Barrister Igbodekwe Emmanuel

11- 12TH September, 2013

Special Control Unit Against Money Laundering (SCUML)

Regulating The Accountants for AML/CFT Challenges and Way

Forward

2

Topic

Financial Action Task Force (FATF) requirements on accountants

Highlight of the FATF recommendations relevant to accountants

Way Forward in regulating accountants

The Financial Action Task Force (FATF) : an inter-governmental body created in 1989 by ‘G7’ sets standards, develops and promotes

policies to combat money laundering and terrorist financing

published 40+9 Recommendations to achieve its purpose

Now Revised to 40 Recommendations3

4

Designated Non-Financial Businessesand Professions (DNFBPs)

DNFBPs as defined by Financial Action Task Force (FATF) are:

Lawyers

Accountants

Trust and Company Service Providers (TCSPs)

Real Estate Agents

Dealers in Precious Metals/ Stones

Casinos

You Play an Important Role

Designated Non-Financial Businesses and Professions (DNFBP)

Trust and Company Services

Providers

Lawyers

Accountants

Casino

Estate Agents

Banks

Securities House Insurance

Firms

Dealers in Precious

Stones and Metals

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FATF Requirements on Accountants

New Technology

(Rec. 15)

Accountants – operating individually

or in a firm

CDD (Rec. 10, 22)Complex

Transactions (Rec 20, 21)

Record Keeping (Rec. 11)

STRs (Rec. 20 & 21)

Internal Control (Rec. 18)

PEPs (Rec. 12)

Special Attention (Rec. 21)

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FATF Requirements on the Accounting Profession

The Accounting Profession

Sanctions(Rec. 35)

Guidelines(Rec. 34)

SRB(Rec. 24)

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FATF Requirements on Accountants

Customer Due Diligence (Rec. 10, 22, 23)

Record Keeping (Rec. 11)

Suspicious Transaction Reporting (STR) (Rec. 20)

Risk-based Approach Guidance for Accountants (REC. 34)

Requirements to be specified in law:

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When to Conduct CDD?

When accountants prepare for or carry out transactions in relation to: Buying and selling of real estates;

Managing of client money, securities or other assets;

Management of bank, savings or securities accounts;

Organisation of contributions for the creation, operation or management of companies;

Creation, operation or management of legal persons or arrangements, and buying and selling of business entities.

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When to Conduct CDD?

When accountants act as Trust and Company Service Providers and

Acting as a formation agent of legal person;

Acting as a director or secretary of a company;

Providing a registered office, etc for a company;

Acting as a trustee of an express trust;

Acting as a nominee shareholder for another person.

They have to comply with Rec. 5, 6, 8-11, 21.

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FATF Requirements on Accountants

Other selected requirements:

Internal Controls (Rec. 18)

Self Regulatory Organisation (SRB)

(Rec. 28 & 35)

12

Internal Controls

To establish / maintain internal policies / procedures to prevent ML / TF.

Policies / procedures to cover CDD, record keeping and STR obligations.

To communicate these to employees.

To develop appropriate compliance management (e.g. AML/CFT Compliance Officer at management level).

INTERNAL CONTROLS

On-going staff training. Independent audit function to test

compliance with the policies and procedures.

To put in place screening procedures to ensure high standards in hiring employees.

The type and extent of measures to be taken should commensurate with:

the level of ML / TF risk; and the size of the business.

13

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SRO – Responsibilities & Sanctions

Government authority or SRB to monitor and ensure compliance with AML / CFT requirements.

Power to sanction in case of non-compliance.

Effective, proportionate and dissuasive criminal, civil or administrative sanctions be available.

SRO - SANCTIONS

Range of sanctions available should be broad and proportionate to severity of non-compliance.

Sanctions should be available to legal persons, their directors and senior management.

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SRO - RESOURCES

Adequate structuring, funding, staff with sufficient technical and other resources to fully and effectively perform their functions.

Sufficient operational independence and autonomy to ensure freedom from interference.

Staff be of high professional standard & integrity and adequately trained for AML / CFT.

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Government authority or SRO to establish guidelines to include the following:

ML / FT techniques and methods; and any additional measures that accounting

firms/accountants could take to ensure their AML / CFT measures are effective.

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18

Establishment of Central Co-ordinating Committee (CCC), NRA - CCC

To steer & co-ordinate the strategic development of AML/CFT regime in line with internationally recognised standards.

Action by Political Authority

19

Establishment of

Legal Framework

Institutional Framework

Designation of Institutions with AML / CFT matters and with specific responsibilities on financial sectors (FIUs).

Law Enforcement agencies

DNFBPs and Non-profit Organisations.

Action by Political Authority

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Conflict of Accounting Concepts

Transparent Disclosure

Wholesome Importation of Principles and Procedures

Independence of Accountants

Legitimacy of Figure Manipulation

Background of Some Accounting personnel

Integrity and Ethical principles

knowledge of AML/CFT

AML/CFT Displacement

Disregard for good governance and Accountability

Complexity of Practice

Whistle blower

Customer Confidentiality

The culture of get rich syndrome

New technologies

Challenges Con’d

General

Political Factors

Economic Factors

Technological factors

Environmental Factor

Legislative Factors

Challenges Con’d

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Phase I : Financial Sectors

Phase II: DNFBPs

Political Will

Management Will

Way Forward

Legislation on CDD & Record Keeping

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Consultation on Legislative Proposals and Amendments.

Continued reliance on unregulated Third Parties by Financial Institutions. (Financial Inclusion).

AML/CFT included as part of Financial Reporting Standards Requirements.

Way Forward Contd…

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Step up outreaching activities to raise awareness on AML / CFT and work closely with professional bodies.

Seminars, Workshops,

one-on-one Inter-Face with Stakeholders

Sector Specific Guidelines.

Interactive System Mechanism.

Way Forward Contd..

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Way Forward Contd..

Timeline

Compliance costs

Regulatory Authority

Bye-Laws (Regulations)

Consultation Issues

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20102011

20122013

2014

2015

2016

Timeline (1)

28

FATF 36

members

Timeline (2)

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Internal

Control

Systems

Staff Traini

ng

Audit Functi

on

Policies and

ProceduresComplia

nce Officer

Compliance Costs (1)

30

International

Standards

Compliance Cost

Compliance Costs (2)

31

Professional Status

and Reputatio

n

Business Costs and

Legal Obligation

s

Compliance Costs? (1)

32

Compliance Costs? (2)

33

Open-minded

34

Partnership

35

Thank you!