Auditors’ headache

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Sir Ronald Sanders speaking at the opening of the ICAC’s 35th Annual Conference on Friday.

…new FATF rules require accountants to be whistleblowers against clients

TOP Caribbean diplomat, Sir Ronald Sanders, told a gathering of accountants on Friday that despite their obligations to be loyal to their clients, under the new rules of the Financial Action Task Force (FATF) and Organisation for Economic Cooperation and Development (OECD), they are also expected to be “whistleblowers” on their clients if they found them to be involved in financial crimes.
Sir Ronald was among the speakers who addressed the opening of the 35th Annual Conference of the Institute of Chartered Accountants of the Caribbean (ICAC) which kicked off on Friday at the Marriott Hotel. The two-day conference gives those professionals the opportunity to discuss issues that affect their individual territories but also look at the various commonalities that can be assessed and corrected.
Noting that FATF and the OECD Global Forum now require all jurisdictions to identify and name beneficial owners of financial assets, Sir Ron said this has extended to International Business Corporations and companies incorporated in domestic jurisdictions. He said the days of bearer shares and numbered accounts are gone, except in some states of the United States such as Delaware and Nevada where the practice continues, and to which a great deal of global business has been moved to avoid disclosure. “In the Caribbean, however, our governments have been pushed into enacting legislation on beneficial ownership or face the pain of being black-listed with grave consequences for doing business in the international community.”

High-level principle
According to Sir Ron as part of this process, the FATF has issued “high-level principles and procedures for accountants” to guide them on ‘the risk-based approach to combatting money laundering and terrorist financing’. “In effect, accountants and lawyers, who have provided services to clients for years, are now required to be ‘gatekeepers’ and, effectively, they are obliged to report on their own clients if they suspect activities such as money laundering, terrorist financing or tax evasion.”

Incidentally, though, he said the US Treasury has not applied anti-money laundering laws to ‘gatekeepers’ and in Canada, courts have repeatedly said that AML/CTF requirements, such as reporting on clients, violates the attorney-client relationship. “But, in our Caribbean jurisdictions, laws to this effect have already been adopted in some jurisdictions or are in the process of being implemented. So, there is no level playing field in the global community. But as much as Caribbean jurisdictions complain about the double-standard and hypocrisy of the application of OECD and FATF rules as the Premier of the Cayman Islands and the Chief Minister of the Isle of Man have done, having not fought collectively against this situation from the beginning, they now have to implement the rules or suffer the consequences of black listing and counter measures.”
Sir Ron said in this connection, huge obligations will be placed on accountants to know the business of their clients in far greater detail than ever before, and to exercise extreme caution in providing a range of advice, including: financial and tax advice; creation of corporate vehicles; buying or selling property; performing financial transactions on behalf of clients; and even providing introduction to financial institutions.
Additionally, he said FATF and OECD Global Forum rules will require governments to adopt and implement legislation that will hold accountants responsible for the actions of their clients that can result in them being charged with facilitating money laundering, terrorist financing and tax evasion by their clients, not only within their own jurisdictions but in cross-border activities. This, Sir Ron said imposes a huge challenge on accountants and auditors. He charged that practitioners must now constantly keep abreast of international, regional and national developments to maintain their clients and develop new ones. “You will need to be able to adjust your own practices, including the potential needed to invest resources and develop new practice areas for clients, including those in compliance and enforcement.”

Heavy-handed rules
Sir Ron said what is remarkable in all this is that, in the small communities of many Caribbean jurisdictions, these heavy-handed rules, devised by the OECD and the FATF, are hardly necessary. He said the size and range of transactions in the Caribbean are not large enough to pose any grave risk to the world’s financial system.
He however, charged accountants and auditors to insist on consultations with their professional bodies and governments prior to meetings of the Caribbean Financial Action Task Force (CFATF), the Paris-based Financial Action Task Force (FATF) and the OECD Global Forum “so that your views contribute to the positions adopted at decision-making meetings; and urge governments of all Caribbean jurisdictions to establish machinery for joint Caribbean policy positions that can be collectively argued in the G7 bodies.”
He said alliances should also be sought with groups within OECD countries that recognise that imposing onerous and unnecessary rules on small jurisdictions and disadvantaging them by allowing unlevel playing fields to prevail, do not make for a prosperous world or a peaceful one.
Meanwhile, President of the ICAC, Jasmine Davis, in her address to the gathering mentioned that over the two days they will deliberate on and explore key issues such as disruptive technologies, public financial accountability and prospects for key regional industries. Fresh approaches to strategic business planning will be taken into consideration because there will be the need for jobs in the area of cyber security, said Davis who added that they need to be more proactive in boosting cyber security and making it a priority.
“Finance professionals cannot be ignorant and uninvolved as the rest of the world grapples with its issues that challenge the future and survival of the regional professionals…we are responsible for prioritising the needs of our talent,” she said. By exchanging information, they will look to tap into the pool of resources that are available so as to find solutions, and upgrade and modernise the systems and processes that drive their operations. Despite their shortfalls, the ICAC announced that they have managed to implement the public sector accounting standards and establish a public sector financial management committee which is responsible for engaging governments and stakeholders.