The impact of the Prevention of Money Laundering Regulations 2003 on the accountancy profession

Abstract

The Prevention of Money Laundering Regulations 2003 came into force on 12th August 2003. Apart from regulating banks and other financial institutions, the Prevention of Money Laundering Regulations 2003, as required by the Second EU Directive on measures against money laundering (Directive 2001/97 /EC), also impose five main obligations on a number of previously unregulated cash-based businesses and professions, including the accountancy profession. As subject persons of the Prevention of Money Laundering Regulations 2003, auditors, external accountants and tax advisors are now required to maintain adequate identification procedures, record keeping procedures and internal reporting procedures (the latter obligation also requires the appointment of a Money Laundering Reporting Officer). Auditors, external accountants and tax advisors are also required to report, to the Financial Analysis Intelligence Unit (FIAU), any suspicions of money laundering that arise during the course of their work. They must also train their employees to recognise and deal with transactions involving money laundering. In examining the implementation of the above obligations, interviews conducted with the Maltese accountancy profession revealed that while the big audit firms are the ones that have been least affected by the Prevention of Money Laundering Regulations 2003, the impact on small firms, and especially sole practitioners, has been much greater, since, in order to ensure compliance, they had to introduce new procedures within their practices. From the interviews held, it also emerged that the Prevention of Money Laundering Regulations 2003 have brought about a number of concerns within the accountancy profession. The main concerns expressed by interviewees were the lack of a granting of a transitional period, and the possibility of a strain being put on the profession's relationship with clients. The Prevention of Money Laundering Regulations 2003 have also exposed auditors, external accountants and tax advisors to additional risks. One of the risks identified by interviewees is the risk of not being in compliance with the Prevention of Money Laundering Regulations 2003, which could lead to severe consequences, namely fines, jail sentences, and loss of the firm's goodwill. In conclusion, one may say that the new role of auditors, external accountants and tax advisors in the global fight against money laundering, as required by the Prevention of Money Laundering Regulations 2003, has certainly had a significant impact on the accountancy profession.