The Do’s and Don’ts of Independent Anti-Money Laundering Audits

When the 4th Anti-Money Laundering Directive was introduced in 2017, it fundamentally changed the way businesses handle money, and one part of this directive which is often overlooked is the need for an independent audit of AML processes to be carried out on a regular basis.

Here Rhys David, CEO of Credas, talks Lawyer Monthly through the complexities of carrying out independent anti-money laundering audits.

Although many practices are managing their due diligence when it comes to the basics – the independent audit is often widely missing from AML procedures.

Unfortunately, failing to carry out these important checks can easily result in an investigation and subsequent fine from the Solicitors Regulation Authority, so it’s vital that firms cover themselves against any unnecessary risk.

When carrying out an independent Anti-Money Laundering audit, there are a number of things that legal businesses need to consider before they get started.

Find an expert. Look for an auditor or company which has specific expertise in Money Laundering regulations to ensure that you are getting an audit which is fit for purpose, as many will offer template services that aren’t quite the right fit.

Be honest. Don’t embellish what you have or don’t have in place. The audit is there to improve your AML compliance and to ensure that you don’t fall foul of the regulations, so being brutally honest about your procedures is the best way to ensure that you’re seeing real value from it.

Involve the team. Have your staff involved in the process. Let them know that it is happening and make sure they know the importance of the audit and its findings for the business. This is an important part of the 4th Directive and one which should help you manage and mitigate risks in the following year’s accounts. Its important the wider team understand the firms approach to AML compliance as another component of the 4th directive is training and communication, anyone in the business should be able to answer questions on the process should HMRC visit.

Take the advice. When you have received recommendations following the audit – action them. Spending money on a service like this is sadly a wasted effort if you don’t then follow through on the necessary changes.  Act on the advice of the audit and make some positive steps towards improving on your AML compliance.

Do it soon. The 5th AML Directive is coming into force in January 2020 and the need for an audit as well as risk assessments on clients and staff is a significant part of that directive. Take action now and get your house in order so you know that when the 5th is enforced you are AML-OK.

Although the 4th Directive has been in place for two years already, this is an aspect of compliance that has otherwise completely slipped under the radar. With that being said, in recent months we’ve received an increasing number of customers asking about independent audits, especially with the 5th Directive on the horizon, so it’s fantastic to see that businesses are beginning to protect themselves against unnecessary risk.

By re-visiting the legislation and checking off with a well-informed auditor all the aspects of compliance that legal practises need to adhere to prevent financial crime, the industry can rest assured that its ready for the 5th AML Directive coming in to force within a few short months.

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