THE GOVERNMENT estimates that around $90bn of dirty money comes through the UK each year. Inevitably, this money eventually comes into contact with finance professionals, which has prompted charges of widespread ethical failures.
Clearly, there are people with financial skills who are knowingly laundering money. But the truth is more nuanced than the frequent accusations that accountants are “professional enablers” of financial crime.
It is not always obvious when money is dirty. Cash made selling heroin or trafficking people obviously is, but there’s a grey area where the situation isn’t quite so clear.
For example, since the 1990s there has been an ongoing extraction of funds from Russian industry, which prompted many suspicions – and there are numerous records of fraud and corruption from what the government terms “politically exposed persons”, who are considered at high risk of potential bribery.
But if money is deemed legally-made in its country of origin, there are potential diplomatic issues. Brave would be the government official willing to declare a foreign state criminal.
Then there is the question of a statute of limitations. Drugs peddled yesterday are one thing, but a potentially murky utility sell-off a quarter-century ago is another matter. Half the accountants dealing with the proceeds wouldn’t have been born when that money was “acquired”.
This is not splitting hairs; finance professionals need to understand what is and is not illegal. And to do that, they need information from the security services.
It’s easy to see why intelligence and law enforcement maintain secrecy. Their jobs – sometimes their lives – depend on it. But if accountants are to be held liable for handling tainted money, let alone help the government to fight money laundering, they need to know what is going on.
We expect chartered accountants to act to the highest ethical standards, and we have codes, guidance and regulations to support this. But it’s not always easy to avoid dealing with crooks if you’re not told who they are.
Chartered accountants are doing their best to help law enforcement. Between 2010 and 2015, the UK filed more Suspicious Activity Reports (SARs) than the rest of Europe combined.
The Financial Intelligence Unit was deluged. The Law Commission was asked to investigate and swiftly discovered the problem – a low threshold for criminality, coupled with individual liability for accountants. They concluded: “professionals and employees will report rather than risk prosecution for failure to do so”.
Don’t report, and you risk accusations of complicity. Report too much, and you receive complaints about too much paperwork.
Meanwhile, enormous quantities of cash continue to be laundered.
For all the talk, there is surprisingly little action. The 2007 Money Laundering Regulations introduced 20 new offences, but there have been just five convictions over the last decade.
This suggests that the regime isn’t working properly. So what might?
First, intelligence sharing. If law enforcement can share more information with regulators, supervisors and finance professionals, they can act on it.
Second, transferring cases. Chartered accountancy is a regulated profession, and malpractice is punished. If the security services lack proof for a criminal case or resources to investigate, why not pass the cases on?
Finally, we need reporting reform. The SARs regime was designed for banks, not accountants. The central database of SARs is badly in need of modernising, for example with data-searchable fields. At the moment there is no way to group information. Upgrading it could make a real difference.
This may not catch bent bookkeepers who are not regulated professionals. But it would better unite the accountancy profession and law enforcement in their efforts to fight crime. And it would help show that chartered accountants are not part of the disease, but part of the cure.