Under the UK’s anti money laundering legislation (AML) accountants and auditors have a responsibility alongside other regulated bodies such as banks and the legal profession to act as ‘gatekeepers’ in the fight against the proceeds of crime entering into the legitimate financial system.
The Institute of Chartered Accountants in England & Wales (ICAEW) have recently issued updated guidance highlighting additional areas of risk that need to be considered when the accounting profession discharges their responsibility. One area included is the role of the independent/private school as an avenue for laundering funds.
The guidance has highlighted:
‘Criminals, corrupt politicians and sanctioned individuals may attempt to hide their ill-gotten gains by purchasing assets. It comes as no surprise that such individuals might own land, houses or expensive yachts.
But these groups might also have children. Children that require an education.’
The Government recently recognised that the money laundering risk posed by independent/private schools highlighting the need to be vigilant. This follows highly publicised crimes where some educational establishments have been used as vehicles for student VISA fraud.
Educational establishments do not appear in the list of regulated sectors for AML purposes, nor have they historically appeared high on the list of risky sectors, but that doesn’t mean that they do not pose a risk.
Existing guidance requires all accountancy firms to carry out a risk assessment on their clients (entities and individuals). Latest guidance has emphasised that this requirement is no less important when undertaking work for an educational establishment.
This risk-based approach must reflect the purpose, regularity and duration of the business relationship, as well as the business’ own firmwide risk assessment. This might include establishing what controls educational clients have in place to help spot ‘dirty’ tuition fees, and their student demographic.
The former security minister Ben Wallace urged Heads to do the ‘google test’ on proposed students or their parents.
This guidance perhaps could be considered excessive, but may be appropriate in the right circumstances.
However, as a minimum a school should consider implementing an AML policy if there isn’t one in place. This policy should be reviewed on a regular basis to ensure it remains relevant.
In the future your accountant/auditor may wish to review this policy as part of their own on-going regularity requirements. At present they are not required to carry out due diligence on the customers of their clients, but this may however be an option they may wish to adopt.
Should your accountant/auditor, legal advisor or banker suspect you being in receipt of the proceeds of crime they will need to consider their legal obligations to file a suspicious activity report (SAR) with the National Crime Agency (NCA).
These reports are required to be confidential and delivered to the authorities without your knowledge.
If you have any questions or would like further advice on AML procedures, please contact me.