ICAEW Welcomes Reporting Obligation Changes

by Robin Pilgrim, LawAndTax-News.com, London

20 February 2006

The Institute of Chartered Accountants in England and Wales last week announced that it welcomed the change in the country's anti-money laundering law, approved by the Privy Council on Tuesday 14th February.

According to the Institute, the change gives equal treatment, as regards obligations to report money laundering, to external accountants, auditors and tax advisers where they provide services directly comparable to those provided by professional legal advisers. Prior to this amendment, a qualified accountant carrying out the same service as a lawyer, and carrying it out in privileged circumstances, would have to report a suspicion to the National Criminal Intelligence Service (NCIS), but the lawyer would not.

Karen Silcock, chairman of the Institute’s Money Laundering Working Party and a partner at Deloittes, explained that:

“This is an issue which we have been discussing with the Home Office for several years and follows an extensive consultation process concerning the obligations of accountants to report money laundering. Implementation of this Order will bring into effect the requirements of the EC 2nd Money Laundering Directive in this regard. In simple terms, it allows us to respect the clients’ rights of legal privilege as regards reporting to NCIS and so brings much needed clarity to the position of accountants and their clients in the specific circumstances set out in the Order."

“This is a very specific and very limited change to the qualified accountants’ duty to report knowledge or suspicion of money laundering. Nothing in this change alters the need for accountants to remain fully engaged in the fight against financial crime and to ensure that their responsibilities are met in full.”

Felicity Banks, head of business law at the Institute, added: “It is important that the profession appreciates that this proposed Statutory Exemption from reporting, being limited to money laundering issues, does not confer any wider privilege upon the work of the accountancy profession. The Institute is today issuing guidance to assist members in a full understanding of the limits of this exemption, and its interaction with the crime/fraud exception. Whilst an important development, it will affect only a relatively narrow range of our members' services, and will need to be applied with care.”

Earlier this month, Chancellor of the Exchequer, Gordon Brown set out new measures to further strengthen the financial system's ability to deny terrorists funds, identify and investigate terrorist networks and disrupt terrorist activity through swift, pre-emptive strikes.

In a speech on national security - which divided observers, as it appeared to be stretching his remit as Chancellor somewhat - to the Royal United Services Institute (RUSI) in London, Mr Brown explained that:

"We need not only to deny a safe haven to terrorists, but ensure there is no hiding place for those who finance terrorism. Since 2001 we have frozen assets of terrorists of nearly £80 million - including for over 100 organisations with links to Al Qaeda. Today I am announcing new measures to prevent terrorist financing, identify suspicious transactions, and disrupt terrorist activity."

The Chancellor has also written to the Financial Action Task Force (FATF) - the international standard-setter on counter-terrorist finance issues - requesting that the UK assumes the Presidency of FATF in 2007.

Among the proposals unveiled by the Chancellor were:

• A joint review with the Home Office of how best to root-out terrorist abuse of the charitable sector and protect donor confidence;
• New proposals to strengthen safeguards introduced after September 11th for "Money Service Businesses" - and thereby protect the integrity of global remittance flows;
• New guidance to help firms target their efforts to detect terrorist financing on the areas of highest risk and ensure that senior managers in firms take responsibility for the financial crime risks that they face;
• A new dedicated forum bringing together Government and the financial services sector to identify and challenge terrorist threats; and
• Strengthening the Treasury's asset-freezing operation, through greater joint working with other departments and agencies in order to disrupt terrorist networks when they come to light.

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