26 Mar

Anti-Money Laundering – Time to spring into action

With the January 31st tax filing deadline well out of the way, Tim Pinkney, Director of Compliance at the Association of International Accountants, says it’s time for firms to think about ‘spring cleaning’ their risk processes to avoid falling foul of new money laundering regulations.

As the march of technology continues to revolutionise the way financial flows move around the world, the battle to stamp out money laundering and terrorist financing becomes ever more challenging.

The response from the UK Government and professional sector has though, been robust. In addition to the revised Money Laundering Regulations published in June last year, regulatory bodies and the Government have joined forces to promote profession-wide awareness-raising initiatives such as the Flag It Up campaign, in order to ensure that professionals are in the strongest possible position to meet their statutory obligation to report suspicious activity to the National Crime Agency (NCA).

As supervisors, we appreciate that the anti-money laundering (AML) landscape is hugely complex.  Nevertheless, our expectation is that all practices are working to ensure they are 100% compliant with the new regulations. With the hectic January tax filing period behind us, now is the perfect opportunity to carry out a comprehensive spring clean of approaches to managing exposure to all forms of financial crime and AML obligations.

The risks posed to different firms by money laundering activity will not be of the same nature in every case, which is why the key to preparedness is to take what’s known as a ‘risk based’ approach to AML – particularly in relation to client due diligence and staff training procedures.

If we were inspecting a member business tomorrow, at the very least we would expect to see that it had money laundering procedures in place that are shaped around the 2017 regulations or were moving towards them.

The firm’s policies and procedures should clearly outline what its risk appetite is and what it does to mitigate risks. In addition, it should be clear who the Money Laundering Reporting Officer (MLRO) is, and what approach is taken to training.

The exact shape of this risk-based approach will ultimately be defined by a firm’s risk appetite. For example, you could have a policy that says you’re very risk-averse, or you might decide you don’t mind taking on higher risk clients – but in either case the overall approach to managing risk will need to be proportionate.

What should be classed as a client risk? In short, we would define it as the chance of a client or their associates having attributes known to be associated with money laundering. This may sound obvious, but our experience is that it can be far from clear-cut.

Considering client risk, businesses should look for some of the telltale signs that all might not be as it seems. Client secrecy, unnecessary structures, not being able to contact the client, being out of the country a lot and opaque ownership are common red flags. So too are being based in geographic jurisdictions known to be associated with money laundering or being associated with certain political regimes. It is particularly important to bear in mind that these flags don’t just apply to your clients, but also to their clients and associates.

Of course, you should always carry out due diligence at the start of a new client relationship – the usual checklist of things such as verifying identity, personal circumstances, addresses, VAT and company registration numbers – but circumstances can and do change during the course of the year, which is why an annual due diligence refresh is a sensible step.

Depending on the risk-rating of the clients you decide to take on, you may be required to carry out enhanced due diligence to satisfy professional supervisors that you have done everything you can by way of AML mitigation.

By way of example, if the police believed one of your clients was involved in money laundering and was moving illegal funds through your business, they would want you to be able to demonstrate what you have done everything you can to mitigate against that eventuality. And unless you have a documented audit trail showing what action you took to assess the validity of the client, you could find that it’s you, as well as your client, who is facing criminal proceedings.

Another important reason to carry out a regular spring clean on your client portfolio is the introduction last year of the requirement for all businesses, with the exception of sole practitioners, to carry out a ‘whole firm risk assessment’.

This key document will provide evidence that you as a firm have attempted to identify and codify where your weak points are – showing that you know where you are vulnerable if criminals were going to target you. It acts as the cornerstone of your fight against financial crime and is something that we as supervisors will be looking for when we start our rounds of visits, desktop reviews and telephone interviews in the spring.

Carrying out regular, proportionate due diligence on your client base could flag up the discrepancies that might prompt you, either directly or through your designated MLRO, to complete a Suspicious Activity Report (SAR).  Doing so will contribute to the combined intelligence pool that is often required to unravel criminal activity. Now’s the time to polish up those procedures.

Article by Tim Pinkney, Director of Compliance at the Association of International Accountants
06 Oct

WORKING IN THE ‘DARK AGES’: FIFTH OF ACCOUNTANTS STILL USING 13TH CENTURY METHODS

A new report has found that despite six in ten (61%) accountants saying that the finance and accounting profession is at a technological tipping point, six in ten (64%) still know someone who is using desktop spreadsheets as their primary accounting tools.

The research from cloud accounting software company Xero finds there is a high expectation that accountants should be up-to-date with the latest accounting technology, with only a small number (6%) of SMB owners citing that it’s not important. Despite this, eight in ten (78%) accountants who work in accounting and bookkeeping firms still work off computer spreadsheets and a fifth (18%) still use a paper ledger, used as far back as the 13th century, to manage accounts.

To encourage accountants and small businesses to ‘keep up’ and get their accounting systems online, Xero has launched its Digital or Die report and commissioned renowned renaissance artist China Jordan to recreate the Portrait of Luca Pacioli; the man known as the ‘Father of Accounting and Bookkeeping’. The update brings Pacioli, who was the first to publish a detailed description of the double entry system, into the modern age by updating his ledger with modern-day technology.

The Digital or Die report finds half (48%) are worried about the speed of change impacting the accounting industry and being left behind – rising from 22 per cent in 2016. This is amplified by the fact that more than a third (35%) do not think there is enough education or training available to ensure that UK accountants will be able to keep up with the pace of digital change and upcoming legislation.

With change on the horizon, only 17 per cent of accountants say they are very prepared for upcoming legislation, such as Making Tax Digital, the government’s plan to make tax returns digital and quarterly. A further quarter (25%) of accountants were not aware of Making Tax Digital at all – a concern, as a quarter of SMB owners (25%) believe that it’s their accountant’s responsibility to keep them updated with the latest legislation.

Shaun Robertson, Director, Qualifications from The Institute of Chartered Accountants in England and Wales (ICAEW) adds:

Some accountancy professionals fear being ‘left behind’ by the speed of change, which is why it’s so important to learn about the benefits, opportunities and challenges of new technologies. In some cases, technology such as AI may supersede human efforts, however, it does not replicate human skills and intelligence. We need to recognise the strengths and limitations of different forms of technology, and build better understanding of the best ways for humans to benefit from computers.

When asked about the perceived benefits of going online, Xero’s Digital or Die Report finds:

  • Cloud based accounting could save accountants 117.5 hours a year on average (15 days) by eliminating the time spent on administrative tasks – approximately £3,153.70 per year, per staff member.
  • A quarter (23%) say it could save them more than half a day per week (4 hours).

To find out more and to download the Digital or Die Report, click here.

14 Jun

ICAEW: Do digital experts hold the key to solving the corporate reporting conundrum?

Corporate reporting needs to take advantage of new technologies, according to ICAEW. In its report What next for corporate reporting: time to decide?, released today, the accountancy and finance body says that it’s time for policy makers to take a decision on how best to use IT to satisfy increasing demands for information.

Traditional paper-based reporting is still perceived by many as the principal form of communication.  However, there are increasing demands for a range of information to be provided in corporate reports but at the same time, fears those reports are becoming too long and therefore less useful.  ICAEW suggests that inclusion of digital and technology specialists in reporting discussions could highlight opportunities for companies to use technology in reporting as part of the solution to this problem.

Dr Nigel Sleigh-Johnson, Head of ICAEW’s Financial Reporting Faculty, said:

Dr Nigel Sleigh-Johnson, Head of Financial Reporting Faculty ICAEW

Stakeholders  are demanding more information from companies, and companies seem willing to provide it. But there seems to be  little progress in using technology as a reporting tool, which could solve this communication challenge. Demand for more access to information is likely to continue to grow, so it is important to address these problems as soon as possible
There is a real risk that the annual report becomes further overloaded with information in order to meet wider stakeholder demands, while making the report less useful for investors for economic decision making purposes. Presenting additional information outside of the annual report, in a digital format that is user-friendly and easy to access, may provide the answer to this. However, there needs to be further research into the implications of digitalisation. IT expertise would improve understanding of, for example, the potential in this context of two emerging technologies: data analytics and blockchain technology

In its new report, What’s next for corporate reporting: time to decide?, ICAEW captures the main features of vibrant discussions on the future of corporate reporting at a number of ICAEW roundtables and meetings. The importance of including technology specialists in meetings in order to discuss opportunities to meet the demands of the reporting process,  as well as better collaboration between accounting and IT communities for the best results, was a common view heard during these discussions.

However, ICAEW warns that key policy decisions on issues such as this need to be taken if real progress is to be made in advancing the quality of corporate reporting. Either stakeholders make a concerted effort to accelerate and coordinate progress, with collaboration between technology specialists and those with an interest in better corporate reporting, or we accept that the pace of progress in the use of technology as a corporate reporting tool is likely to remain very slow.

It’s time to decide, in this and other areas highlighted in the report.

The full report can be found here: http://www.icaew.com/en/technical/financial-reporting/information-for-better-markets/what-next-for-corporate-reporting
25 Jan

ICAEW members still concerned about HMRC service standards

There has been little change to the quality of HMRC service standards over the past year, according to the latest research by ICAEW.

Half of members think that HMRC service standards have not improved over the past 12 months, while nearly a third believe that they have deteriorated. Similarly, over half do not think complex queries are being resolved satisfactorily over the telephone and only one in five have confidence that HMRC will ‘get right first time’.

Around 4 in 10 members think that the cost of using HMRC has increased over the past year, with only a small percentage thinking they had reduced.

Frank Haskew, ICAEW’s Head of Tax Faculty said:

The results of the survey are disappointing, especially when HMRC’s own statistics over the past year show a different picture of a steadily improving performance for the general public. Getting through to the right person quickly to resolve queries and ‘getting it right first time’ remain problem areas with our members. We know that HMRC is working to address these issues and that they have been meeting their own targets for improvements, but we think that, for example, HMRC’s target for clearing 80% of post within 15 working days should be more ambitious

With current proposals for ‘Making Tax Digital’ (MTD) looming next year, just 3 in 10 members view this as a positive development and only 15% think that HMRC is supporting the role of tax agents in this move.

Frank Haskew added:

HMRC has made improvements this year but there is more work to be done, especially as the UK moves to a digital tax system. Digital ser
15 Dec

BARCLAYS AWARDED SMALL BUSINESS BANK OF THE YEAR AT ANNUAL LUCA AWARDS

HRH Prince Michael of Kent GCVO presents award to Tony Geary, Head of Business Development at Barclays

HRH Prince Michael of Kent GCVO presents award to Tony Geary, Head of Business Development at Barclays

Following the 6th Annual LUCA awards, hosted by the Institute of Certified Bookkeepers (ICB) Barclays was awarded ‘Small Business Bank of the Year’ as voted by ICB members out of 9 other nominees including the British Business Bank, Lloyds and HSBC.

The award was presented by HRH Prince Michael of Kent GCVO and collected by Chris Forrest Head of SME UK and Tony Geary Head of Business Development at Barclays, pictured below.

Chris Forrest, Head of SME at Barclays commented:

To be recognised by the members of the ICB as the Small Business Bank of the Year is a great honour. We have worked hard to build on our existing services for customers in 2015 and believe our digital solutions can help busy customers to keep track of their finances on the go. We look forward to strengthening this relationship further in 2016 and supporting bookkeepers and their clients, while continuing to bring enhancements for our both our customers and introducers

ICB Global President and Chief Executive Garry Carter commented:

Congratulations to Barclays for scooping the award as Small Business Bank 2015 in the 6th Annual ICB LUCA Awards, having amassed an outstanding 66.7% of the vote.  Bookkeepers run the day-to-day financial record-keeping of micro and small businesses and work very closely with their clients.  The bookkeeper’s relationship with their client’s bank is therefore crucial – which is why it is so encouraging to see that ICB members hold Barclays in such high esteem.  Bank reconciliations are fundamental to running a business properly and ICB drums this into students from day one.  Emerging technology is taking away much of the painstaking cross-matching of entries but bookkeepers still need to check what’s going on and a positive relationship with the bank remains paramount

10 Jun

UK micro-businesses owed £16.9 billion in outstanding payments

UK micro-businesses owed £16.9 billion in outstanding payments Slow payment culture hurting UK’s most vulnerable businesses through increased borrowing and time wasted chasing invoices

UK micro-businesses are owed over £16.9 billion by their customers, new research from Intuit QuickBooks.

Micro-businesses – with up to ten staff – account for 96% of all firms in the UK; this slow payment culture is stifling growth amongst the UK’s most important, but also most vulnerable businesses.

The reluctance to pay promptly is having a major impact on cash flow, driving them to resort to additional borrowing: 32% of respondents stating they have had to take on loans or credit to pay suppliers and wages, putting increasing strain on the business. It is also causing micro-businesses across the UK to spend an average of 19 working days per year chasing invoices.

This attitude to payments is in stark contrast to business owners’ attitudes in their personal lives. Ninety three per cent of respondents claimed they are happy to pay immediately as a consumer, but many do not even ask their customers to pay immediately in business. In fact, 94% of those surveyed who wait up to a month to invoice stated they were happy to pay upfront as a consumer.

One issue at the heart of the problem is our dependence on the invoicing process. The research found that only 36% of micro-businesses issue e-invoices via email with many still issuing traditional paper invoices – and some waiting up until a month after completion of work to do so.

Rich Preece, UK VP and Managing Director at Intuit, explained:

[quote]intuit quickbooks Global AccountantAs any entrepreneur knows, starting and growing your own business is tough. When you’re putting out fires and jumping over hurdles on a daily basis, you don’t need the distraction of worrying about whether you’ve been paid in a timely manner for your products or services, so it’s disheartening to see the extent of the issue. This wasted resource and unnecessary exposure to risk is stopping them focussing on what really matters – time with customers and growing the business.[/quote]

Matt Eagles, co-owner of Boo Boo Coffee, said:

[quote]Cash flow is the most important thing to the financial health of my business so I’m constantly looking for ways to get paid quicker. Invoicing can be a very time consuming process; it’s also very stressful when payments are slow or we’re too busy to get the invoice out as promptly as we would like. I want to focus on delivering the best possible job for my customers, so anything that frees me up to focus on that is incredibly welcome[/quote]

Rich continued:

[quote]This isn’t just about late payments, it’s about expecting and facilitating payments much more quickly, and the impact this can have on the millions of very small firms across the UK. There’s major potential to dramatically improve micro businesses’ cash flow and save valuable time by making it easier for their customers to pay – particularly when the vast majority are more than happy to settle up immediately themselves when dealing with small businesses[/quote]

30 Mar

KPMG announces strategic partnership with UKTI

export ukti global accountant kpmgKPMG, the professional services firm, together with UK Trade & Investment (UKTI), are pleased to announce a strategic partnership which will see the two organisations supporting the growth of UK exports of goods and expertise. Both organisations have signalled an intent to collaborate together offering support to what is a vital part of the UK’s economic growth targets. UKTI and KPMG will work together over the coming months on a number of initiatives to support current and new exporters at a time where demand for British excellence has never been higher.

The first initiative to be announced involves a continuation of work with the highly prestigious NHS Leadership Academy. With the support of Healthcare UK, the government body which supports the UK health sector to do business overseas, KPMG will work with the NHS Leadership Academy to take their successful training programmes to countries where there is growing demand for the UK’s proven expertise in healthcare leadership. Created in 2012, the Leadership Academy has already trained over 36,000 leaders at all levels in the NHS in England.

Lord Livingston, Minister for UKTI Trade & Investment, said:

It’s great to see UKTI and KPMG come together to present this vision for how we can work in partnership over the next two years. In particular, the plans to work with the NHS to extend the NHS Leadership Academy across the globe are an excellent example of how Government and the private sector can work together to encourage economic growth

Howard Lyons, Managing Director of Healthcare UK, said:

People sometimes forget how highly valued the NHS brand is overseas, with many emerging markets looking to replicate elements of our health system. We strongly believe that taking the inspiring NHS Leadership Academy and its programmes overseas, delivering revenues back to the NHS, will be of major interest and showcase a real success story

Karen Lynas, Deputy Managing Director and Head of Leadership Development at the NHS Leadership Academy, said:

The investment into the NHS Leadership Academy was extensive and through leadership development at all levels is creating a climate of care and compassion, improve patient outcomes and their experience of the health service

In addition to this, KPMG will be working with the wider UKTI team to address the challenges facing SMEs in identifying opportunities to export. KPMG are to promote the UKTI Business Opportunities Programme (“Bizopps”) to its clients and contacts. This UKTI online service, links UK businesses to over 9,000 global sales leads annually in over 100 countries in 42 sectors. It is estimated to benefit the UK economy by around £4bn per annum. To sign up for alerts and business opportunities please visit www.businessopportunities.ukti.gov.uk.

Simon Collins, Chairman of KPMG in the UK, said:

KPMGKPMG’s work with the NHS to create a world class training programme will now be rolled out to help healthcare teams worldwide. Selling the UK’s knowledge and expertise abroad is vital as the UK competes globally.

SMEs are the beating heart of our growing economy. That’s why we launched KPMG Enterprise to support the growth of private businesses. The Bizopps programme will really boost small businesses across the UK, helping them access international markets to drive the UK’s export growth

12 Mar

AQF: Can businesses get it right?

Business can ‘get it right’ but only when it is diverse, innovative, and looking at the longer term, according to last night’s Audit Quality Forum 10th Anniversary Debate. 350 delegates including the from business, finance and civil society attended the event, introduced by keynote speakers Dr. Vince Cable and Lord Mayor Alan Yarrow.

Business Balance ICAEW Global AccountantThe evening, hosted in the Egyptian Room at Mansion House, was on the theme Can Business Ever Get It Right? and centred around two debates, each chaired by former ITV chief political and economics correspondent Daisy McAndrew.

The first, debated by Transparency International Executive Director Robert Barrington, Sir Win Bischoff, Financial Reporting Council Chairman, Andy Brough, fund manager for Schroders, and the RSA’s Chair of Public Services Ben Lucas, examined the role of business in society, and what society expects of corporations. All agreed short termism has created distrust of business and that viewing a single quarter as long term is a problem. Sir Win pointed out businesspeople don’t magically become ‘society’ when they leave work, but are an intrinsic part of society all along. Andy Brough noted that for business, society and markets to get along ‘everyone needs to leave the party with a balloon.’

Short termism was also referenced by Vince Cable, who said that during his time at Shell it had been hard to reconcile 20 year planning with 24-hour news and constantly moving markets.

The second debate – between New Statesman Editor Jason Cowley, GSK CFO Simon Dingemans, Oxfam Chief Executive Mark Goldring and Harriet Green OBE, former Chief Executive of Thomas Cook Group – looked at how innovation drives sustainable wealth. Much debate focussed on diversity, with all delegates stressing the need for boards to be less ‘male, pale and stale’.

Harriet Green reminded the room that ‘business is exciting’ and we should be inspiring young people to get involved. She also suggested ‘reverse mentoring’ where younger employees help senior management engage with innovations like social media. Mark Goldring suggested longer supply chains meant even responsible businesses could lose track of what was going on.  Simon Dingemans warned business lose trust through the ‘ABC’ of ‘arrogance, bureaucracy and complacency’.

The evening ended with a poll of assembled delegates, who agreed by 70% to 30% that it is possible to restore trust in business, but only where businesses create jobs, innovate and look after people. Also referenced were being transparent, paying tax and caring for the planet.

Robert Hodgkinson, ICAEW Executive Director, said:

Robert Hodgkinson ICAEW Global AccountantBusinesses need to build greater confidence and command the trust of the society in which they operate. Building shareholder value is clearly important but it is not the sole purpose of companies. Organisations need to decide what their purposes are – why they are in business. Then they need to ask themselves if they are in step with the values and norms of society as a whole, and state what they are trying to achieve. They will need to be open and honest about how they operate, and make sure that what they do is socially acceptable. Unless businesses can demonstrate that they are an integral part of society, they will suffer even worse loss of confidence

13 Nov

Dr Rona O’Brien: UK’s Social Mobility Problem

Rona O'Brien, Dean of Business and Management at GSM London Global Accountant

It’s been heartening to see ACCA take a clear stand on inequality in the UK, releasing its ‘Who accounts for social mobility?’ on the same day as the latest Social Mobility and Child Poverty (SMCP) report from Sir Alan Milburn.

Few would take issue with the basic premise. Unlike many other Western economies, if someone starts out poor in the UK, they’re likely to stay poor. And ACCA makes an important point in highlighting the need for better access to the professions in general, how higher-paid jobs in areas like accountancy are a ‘closed shop’, opened up only to those people with the ‘best’ education and networks of contacts.

Good intentions and sentiments, of course, come easy. If the profession is genuinely committed to playing its part in encouraging a more equal society, where merit rather than money matters, then radical changes are needed. Why bother? Because as the ACCA report clearly argues, the most ‘successful’ societies in terms of highest economic growth, high levels of entrepreneurial activity and score better on the ‘happiness index’ are the most equal. It shouldn’t matter where someone stands on the political spectrum.

Accountancy firms and professional bodies shouldn’t lower their standards, but they could do more to support people in reaching the standards needed. Access is very much directed at recruits with a degree or A levels, which already creates a specific barrier.

How much do the professional bodies invest in young people who only have GCSE’s been able to access the professional examinations? What’s being done on work with schools and agencies in disadvantaged areas? More accountancy firms need to show they’re able to look beyond the old-fashioned university ‘milk round’ and really start working with the new universities – and look at what they’re asking for why GCSEs or A levels instead of their degree – why ignore the value added that these students achieve at university. Using GCSEs and A levels as a sorting mechanism is not fair or useful for for students from non-traditional backgrounds.

At my institution the great majority of students are from non-traditional backgrounds. We see their potential and a different kind of energy, commitment, enthusiasm and sheer character they bring to their studies. We should be celebrating this kind of diversity and be more alive to what it’ll offer to the professions.

Staff Return Global Accountant

Changes in attitudes to access and real engagement with new and different groups of potential recruits is what matters. I’d argue we don’t need what ACCA is recommending. How much data collection around social mobility in accountancy firms do we really need? It’s an issue that needs action first and foremost. We also don’t need a Social Mobility Minister in the Cabinet – there would be no need if the issues were taken seriously by the existing Ministers with clout. Getting independent analysis of the impact of tax and spending policies on social mobility and ending unpaid internships are excellent ideas, but are unlikely in the current political context.

In order to be able to pass judgment on what the Government does or doesn’t do in response to the SMCP commission, the profession needs to lead by example.

Rona O’Brien, Dean of Business and Management at GSM London, www.gsm.org.uk