How to adopt a risk-based approach

Few money laundering cases have been as high profile as the prosecution of Manuel Noriega. The former dictator of Panama was found guilty, and subsequently jailed last month, for laundering £1.9m during his time in power.

All competent accountants would proceed with caution if Mr Noriega were to knock on their door. As a politically exposed person (PEP) with a series of negative news articles available for the world to see on Google, it’s obvious that no firms’ risk appetite would (or indeed should) be that high. However, when your client is not a former dictator with a criminal record, spotting where the risks lie can be difficult. Therefore it’s vital that accountants ensure that they use a risk-based approach to establish whether they should be doing business with their clients.

Accountants working in practice have experienced an increase over the years in rules for scrupulous anti-money laundering (AML) systems and reporting requirements. Those working in the sector must be aware of legislation such as the Proceeds of Crime Act 2002 (POCA) and the Money Laundering Regulations 2007. These acts introduced important changes to accountants’ responsibilities, including potential criminal liability for failures in systems that allow money laundering to occur. These regulations force accountants to report any suspicious activities to the Serious Organised Crime Agency (SOCA), or face stiff penalties and even the prospect of going to prison.

The Association of Accounting Technicians (AAT) has an anti-money laundering regime that supervises its self-employed members for compliance in that area. As a supervisor, the AAT monitors compliance and offers practical advice, as well as providing guidance and training. The aim of this is to support members in achieving compliance under regulations. Because money laundering is rarely as obvious as the Noriega case, accountants must demonstrate rigorous practice in managing this area of work in order to avoid falling foul of the POCA.  

AAT’s guidance recommends that members:

• Have a written AML policy in place and available for all to see;
• Undertake a risk assessment of all activity within the firm to identify high risk practice areas that are vulnerable to the threat of money laundering;
• Ensure they know their clients by being meticulous at the start of the business relationship and continue monitoring on a regular basis to identify any relevant changes to risk profile;
• Report to SOCA as soon as practicable if they have a suspicion that a client may be laundering money.

Accountants are likely to face scenarios such as the introduction of unusual (high value) transactions outside the client’s normal risk profile. They could also find difficulties in identifying and verifying the beneficial ownership of corporate entities.

The case of Noriega demonstrates the important role accountants play in the wider anti-money laundering agenda to prevent this type of criminal activity. Their role cannot be underestimated and it is AAT’s responsibility to guide them in the right direction.


Tania Hayes has been Conduct & Compliance Manager at the AAT for 18 months. She oversees conduct and compliance issues, the disciplinary process, professional ethics guidance and is the Money Laundering Reporting Officer for the association.

A question of ethics

The spotlight on ethical behaviour has never burned brighter, as media coverage of the Goldman Sachs case demonstrates. Headlines have also homed in on auditor Ernst & Young’s failure to report the controversial accounting practices of investment bank Lehman Brothers. These cases stress the magnitude for ethical awareness within finance and accounting sectors. In response, AAT, the leading professional body for accounting staff, has introduced a ‘Professional ethics in accounting and finance’ unit to be studied as part of its Revised Accounting Qualification.

Clients accountants have the right to expect minimum standards of ethical conduct –know as the fundamental principles of professional ethics. This consists of integrity, objectivity, professional competence and due care and professional behaviour at all times. US lawmakers have accused Goldman executives of helping to inflate the housing bubble and making billions off the market’s collapse. Goldman Sachs has denied any unethical behaviour, stating that they cannot be held responsible because it was a matter of judgment. However, as public opinion holds the bank accountable, minimum standards have clearly been compromised and attempts to justify their actions undermines public confidence.

By introducing a new ethics unit at the Level 3 Diploma in Accounting, AAT is setting students on the right track to manage their own moral dilemmas. Qualified accountants are technically adept and accurate – skills that are straightforward and without question. But softer skills come into play when faced with an ethical dilemma, because they are based on personal judgment in which there is often no right answer. The issue of ethics is pervasive across all areas of accountancy, yet the specifics of ethical dilemmas will differ depending on how the individual is employed.

A common scenario may involve a self-employed member in practice, who is contacted by a solicitor requesting information on a company’s accounts. Trust between an accountant and client is fundamental to ethical conduct, so the matter of client confidentiality can be confusing. Another typical dilemma could involve a married couple who run a company together, eventually split acrimoniously and go on to demand that the other cannot see the accounts. This situation could cause a significant ethical dilemma for the accountant who has to weigh the potential for conflict of interest and breach of confidentiality between parties with whom they might have had a harmonious relationship in the past.  

The AAT’s Conduct and Compliance team are on hand to support and guide members on issues of ethics, although we will not give a definitive ‘yes or no’ answer. Instead, we aim to supply accountants with the tools to make the decisions themselves. Since more than one outcome might be possible, we work with them to determine the most ethical way forward. 

As the UK emerges from recession, it is clear that the unethical behaviour of those responsible for the economic downturn will continue to be scrutinised. As for the accounting profession: these cases should serve to reinforce the potential consequences of immoral conduct. 


Tania Hayes has been Conduct & Compliance Manager at the AAT for 18 months. She oversees conduct and compliance issues, the disciplinary process and professional ethics guidance. She also acts as Money Laundering Reporting Officer, overseeing money laundering supervisory responsibilities.