IFAC’s Action Plan for fighting corruption and economic crime. How does it apply to UK accounting?

The reason for its release is to further strengthen the Accountancy sector’s role in detecting, preventing and reporting money laundering, terrorist financing and proliferation financing (ML/TF/PF). Ultimately, it will also mean that there will be more scrutiny of the AML/CTF/CPF activities performed by individual businesses and professionals in the sector worldwide

In this article, I’ll look at how this plan is being put into motion and how it will affect your day-to-day role.

Why is there a need for this Action Plan?

In 2015, the UN adopted the 2030 Agenda for Sustainable Development. At the heart of the Agenda are 17 Sustainable Development Goals (SDGs) that every member state has committed to furthering. These goals all aim to improve health and education, reduce inequality and spur economic growth.

ML/TF/PF are in direct opposition to the SDGs. More than that: they directly and indirectly impede the success of the SDGs.

As one of the key gatekeepers of a country’s financial system, the Accountancy sector worldwide is coming under increasing pressure to play a bigger role in the detection, prevention and reporting of ML/TF/PF.  The Action Plan responds to this pressure by laying out exactly how the sector will rise to the challenge.

The Action Plan also supports IFAC’s new Impact Approach, as outlined in its Strategic Approach, which puts the fight against corruption and economic crime in the broader context of IFAC’s activities.

 What does the Action Plan say?

 The Action Plan is intended as a framework to enhance the role the Accountancy sector plays in AML/CTF/CPF.  It’s very much a working document: professional accountancy organisations and other stakeholders are being actively encouraged to engage with the IFAC on its contents.

 But the evolving nature of the Action Plan doesn’t mean it can be ignored until a later date. With USD 3.5 trillion lost to corruption each year^[1], you can bet that the framework will be put into place as quickly as possible.

The Action Plan uses these five pillars to layout a holistic set of actions that the profession can and should take to further the UN’s SDGs. 

1. Harnessing the full potential of education and professional development

The IFAC aims to introduce AML/CTF/CPF into every part of an accountant’s professional development: from the academic foundations to assessment and CPD. Alongside this, they want to do more to educate the public in how to fight corruption and economic crime.

 What does this mean for you? 

• Current AML/CTF/CPF education tools used by the Accountancy sector will be audited and improved.
• IFAC will promote the appointment of ethical accounting professionals into government, business and societal positions in countries that need the most support.
• More AML/CTF/CPF resources will be created so that professional accountancy organisations (PAOs) can better educate accountants.
• New accounting qualifications related to fighting corruption and financial crime with be developed.
• Improved ways to knowledge-share between the private and public sectors will be created.

2. Supporting global standards

Raising global standards for the Accountancy sector has been a constant priority for IFAC. It will continue this work by ensuring corporate reporting on corruption and bribery remains a high priority for the sector.

You’ll already be applying standards set by International Auditing and Assurance Standards Board (IAASB), the International Ethics and Standards Board for Accountants (IEBSA) and the International Public Sector Accounting Standards Board (IPSASB) in your daily role, to maintain high levels of ethics. These standards will evolve to come into line with those laid out by global, non-accounting bodies, such as the Financial Action Task Force (FATF).

Changes to global standards introduced by the ISSB (The International Sustainability Standards Board, created in 2021 by the International Financial Reporting Standards Foundation (IFRS) to develop a comprehensive global baseline of high-quality sustainability disclosure standards) will also influence the new Accountancy-sector standards.

 What does this mean for you? 

• The Accountancy sector must adopt the new IESBA standards, with professional accountants being expected to promote an ethics-based culture in their organisation.
• The Non-Compliance with Laws and Regulations (NOCLAR) standard must be upheld and the importance of a comprehensive whistleblowing system emphasised.
• The FATF Recommendations underpin much of the work being done so you need to understand how they apply to you.
• The IAASB’s standards must be adopted by audit professionals.
• IFAC will advocate that non-professional service providers (tax, company formation etc.) are vital gatekeepers and be subject to the same ethical code and requirements as accountants.

 3.Contributing to evidence-based policy making

Here IFAC recognises that accountants the world over create and verify high-quality, decision useful information every day. And always in the interest of their clients and the public. They want to ensure that any decisions you have to make concerning AML/CTF/CPF are supported by effective, efficient global policy.

 What does this mean for you?

• IFAC will review to what extent large, listed company’s report on their AML/CTF/CPF
• Trust in Tax will continue alongside the development of national tax/revenue strategies.
• A global corruption survey will take place, to understand corruption perception among accountants.
• Research will take place into the connection between a high-quality accountancy profession and corruption. 

4. Strengthening our impact through engagement and partnership

As an accountant, you’ll most likely have professional relationships with other regulated professionals who also play a role in the fight against corruption and organised crime. The IFAC plans to leverage relationships like these between global organisations in various regulated sectors, to increase the impact they can have on ML/TF/PF.

 What does this mean for you?

•  IFAC will be working with and supporting PAOs to develop tools to engage with policymakers on the matter of AML/CTF/CPF.
• The pre-existing relationship between IFAC and the IBA will mean that the Accountancy and Legal sectors will be more aligned on areas of common interest.
• Engaging with global policymakers and organisations will most likely bring updates to domestic AML/CTF/CPF
• Corruption and economic crime issues will remain the focus of IFAC’s work with accountancy stakeholders, such as the Institute of Internal Auditors (IIA). 

5. Contributing our expertise through thought leadership and advocacy

There are over 3 million accountants worldwide, both in the private and public sectors. The IFAC wants to draw on their expertise and first-hand experiences to improve policy making. They also propose to use smart regulation to deliver required changes in the least burdensome way. The importance of new technology is highlighted too, along with the risks and opportunities it brings.

 What does this mean for you? 

• IFAC’s ‘Point of View’ will be updated to reflect the OECD Anti-Bribery Recommendation, among other sector developments.
• There will be more advocacy for the sector’s perspective on ML, beneficial ownership transparency and whistleblower protection.
• The IFAC’s Knowledge Gateway will be further supported as a hub for thought-leadership on AML/CTF/CPF.
• The PAO Membership base will be expanded to bring in more accountants in business and the public sector.

 Final thoughts

 As the Action Plan for Fighting Corruption and Economic Crime itself states, this is just the beginning. The Accountancy sector worldwide has always played an important role in gatekeeping a country’s financial system. This plan puts a greater emphasis on this role.

 That’s not to say this is yet another burden to add to your workload. If anything, the actions the IFAC sets out are designed to, hopefully, make the role that accountants need to play much clearer. And to give a voice to the sector in the global debate on how to effectively fight corruption and economic crime.

^[1] IFAC’s Action Plan for Fighting Corruption and Economic Crime (2022), p. 3