Amid the turmoil provoked by the Covid-19 pandemic, opportunities for illicit financial activity have increased, ratcheting up the pressure on everyone to remain alert. Accountants and finance professionals are in the forefront of the fight against such crimes and bear a particular responsibility for halting them.
To enhance the chances of successful prosecution and prevention, the head of global anti-money laundering organisation Egmont Group would like to see accountants work more closely with financial intelligence units. These units are specialist government agencies around the world that collect and share information on suspicious or unusual financial activity, which can be used by law enforcement agencies to detect and ultimately block dirty money flows.
Financial intelligence units analyse transaction reports from banks, accountants, lawyers, casinos and others with a legal duty to report suspicions about money laundering and terrorist finance. They work with police and prosecutors to bring money laundering cases to court.
Egmont Group is a forum that facilitates the exchange of intelligence and good practice among 165 financial intelligence units around the world. Its chair, Hennie Verbeek-Kusters, says support from accountants and auditors is of great value to her organisation and to the units.
‘Because of the service they deliver, accountants are in a position to identify transactions that are unusual and so might be related to money laundering and terrorist finance,’ she explains. ‘It’s of the utmost importance that they report these.’
Verbeek-Kusters, who was confirmed in her position in July, has called on international, regional and national accounting organisations to collaborate with Egmont to intensify relationships between financial intelligence units and the profession.
Anti-money laundering laws in most countries generally impose legal duties on accountants to report suspicious transactions. However, Verbeek-Kusters, who is also head of the Netherlands’ financial intelligence unit, recognises it can be a struggle for accountants to blow the whistle. ‘They are connected to their clients; they have a relationship built on trust,’ she explains.
She offers the reassurance that, under international convention, financial intelligence units have operational independence in deciding which activities to refer to law enforcement. They sometimes can withhold sensitive information to avoid betraying a source, so preserving the professional relationship between accountant and client.
Marko Stolle, chair of Egmont’s Information Exchange Working Group, stresses the importance of this protection, given that accountants may have relationships with clients stretching back 20 years or more. However, it is the very closeness of the relationship that makes them perfectly placed to recognise a suspicious transaction, one that is ‘not something done by mistake’, but rather ‘somebody… trying to misuse the system’.
Stolle also points out that accounting expertise is valuable in analysing how major money laundering episodes take place. Accountants, he says, can offer lessons for the future and inspire new guidance on money laundering red flags, and even legislation.
‘Accountants are in a position to identify transactions that are unusual and so might be related to money laundering and terrorist finance…It’s of the utmost importance that they report these.’
Founded in 1995 by a small collection of financial disclosure units seeking to cooperate, Egmont Group has developed into a platform for 165 financial intelligence units around the world to securely exchange expertise and intelligence to combat money laundering and terrorist financing. In 2018-19, 23,303 information requests were exchanged among Egmont Group member FIUs. The group also advises financial intelligence units on anti-money laundering operations and organises practical help for smaller units in poorer/less populous jurisdictions. Financial intelligence units securely request and share case information and post information about analytical tools and technological developments via Egmont’s secure web system.
Policy of trust
Egmont has developed advice for accountants on how to identify money laundering, with explanations of the complex strategies used. Some of these resources are published on the organisation’s website, but other more sensitive guidance is sent privately to member financial intelligence units. ‘We don’t want this advice published in newspapers,’ explains Verbeek-Kusters – it could alert criminals to what are considered red flags for money laundering so aiding them in avoiding detection.
The individual financial intelligence units decide which guidance to share with local accounting networks, and which to restrict to law enforcement. Egmont encourages the units to share insights with accounting organisations, with the proviso that they keep such information within the profession to help accountants detect crime.
‘We have a policy of trust. If you don’t share, nothing will be achieved,’ Verbeek-Kusters says. Accounting organisations can offer feedback on this advice, perhaps adding other red flags, which financial intelligence units can in turn share with their counterparts.
Because of accountants’ close involvement in financial matters, any reports they make about suspicious transactions can be very valuable, containing detailed financial information and explanations of investigative work, Verbeek-Kusters says. The information can often be meshed with data from other sources, such as banks, and reports from other financial intelligence units, so helping create a comprehensive file and potentially aiding a prosecution.
Stolle says reports from accountants can play an essential part in detecting bribery of politicians and government officials in the course of procurement processes. When contractors bidding for government work file their books with accountants, the latter can report to a financial intelligence unit any transactions that look suspiciously like potential pay-offs to a politician or official.
Financial intelligence units recruit both from big accountancy networks and smaller firms. They combine accountants’ talents with a wide range of expertise – from law enforcement to lawyers and IT specialists.
Accountants’ expertise in international accounting standards, for example, helps financial data received from other financial intelligence units to be integrated into local transaction reports. Accountants can also help the units understand how professional money-laundering organisations assist criminals in hiding illicit proceeds.
An Egmont report notes that professional money launderers ‘often keep a shadow accounting system that contains detailed records with code names’, which can prove an invaluable resource for investigators. Such shadow systems may use ‘detailed spreadsheets that track clients (using code names); funds laundered; the origin and destination of funds moved; relevant dates; and commissions received’.
Accounting expertise will also be of value to Egmont Group in tackling its current priority: monitoring money laundered through cryptocurrencies. Companies running these systems – known as virtual asset service providers (VASPs) – are increasingly required to log suspicious transaction reports. But to understand those reports, IT experts need to distil blockchain data. Stolle thinks accountants can provide insights into how crypto assets are moved into fiat currency and property.
Verbeek-Kusters believes accountants will remain a key part of the anti-money laundering system: ‘We expect accountants to ensure that the financial world maintains a level of integrity. They are the gatekeepers.’