hardly not do so. This does not imply that there is widespread ethical failure in the professions, although clearly there could be a point in the chain at which someone who is skilled at accounting is knowingly behaving unethically or illegally. But there are always shades of grey – and not just because people turn a blind eye – there are some very clever crooks out there.


Sometimes, for example, it is pretty obvious. If someone has made millions selling narcotics or weapons or trafficking people across borders, then that money is clearly tainted. But rarely are things so conveniently clear-cut. The prolonged extraction of funds from Russian industry over three decades from the 1990s onwards has been well-documented elsewhere, as has corrupt practices by Politically Exposed Persons in other countries.


One problem is how we define “dirty” money. If money has been deemed to have been legally made under the laws of the country from which it originates, something of a diplomatic tightrope must be walked – brave is the government official willing to take it upon themselves to vilify a foreign government’s actions. And then there is the question of a statute of limitations. Human rights abuses and state-sanctioned ‘redistribution of wealth’ may well be remembered for generations, but the finance professionals dealing with some of these transactions weren’t born when the money was first ‘acquired’. Raw opium sold yesterday is clear enough, but a utility sell-off quarter of a century ago? This is not a philosophical nicety. Finance professionals need to know what is, and what is not, illegal. And that means clear guidance from law enforcement.


We expect chartered accountants to act to the highest professional and ethical standards, and have codes, guidance, regulations and advice to enable this. But they also need information. It is obviously understandable that the security services need to keep vital intelligence under wraps during investigations but at some point the information needs to be shared if professionals are to play an active and effective role in anti money laundering.


And the fact is that for all the noise around dirty money, and all of the – no doubt justified – suspicions, it is not translating into action. The Money Laundering Regulations were introduced in 2007, and they created over 20 offences of financial crime. The first conviction under these regulations did not take place until 2012, and there have been just four further convictions in the following three years. Five successful prosecutions over a decade suggests that the AML regime isn’t achieving important goals. It does not, of course, mean that crime isn’t happening, but it does mean that we should consider other approaches to intelligence and skills sharing, investigation and prevention.


This is one reason ICAEW is working with the UK Government, as well as legal and property sectors through “Flag It Up”, a campaign to promote best practice in anti-money laundering compliance and reporting suspicious activity.


And we should not assume that all chartered accountants are being complacent. Between 2010 and 2015, finance professionals in the United Kingdom filed more Suspicious Activity Reports than the rest of Europe put together. So much so that the UK Financial Intelligence Unit found themselves swamped and asked the Law Commission to investigate if anything could be done to hold back the tide. The Law Commission was equivocal; in their consultation they stated


“The low threshold for criminality combined with individual criminal liability incentivises defensive reporting. Individuals in the regulated sector are at risk of personal criminal liability for their actions which includes where they have been negligent in their failure to report… risk averse professionals and employees will report rather than risk prosecution for a failure to do so.”


It is worth remembering this in the context of the charges of being “professional enablers” often levelled at the accountancy profession. There is something of a double bind here for conscientious accountants. Don’t report and you risk being accused of complicity. Report too much and law enforcement complains they are being buried in paperwork. But this still doesn’t change the fact that a lot of dirty money is being washed through the UK.


So what can we do about it?


The first is intelligence and information sharing. If law enforcement can share more, better, information with regulators, supervisors and finance professionals they can act on it.


The second is transferring cases. Chartered accountants are members of a regulated profession. That means their regulators can take action against malpractice. If the judiciary are unable to make prosecutions stick through lack of criminal evidence, or lack the resources to investigate fully, why not pass the cases on to regulators and supervisors?


Finally, we need to reform the reporting procedures. If the FIU is drowning under reports then something needs to change. The problem is that the current SAR system is creaking, old-school and was designed for banks, not for accountants. We unequivocally and actively support the government’s initiatives to upgrade the UK’s central SARs database with systems that can turn the tide on the crooks – with the use of, for example, data searchable fields – at the moment there is no way to group information by type, source, severity, etc.


This will not solve the problem completely. One major challenge will remain, which is that not everyone who has financial skills is a member of a regulated profession. And if they are not, they fall outside the remit of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). But more dialogue, more intelligence and better reporting would be a great start.


Transparency International has been fighting corruption around the world for a quarter of a century. As we turn 25 we’re asking what does corruption look like in today’s tumultuous world, and importantly how we can best fight it? For this blog series we’ve canvassed opinion from some of the leading voices in the anti-corruption world and will be sharing those here. Views expressed on this blog do not necessarily reflect those of Transparency International and where possible we encourage robust discussion and debate.


Contact Us | Sitemap | Privacy

UK Charity Number 1112842

Transparency International UK is a chapter of