Money Laundering

MONEY LAUNDERING

"Money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activity, allowing them to maintain control over the proceeds, and ultimately providing a legitimate cover for their sources of income"

Money laundering is a criminal offence. It is considered as criminal because it covers the proceeds of illegal activities thus encouraging them to perpetrate.

Now the question arises that why does an auditor need to know about and how is he a stakeholder to money laundering process.

Unfortunately, the answer to this question lies in the fact the proceeds from money laundering are channeled into the economy through three stages i.e., placing, layering, and integration. These three stages are conducted through different kinds of businesses.

An auditor, during his audit needs to use his professional skepticism to identify any signs of money laundering.

The duty to identify money laundering does not end here; the audit firm as a whole needs to appoint a money laundering reporting officer (MLRO). The MLRO should have a sufficient level of seniority and expertise .This is essential as the MLRO needs to enquire people at different hierarchies .The MLRO needs to be both a financial and a legal expert. Financial expertise is necessary as audit firms are mostly engaged in financial services. The need for legal expertise arises from the fact that the anti- money laundering regulations need to be understood clearly.

The duties of MLRO include:

 Train individuals to ensure that they are aware of relevant legislation, procedures of reporting money laundering and how to identify clients.

 Establish internal procedures appropriate to forestall and prevent money laundering and make relevant individuals aware of the procedures.

 Verify the identity of new and existing clients and maintain evidence of identification.

 Ensure that client's records are maintained and any transactions undertaken for or with the client.

 Report suspicion of money laundering to relevant regulatory authorities.

DUTIES OF THE MEMBERS INCLUDE:

Following are the duties to which a member should adhere to :

 Members should not be involved in money laundering process.

 Members should not conceal criminal property.

 Members should not acquire or possess criminal property.

 Members should not "tip-off