Written evidence submitted by the Association of Taxation Technicians

Executive summary

  • We have worked constructively with OPBAS since its creation in 2018 and note the progress made to date in relation to intelligence sharing.

 

  • Intelligence sharing needs to go further. Members who submit a SAR often hear nothing and see no evidence of action being taken. We recommend that OPBAS work with the UKFIU including the NCA to facilitate the provision of more examples both of the results of SARs from our sector and also of cases where it is believed that a SAR should have been submitted but was not.

 

  • Recent and proposed changes on AML compliance have increased – and threaten to increase further – costs and compliance burdens for supervised firms. This is a concern - it could lead to more tax advisers choosing not to be members of a professional body or ceasing their practices altogether. This would have implications for the quality, cost and availability of tax advice for the public.

 

  • Further changes to AML compliance requirements should only be considered once clear evidence has been set out of the risks being addressed and the benefits of the proposed change. The approach should be targeted and take account of the different risks attached to different parts of the tax and accountancy sector.

There should be a review of the information sharing groups and working parties under the Economic Crime Plan to ensure effort and resources are not being duplicated.

 

1          

Introduction

1.1    

The Association of Taxation Technicians is a charity and the leady professional body for those providing UK tax compliance services. Our objects are:

1.1.1                

(A) to advance public education in and promote the study of the administration and practice of taxation and the principles of economic and political science in relation to taxation and public finance;

1.1.2                

(B)

(i) to prevent crime and

(ii) to promote the sound administration of the law for the public benefit

by promoting and enforcing standards of professional conduct amongst those engaged in the provision of advice and services in relation to taxation and monitoring and supervising their compliance with money laundering legislation.

1.2    

This submission is made with paragraph (1.1.2) above in mind.

 

2          

Anti-Money Laundering and the Sanctions regime

2.1    

The ATT is a professional body Anti-Money Laundering (AML) supervisor and operates under the supervision of the Office for Professional Body AML Supervision (OPBAS).

2.2    

We are one of the smaller supervisors currently supervising approximately 563 firms which are largely sole practitioners or 2-3 partner firms. Over 25% of our supervised firms have fees of less than £20,000 and approximately 55% have fees of £50,000 or less (note this is not profit; it represents income before costs are taken into account). As part of our supervision process each supervised firm has to submit an annual return which questions whether the firm has fulfilled all of its AML compliance obligations such as carrying out Customer Due Diligence identification checks, trained their staff, reported knowledge or suspicion of money laundering etc. The firm also has to answer the standard conduct questions such as whether any principal has ever been convicted of a criminal offence, been disqualified as a director, been declared bankrupt etc. Answers which suggest non-compliance are followed up. This is in addition to carrying out compliance visits and desktop reviews. We also require all members to complete an annual membership return and those who are principals of a firm are asked about AML supervision and follow up work is undertaken in respect of the answers provided to ensure appropriate supervision is in place.

2.3    

As set out in paragraph 2.2 our population of supervised firms represents smaller practices compared with a number of other supervisors and the implications of increased costs and compliance burdens for firms at this end of the market is considerable. Tax advisers can operate outside professional body membership and to reduce costs may cease professional body membership. They would then no longer be bound by our professional standards including Professional Conduct in Relation to Taxation and the associated provisions directed against tax avoidance, Continuing Professional Development, Professional Indemnity Insurance etc. This has disadvantages for consumers and potentially increases the tax gap. A reduction of firms in the tax market will exacerbate the problems for those on lower incomes by reducing the availability of lower cost tax advice to this sector of the market.

2.4    

We await the publication of the next National Risk Assessment (NRA) but remain conscious of the findings of the 2015 and 2017 NRAs which assessed there to be a high risk of money laundering for accountancy services. We work closely with the other accountancy supervisors through the Accountancy AML Supervisors’ Group (AASG) and through that group look at risks for the accountancy sector. Work through this forum feeds into our own Supervisory Risk assessment and the risk assessment of our supervised firms. We are also involved with the AML Supervisors Forum (AMLSF) which includes the legal professional body and public sector supervisors together with representatives from OPBAS and law enforcement agencies.

2.5    

The ATT has taken a risk based approach to AML supervision for a number of years using data provided through the AASG and AMLSF, the information supplied by the NRA and FATF, risks identified through our supervisory activity and OPBAS information sharing initiatives. Since the inception of OPBAS we have also checked to ensure our approach is aligned to the supervisory requirements as set out by OPBAS in their Sourcebook.

2.6    

When responding to the 2018 Treasury Committee inquiry into Economic Crime we looked forward to interaction with OPBAS to determine an appropriate approach to maintaining awareness of risk and monitoring compliance. We also looked forward to developing a mutually constructive and beneficial relationship with OPBAS. In particular, we saw this as a good opportunity for more granular feedback, for example on emerging trends, what sorts of activities members (by professional body) are reporting to the NCA, whether there are any common factors among those in the accountancy sector who are facilitating proceeds of crime etc. We hoped that OPBAS would provide a level of detail to enable us to identify the areas of highest risk of money laundering and terrorist financing and non-compliance so that we could target our resources effectively.

2.7    

We have worked constructively with OPBAS since its inception and have devoted resources to meeting the action plan set following our inspection visit. We welcome OPBAS initiatives in relation to intelligence sharing. We have taken an active role in the Information Sharing Expert Working Group (ISEWG) and have taken part in the smaller subgroup working on Joint Money Laundering Intelligence Taskforce (JIMLET) summary alerts to be issued to supervised firms to increase their awareness of risks in specific areas. OPBAS have also encouraged the use of intelligence sharing tools such as the Shared Intelligence Service (SIS) which we now refer to on a regular basis as part of our supervisory work.

2.8    

We would like to see more intelligence sharing particularly in relation to Suspicious Activity Reports (SARs). As referred to in our 2018 response it is quite common for members to say that they have submitted a Suspicious Activity Report (SAR) but then heard nothing more and seen no evidence of action being taken. In some cases, the wrongdoing seems to be continuing months and even years after the SAR was submitted. We note the considerable work by the UK Financial Intelligence Unit (UKFIU) in relation to providing information on good quality SARs including a recent webinar prepared specifically for our members. As a next step we look forward to more granular information on the SARs made by our members. We continue to press for more examples of the outcome where SARs have been submitted by the accountancy sector and examples where there have been failures by the sector and the difference which would have been made to a case if a SAR had been submitted.

2.9    

We note the wealth of initiatives taking place as part of the Economic Crime Plan. We support the work being done to implement the plan (and the Corporate Transparency and Register Reform). We contribute to this work via comments to the chair of AASG and providing attendees at relevant meetings, workshops and roundtables. We note that as part of the Economic Crime Plan there continues to be an acknowledgement of the importance of information sharing. We receive details of and input into various information sharing groups and would encourage a review of these different groups to avoid duplication of effort and resources.

2.10            

It should be noted that to date we have received no intelligence of money laundering in relation to any of our supervised firms via any of the intelligence sharing initiatives.

2.11            

We are aware that money laundering and terrorist financing is a very serious problem posing very real risks to society. In our view effectively countering it requires a targeted approach to those risks. It is not simply a question of imposing more and more across the board rules which could encourage the mentality of box ticking, desensitising people to real risk. It is apparent that many of the small firms supervised feel that economic crime is remote to the day to day conduct of their business and clients and adding to detailed requirements for firms is often taken by them as a requirement for ‘box-ticking’ rather than focusing them further on the economic crime risks and red flags in relation to their clients and the work required. The challenge for supervisors is to excite a sense of active scepticism amongst our supervised population but it is counterproductive if we are seen as simply a channel through which detailed rules and compliance costs are disseminated and enforced. We note the increasing compliance and cost burdens on accountancy firms, particularly since 2017. This includes greater compliance burdens in the form of written documentation, increased registration fees as a result of supervisors passing on the OPBAS levy and the possibility of further costs in relation to the Economic Crime levy. As an example of the imposition of additional requirements over the period criminality check requirements were introduced in 2018 – whilst we understand that self-certification alone is not sufficient this represents an additional administrative and cost burden required for business owners, officers and managers of our supervised firms which to date has not uncovered a single case of criminality as set out in the Money Laundering Regulations. We continue to encourage government to look in the round at compliance changes and costs to avoid a piecemeal approach and to ensure that resources are focused on the highest risk areas.

2.12            

Tax advisers are not a regulated profession. Anybody can set themselves up as a tax adviser and membership of a professional body is therefore effectively optional. Members choose to undertake our exams and maintain membership. Whilst professional body supervision has been referred to as fragmented we consider the current system has strengths as the professional body supervisors focus on areas of work they are familiar with and understand the risks firms are subject to and how they operate. This avoids a ‘one size fits all’ approach and enables supervisory work to be tailored to the firms supervised. We recognise the need for OPBAS supervision to be in place to ensure as much consistency as possible between the supervisors. This desire for supervision to be consistent must continue to be balanced with a recognition that different areas of accountancy have different levels of risk and different ways of providing services. Through our knowledge of tax adviser firms we are well placed to work with our supervised population to address the risks they face. We would be concerned if costs and administrative burdens for tax advisers were to increase without evidence of the risks for that sector that are being addressed or clear benefits for our supervised firms.

2.13            

When considering further changes to the anti-money laundering or sanctions regimes we believe additional intelligence sharing to be a key factor. Without evidence to support the need for new approaches there is a risk that there will be increasing costs and compliance requirements for no tangible benefits. This potentially risks -

  • driving small firms out of the market and reducing consumer choice;
  • making the cost of using a tax adviser prohibitive;
  • driving firms away from professional body membership with associated deprofessionalisation as they would not be required to meet the high standards of professional body membership (this also potentially increases the tax gap);
  • increasing numbers of firms requiring AML supervision by HMRC.

 

3          

Acknowledgement of submission

3.1    

We would be grateful if you could acknowledge safe receipt of this submission, and ensure that the Association of Taxation Technicians is included in the list of Respondents when any outcome of the call for evidence is published. We would be happy to discuss our response with you further if that would be helpful.

 

 

4          

The Association of Taxation Technicians

4.1    

The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible.

Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia.

The Association has more than 9,000 members and Fellows together with over 6,000 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.

November 2020

 

 

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