AML threats, SARs and compliance challenges: UKFIU podcast

On AML threats and red flags

“Some of the smaller practitioners are often so alone in the world that they deal with that they don't see the risks,” Pinkney said.

He mentioned red flags to be aware of at either end of a spectrum of client size – the small local businesses with heightened risk profiles based on their cash operations, and the larger businesses whose complex corporate structures also may present risk for smaller firms.

“Take a step back and look at ‘why has this client approached us?’,” Pinkney suggested. “Especially if it's something out of the norm, not from their local communities or from the normal client base.”

Finally, Pinkney suggested refusing a client as a de-risking strategy, particularly for forms without the resources to devote to incorporating and mitigating risks, and deeply understanding business models.

On SAR submissions

Podcast host Emma-Jane Turner referenced the UKFIU stats – 5,863 SARs were submitted by accountants in 2021–22, a 25 per cent increase on the previous year.

All three guests suggested that, although it’s difficult to assess how many SARs ought to be submitted, firms may well be underreporting.

“Our work shows that there are reasonable suspicions that go unreported and, as supervisors, we must consider the firm's role in allowing that to happen,” Pinkney said. “While we cannot compare the number of SARs submitted by accountants with those submitted by lawyers, we would probably conclude that the numbers submitted should be slightly higher.”

The panel also discussed one possible reason for low rates of SAR submissions – that firms may not be clear on the need to submit a SAR in cases where the firm declines to take on a new client because of suspicions or dissatisfaction with incomplete information during the know your client and customer due diligence processes.

On AML compliance and SAR challenges

Firms, and particularly smaller practitioners, face the challenge of resources, Pinkney explained.

“Compliance requirements and enforcement activities are not always enough to engage them.”

Pinkney urged additional training, easy and intuitive reporting processes, and re-engaging firms that have interacted with the NCA in previous years.

“[My reviewer team and I] already know, generally within 10 or 15 minutes of a review, whether a firm is going to be compliant or non-compliant, because we can witness firsthand that compliance culture,” Pinkney said.

“Develop a compliance culture within your firm which encourages professional scepticism, rather than adopt policies and procedures as a simple tick box exercise.”

The full episode is available on Spotify, or watch below, with subtitles.