A step-by-step explanation of a firm’s responsibilities under anti-money laundering regulations.
For many insolvency practitioners, anti-money laundering (AML) compliance starts and finishes with client identification procedures. But that simply isn’t sufficient to comply with current legislative requirements, nor to adequately protect you from becoming a professional enabler – a title none of us relish acquiring!
The area is under increasing regulatory scrutiny as the Recognised Professional Bodies (your AML supervisors) now have their own oversight regulator, the Office for Professional Body Anti-Money Laundering Supervisions (OPBAS), breathing down their necks. We IPs are likely to come under closer scrutiny from our AML supervisors, with a renewed focus on meaningful AML compliance.
So, aside from Customer Due Diligence (CDD) procedures, what do you need to do?
What are the risks faced by IPs?
Money laundering and terrorist financing are significant threats to any economy, particularly those operating globally. The UK is the world’s sixth largest economy, of which our financial services sector is a key component.
HM Treasury’s 2015 National Risk Assessment judged accountancy services to be at high risk of money laundering exploitation. The Treasury re-affirmed that view in 2017, concluding that ‘the inherent risks and vulnerabilities of accountancy services remain, due to the value of these services to those engaging in high-end money laundering… Company liquidation and associated services (including insolvency practice, which may be conducted by certain accountancy professionals) also pose a risk of criminals masking the audit trail of money laundered through a company and transferring the proceeds of crime…’.
Firm-wide risk assessment
First and foremost you must have a documented firm-wide risk assessment in place. This is a mandatory requirement under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR17), placed upon all ‘relevant persons’ (which includes IPs) and your supervisor may ask for sight of it at any time. Your risk assessment should:
- identify the risk factors that apply specifically to your business and the way in which it operates
- consider the frequency of occurrence of these risks, as well as their potential severity
- explain how these risks are adequately managed and mitigated by the processes and procedures employed by your firm
- be reviewed periodically and updated with new service lines and operational models
used to educate and inform your staff
If you don’t know where to start or are pressed for time, ISS can assist you.
Oversight
Secondly, you need to consider who within your practice is going to take responsibility for production, operational oversight and periodic review of your policies, controls and procedures and whether this is going to be a formal compliance officer role, or an informal or shared function. Depending on the size and nature of your practice, either route may be appropriate. The key requirement is that someone (individual or group) needs to oversee this area. This is not the same function as the traditional money laundering reporting officer role, although these may be combined, if that works best for your firm.
Policies, controls and procedures
Regulation 19 of the MLR17 requires you to establish and maintain policies, controls and procedures to effectively mitigate and manage the risks of money laundering and terrorist financing identified in any risk assessment undertaken by the relevant person. These must be maintained in writing and must include:
- risk management practices
- internal controls
- customer due diligence
- reliance and record keeping
- the monitoring and management of compliance with, and the internal communication of, such policies, controls and procedures
Do you have these policies in place? If not, we can help.
CPD and staff training
Those responsible for AML oversight must receive appropriate CPD on the conduct of their functions. Additionally, your whole team should be provided with periodic training, not just about the law in this area, but also about the specific risks presented to your business and the policies, controls and procedures that your firm has in place.
ISS can supply in-house and/or online learning modules for your officers and your team members, specifically tailored for your business and the risks it faces.
Beneficial owner and manager approval
It is a criminal offence for a person to act in the capacity of a beneficial owner, officer or manager of a relevant firm without the approval of an AML supervisor. Have all relevant owners and managers of your practice registered with your AML supervisor yet?
This requirement extends to any party with a controlling interest in the business (eg a shareholding in excess of 25%) and any principal, senior manager, or member of a management committee who is responsible for setting, approving or ensuring the firm’s compliance with the firm’s anti-money laundering policies and procedures.
We will be examining the legal requirements and the risks presented to practices in our forthcoming Intensive CPD / CPE Catch-Up Courses and discussing how practices may manage these.
For further information about how ISS may assist you in meeting your AML obligations, contact [email protected]
We’re speaking at R3’s Series of SPG Technical Reviews
Insolvency Support Services’ Eileen Maclean and Alison Curry are looking forward to speaking at R3’s series of SPG Technical Reviews, specifically designed for insolvency and restructuring professionals in small and medium-sized practices, in the next few months.
Their practical, focused sessions will cover the new Scottish Insolvency Rules, highlighting key changes and differences to the current England and Wales Rules.
Want to know what has changed and why? You can catch Eileen at the R3 SPG Technical Reviews in Birmingham (26 February) and Leeds (30 April) and Alison in London (14 February) and Exeter (9 May).
For more information and to book, click here.
If you need more than an overview and would like to book one of our half day courses on the new Scottish Rules, click here for more information. We’ve also added an extra Edinburgh course on 19 February due to demand. Booking is straightforward: contact Danielle Kelly and the ISS Training courses team on 0845 601 7570 or on [email protected].
New Scottish Insolvency Rules 2018
Thanks to everyone who attended the first of our New Rules training courses in Glasgow on 16 January. Great to see so many of you, and thanks for such positive feedback on the course. Out of an overall score of 5, this course scored 4.69!
Testimonies include: “ very informative training session / well presented” and “the content is brilliant”.
We have also taken on board your feedback about the amount of content – for which thanks – and will adjust that for courses going forward.
There is still an opportunity to book for the Edinburgh course on 22 January, and booking is open for Aberdeen, Manchester and London. Alternatively we still have half days slots available for in-house team training.
Contact courses@insolvencysupportservices or for more details click here
Insolvency (Scotland) Rules 2018 – are you ready?
The long-awaited Scottish Rules are here!
Two sets of Rules
Due to the nature of the partially devolved corporate insolvency regime, Scotland’s Rules are found in two pieces of secondary legislation. The Insolvency (Scotland) (Company Voluntary Arrangement and Administration) Rules 2018 and the Insolvency (Scotland) (Receivership and Winding up) Rules 2018 (“the new Scottish Rules”) were laid last month and will bring Scotland’s corporate insolvency regime broadly in line with England and Wales from 6 April 2019. Are you ready?
Decisions, decisions…
Perhaps the most significant change is the restriction placed upon an office holder’s ability to hold a physical meeting of creditors. Decisions of creditors are to be obtained using either deemed consent (where this is available) or by one of a number of prescribed decision procedures: correspondence, virtual meeting or electronic voting, with physical meetings available only where requested by the requisite number or value of creditors (the 10/10/10 rule).
Practitioners South of the Border have got to grips with these new requirements over the last two years, but not without some teething pains. Concerns remain about verifying the identity of a participant in a virtual meeting, and the potential implications of a person being excluded because of a technological failure. Perhaps counter-intuitively, it seems removing the requirement of a physical meeting has not increased creditor engagement. But the good news for practitioners dealing with Scottish appointments from 6 April 2019 onwards, is that a lot of creditors and stakeholders will be familiar with the decision-making process already.
Effects of the new Rules
Remuneration and accounting periods
As those of you dealing with Scottish cases know, the process for obtaining approval for remuneration is distinct from England & Wales and invariably involves the court. The remuneration approval process will remain largely unaltered, which limits the impact of the decision-making procedures when compared to England & Wales.
A more welcome revision may be the changes to the operation of accounting periods that allow an IP to manage accounting periods without court or committee approval. The first two six-month accounting periods will remain, but thereafter a practitioner can defer a claim for remuneration without court or committee approval.
Key steps for your practice:
We will be examining the new legal requirements and their practical implications at a series of courses running throughout January and February 2019 and providing document packs and compliance support.
For further information about how ISS may assist you in adjusting to these changes, contact: [email protected]
INSOLVENCY (SCOTLAND) RULES 2018
The new Insolvency (Scotland) Rules 2018 are finally here!
Due to commence on 6 April 2019, now is the time for familiarisation, planning and preparation. Here’s how we can assist you.
ICAS Insolvency and Restructuring Conference 2018
Insolvency Support Services director Eileen Maclean is delighted to have been invited to join a superb line-up of speakers at the ICAS Insolvency and Restructuring Conference 2018 at Gleneagles on 13 and14 November. The theme of this year’s conference is A Profession in the Spotlight, which ICAS has chosen to reflect the increasing levels of scrutiny faced by our profession.
For more info and to book: https://www.icas.com/events/the-icas-insolvency-and-restructuring-conference-2018
If you’re going too, Eileen hopes to catch up with you there.
Guest lecturing on insolvency
Insolvency Support Services director Eileen Maclean presented to a different audience from our usual earlier this month when she was back at The University of Glasgow Adam Smith Business School to guest lecture again on corporate insolvency with course leader Yvonne Joyce.
Common Financial Tool (Scotland) Regulations 2018 – Giving evidence to Parliament
Eileen Maclean, R3 Scottish Technical Committee member, gave evidence to the Scottish Parliament Economy, Jobs and Fair Work Committee, on the new Common Financial Tool (Scotland) Regulations 2018 on 30 October.
Eileen said: “It was a privilege to be asked to give evidence on behalf of the profession. Now we await the Committee’s recommendation, with interest.”
You can watch the session here: https://www.scottishparliament.tv/meeting/economy-energy-and-fair-work-committee-part-i-october-30-2018
Lifting the corporate veil
It seems that the protection afforded by Limited Liability has received a body blow in the Budget with an announcement that directors may face personal liability for their company’s tax liabilities:
“Tax abuse and insolvency – Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency. (69)”
The language is perhaps a little confused. Insolvency is, after all, a measurable financial position, defined in statute with reference to two established tests, so not something that is “deliberately” entered, per se. It’s also not entirely clear which company is being referred to – the one with the liabilities or the successor. At a guess, the provisions are aiming at behaviours that cause or contribute to the insolvency of a company, but viewed with hindsight of an insolvency proceeding.
But leaving aside the semantics, there could be some significant and tangible impacts for business owners looking to avail themselves of the entrepreneurial encouragement to “have another go” that Limited Liability is intended to afford. Whilst there is no great surprise that tax evaders should be targeted, interestingly, both avoidance and phoenixism (like them or not – both currently legal practices), appear to be encompassed also.
We will have to await further details before the impact of this on the advice provided to directors of insolvent companies can be fully assessed. However, if the trigger for personal liability is the act of starting again (i.e. phoenixing), these provisions may have the unintended consequence of discouraging business restarts at a time when the economy is likely to be sorely in need of them. They may also impact the saleability of distressed assets, where often a connected party is the only interested purchaser. If such a purchase risks the imposition of personal liability for the debts of the predecessor company, the well-advised might reasonably look to buy their stock and fixtures and fittings elsewhere, or at the very least, be willing to pay rather less for them!
Alison Curry
Director, Insolvency Support Services
Anti-Money Laundering – Have you assessed the risks?
A step-by-step explanation of a firm’s responsibilities under anti-money laundering regulations.
For many insolvency practitioners, anti-money laundering (AML) compliance starts and finishes with client identification procedures. But that simply isn’t sufficient to comply with current legislative requirements, nor to adequately protect you from becoming a professional enabler – a title none of us relish acquiring!
The area is under increasing regulatory scrutiny as the Recognised Professional Bodies (your AML supervisors) now have their own oversight regulator, the Office for Professional Body Anti-Money Laundering Supervisions (OPBAS), breathing down their necks. We IPs are likely to come under closer scrutiny from our AML supervisors, with a renewed focus on meaningful AML compliance.
So, aside from Customer Due Diligence (CDD) procedures, what do you need to do?
What are the risks faced by IPs?
Money laundering and terrorist financing are significant threats to any economy, particularly those operating globally. The UK is the world’s sixth largest economy, of which our financial services sector is a key component.
HM Treasury’s 2015 National Risk Assessment judged accountancy services to be at high risk of money laundering exploitation. The Treasury re-affirmed that view in 2017, concluding that ‘the inherent risks and vulnerabilities of accountancy services remain, due to the value of these services to those engaging in high-end money laundering… Company liquidation and associated services (including insolvency practice, which may be conducted by certain accountancy professionals) also pose a risk of criminals masking the audit trail of money laundered through a company and transferring the proceeds of crime…’.
Firm-wide risk assessment
First and foremost you must have a documented firm-wide risk assessment in place. This is a mandatory requirement under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR17), placed upon all ‘relevant persons’ (which includes IPs) and your supervisor may ask for sight of it at any time. Your risk assessment should:
used to educate and inform your staff
If you don’t know where to start or are pressed for time, ISS can assist you.
Oversight
Secondly, you need to consider who within your practice is going to take responsibility for production, operational oversight and periodic review of your policies, controls and procedures and whether this is going to be a formal compliance officer role, or an informal or shared function. Depending on the size and nature of your practice, either route may be appropriate. The key requirement is that someone (individual or group) needs to oversee this area. This is not the same function as the traditional money laundering reporting officer role, although these may be combined, if that works best for your firm.
Policies, controls and procedures
Regulation 19 of the MLR17 requires you to establish and maintain policies, controls and procedures to effectively mitigate and manage the risks of money laundering and terrorist financing identified in any risk assessment undertaken by the relevant person. These must be maintained in writing and must include:
Do you have these policies in place? If not, we can help.
CPD and staff training
Those responsible for AML oversight must receive appropriate CPD on the conduct of their functions. Additionally, your whole team should be provided with periodic training, not just about the law in this area, but also about the specific risks presented to your business and the policies, controls and procedures that your firm has in place.
ISS can supply in-house and/or online learning modules for your officers and your team members, specifically tailored for your business and the risks it faces.
Beneficial owner and manager approval
It is a criminal offence for a person to act in the capacity of a beneficial owner, officer or manager of a relevant firm without the approval of an AML supervisor. Have all relevant owners and managers of your practice registered with your AML supervisor yet?
This requirement extends to any party with a controlling interest in the business (eg a shareholding in excess of 25%) and any principal, senior manager, or member of a management committee who is responsible for setting, approving or ensuring the firm’s compliance with the firm’s anti-money laundering policies and procedures.
We will be examining the legal requirements and the risks presented to practices in our forthcoming Intensive CPD / CPE Catch-Up Courses and discussing how practices may manage these.
For further information about how ISS may assist you in meeting your AML obligations, contact [email protected]
R3 in Scotland Breakfast Seminar: An Insolvency Practitioner’s Duties and Obligations
Insolvency Support Services (ISS) is delighted to sponsor the upcoming R3 in Scotland Breakfast Seminar on An Insolvency Practitioner’s Duties and Obligations: a look at Doonin Plant vs SEPA.
The excellent panel of speakers comprises Kirsten Fleming and Tim Cooper from Addleshaw Goddard and Alison York, Head of Legal at the Scottish Environment Protection Agency (SEPA).
R3 President, Stuart Frith, will also give an update on behalf of R3.
When: Friday 30 November 2018, 08:00 until 10:00
Where: Addleshaw Goddard LLP, 19 Canning Street , Edinburgh EH3 8EH
We look forward to catching up with you for an excellent breakfast seminar!
To book, please click here.