In the European Union, auditors and tax consultants are becoming increasingly involved in prosecution of money laundering cases. In order to be compliant in Germany, they must have a money laundering risk management system as an inegral part of client management.
Primarily, an analysis of business activities of an auditing firm must be performed. Similarly, a structure of any law firm must be assessed on the basis of criteria such as size and organisation, client structure, business areas and whether it operates nationally or internationally.
The next step is to analyse the business and client risk. This raises many questions, for example: if fiduciary activities are involved; if activities are carried out without personal client contact; if clients with special risks of money laundering offences are served.
Possible risks must be identified, evaluated and categorised. Appropriate preventive measures are then to be introduced, taking into account the risk analysis. General due diligence obligations such as the identification of clients and beneficial owners can become time-consuming and with international implications. This is particularly the case if the “know your client” system, which has been customary in Germany, is no longer deemed sufficient. Long-standing clients must also be re-evaluated and categorized..
The following is a summary of the system used in our office:
Our risk management system is divided into three parts:
- General Information on (the performing) accounting/legal firm (legal form, size, geographical location, revenue and turnover from fiduciary activities).
- Risk analysis
Part 1 Relationship and Services
-Analysis includes understanding who the clients are and what services are performed for them
Part 2 Information on clients business
-Analysis includes understanding clients‘ businesses and defining likelihood of money laundering
Part 3 Unusual/conspicious features and risk assesment
-Analysis requires becomng aware of tell-tale signs indicating inpropriety, such as: (a) client avoiding personal contact (b) client demands special discretion or even anonymity (c) use of shell companies and the like.
As a result, we have developed a schedule which lists all our clients. It also identifies the relevant risk money laundering factors associated with them. We then, based on such data, can evaluate these for our risk report and create a risk matrix. Based on the groupings of activities the clients are classified as “low“, “medium“ or “high“ risk.
With this information, the risk report for our office can be prepared. This satisfies the legal criteria and defines our futur actions in connection with clients so evaluated.
Again, in conclusion, if anyone has a comparable or better system in use, please inform the Board. If there is enough interest, there may be a good exchange between members.
by Frank Klaus
Klaus and Partners
Neu-Isenburg, 63263 Hessen
Germany
PO Box 15 52 Neu-Isenburg 63235
Germany
Telephone : +49 6102 71170
Fax :+49 6102 7117120
Email : fklaus@kp-taxandlaw.com
Website : http://www.kp-taxandlaw.com/index.php