Written evidence submitted by the Chartered Institute of Management Accountants (CIMA)



Executive Summary


  1. CIMA believes a barrier to fighting financial crime is the range of organisations duplicating work and efforts to fight fraud and money laundering.


  1. CIMA suggests a review of Economic Crime Plan to ensure a more streamlined agency response to fighting financial crime and protecting victims.


  1. Legislation is required as part of the Government’s response to combatting economic crime.


  1. Brexit could potentially threaten the UK fraud prevention and disruption efforts.


  1. The lack of regulation of the title and/or function of “accountant presents a threat to the public interest in the context of economic crime whilst unregulated accountants can present themselves, appearing to share the same professional platform as those that are regulated. A review of this may provide a simple solution to better regulatory oversight and help curb financial crime.


  1. The Committee could seek evidence from the National Crime Agency to substantiate the current view that money launderers are seeking to use professionally qualified accountants to legitimise their business dealings.


  1. Primary legislation will be required to support the proposed new SARs Reform Levy.


  1. There is little evidence that a levy on the accountants supervised by the professional body supervisors (PBSs) is necessary. If introduced, the levy should be ringfenced to ensure that its original purpose supports the body and sector who contributed via levy payments in their fight against economic crime.


  1. OPBAS could better understand the role and powers of professional bodies.


  1. Fraud relating to the COVID Job Retention Scheme (“furlough fraud”) is a new trend in economic crime and we have advised our members how to report and tackle it.




About CIMA


The Chartered Institute of Management Accountants (CIMA), founded in 1919, is the world’s leading and largest professional body of management accountants, with members and students operating in 179 countries, working at the heart of business. CIMA members and students work in industry, commerce, the public sector, and not-for profit organisations. 

In the UK CIMA has over 80,000 members working across all sectors. Most CIMA members are employed in business and a small percentage (around 1,500 individuals) offer services for fees directly to clients, primarily in the SME sector.

As a condition of membership CIMA requires applicants to pass examinations which include identifying and addressing economic crime including fraud and money laundering. Ongoing requirements for continuing professional development ensure that members keep up to date with the latest threats and risks in the area of economic crime in order to be effective drivers of measures to combat this. One of CIMA’s core missions is to develop research and analytical thinking of the challenges faced by both our management accounting professional but also the wider and global finance sector. This includes economic crime and CIMA produces guidance and thought leadership for all members including bespoke guidance for those small practitioners subject to supervision for compliance with the UK Money Laundering Regulations.


  1. Introduction


1.1         CIMA believes that one of the biggest barriers to the fight against economic crime in the UK is the plethora of agencies duplicating effort and creating levels of bureaucracy that use resources that could be better directed. Those supervising individuals and firms involved in company formation is a case in point. The Government Response to the Committee’s Twenty-Eighth Report: Economic Crime—Anti-money laundering supervision and sanctions implementation (Eleventh Special report of Session 2017-19) highlights this issue on page 6.


1.2         There should be a full review of the Economic Crime Plan with a view to rationalising the roles, responsibilities and functions of agencies fighting financial crime to ensure less duplication and a more streamlined approach to fighting economic crime. This will have the effect of maximising the impact of funds deployed in this area and avoiding continued waste We suggest that the guiding principle of any expenditure in this area should be that it results in a measurable reduction of economic crime and/or demonstrably protects victims.

1.3         CIMA welcomes the recent announcement from the 2020 Spending Review that the Chancellor has agreed to provide a further £63m of additional funding in 2020/21 in order to support the economic crime work, including SARs reform, the continued expansion of the National Economic Crime Centre, as well as to begin the reform of the Action Fraud system. In addition to this, more than £20m has been secured in 2020/21 for Companies House reform, boosting its capacity for tackling economic crime.

1.4         We understand that the Economic Crime Board will be deploying this investment towards the objectives of the Economic Crime Plan, as one of a number of elements of a sustainable resourcing model for economic crime which we look forward to discussing in more detail in the run up to and at the next ECSB.

1.5         CIMA is increasingly approaching the conclusion that primary legislation needs to be part of the response to combatting economic crime to enable volunteers such as CIMA to fully engage with and support through our own efforts the fight against economic crime.

1.6         An example of where legislation could enable the accountancy sector to address economic crime is the question of use of the title “accountant”. It is difficult for the public to distinguish which individuals calling themselves accountants are supervised and properly regulated professionals with appropriate qualifications. Currently anyone can operate as an accountant and call themselves such. Professional bodies enable their members to refer to themselves as “professionals”, but this provides little assistance to the public in selecting an advisor who will provide the extra level of protection so necessary for identifying and dealing with fraud.

1.7         While the term “accountant” remains unprotected professional bodies such as CIMA can only regulate those who voluntarily seek membership. It is the role of the professional bodies to qualify individuals and ensure that they meet the standards of ongoing membership. A CIMA member will need to pass our qualifications, keep up with compulsory professional development (CPD) and abide by our ethical code and standards. Other professional accountancy bodies require similarly high standards for entry to membership. Such requirements of accountants who are members of professional bodies assures clients and members of the public that they operate legally, ethically, abide by professional standards and maintain competence.


1.8         CIMA has two syllabi for its qualification both of which include identifying and dealing with fraud:

CIMA also has a Code of Ethics and Global Management Accounting Principles (GMAP) that includes references to fraud and protecting the public:


1.9         In order to discourage members of the public using unregulated accountants the term accountant could be restricted to those who are members of a recognised professional accountancy, finance or tax body being allowed to call, promote, advertise and operate as an accountant.

1.10     This means that members of the public who have concerns about the actions of their accountant would be able to seek recourse through the professional body, which would then investigate and take appropriate action where any wrongdoing was suspected or found. This would equally provide a further and robust mechanism for detecting and reporting economic crime. CIMA has received calls from the public wishing to complain about the actions of their accountant only to find that the accountant is not a member of CIMA or any professional body. There is certainly a need for greater public understanding around the regulation of accountants.

1.11     At present any individual can call themselves an accountant. This is a challenge for the wider system of regulation in this area, as professional bodies can only regulate and provide supervision to their members. In order to provide better regulation of accountants and help the sector prevent economic crime the term accountant should only be associated with regulated members of a recognised professional accountancy, finance or tax body. This is a powerful public interest feature of professional bodies in that the public would be able to more easily discern between professionals and the unregulated population offering the same services and make the most appropriate choice.


1.12     Whilst it is the view of the National Crime Agency (NCA) that money launderers seek to legitimise their business dealings by employing supervised accountants, from our perspective we have not seen any evidence of this. CIMA has raised this issue with the NCA who has indicated that they will endeavour to provide us with this evidence. If this evidence were provided it would assist in our efforts to target supervision and guidance more appropriately. Furthermore, it would assist the fight against economic crime by enabling the targeting of resources to the right sub-sector within accountancy. CIMA respectfully suggests that the Select Committee may itself be assisted by sight of such evidence.


  1. Suspicious Activity Reports (SARs) Reform Levy


2.1         It is proposed, under the Economic Crime Plan that a levy be applied to supervised accountancy practitioners to fund the reform of the SARs regime.

2.2         CIMA has responded to the latest consultation about the setting and collection of such a levy. Our response advocates that the revenue so collected should be ring-fenced for SARs related to the accountancy sector. Our concern is that in fact any revenues generated will simply end up funding wider enforcement activity rather than achieving any degree of SARs reform.

2.3         The UK Financial Intelligence Unit Suspicious Activity Reports Annual Report 2020 was published recently. CIMA notes the small number of SARs (in comparison to the banks) made by the accountancy sector (page 9). Whilst we recognise that voluntary funding for SARs reform is already committed by the banks, we continue to question the appropriateness of a compulsory levy on a sector that produces so few SARs. CIMA is committed to educating our population on the need for, and value of SARs whilst addressing the perceived unfairness of a levy to the accountancy supervised sector, the need for which seems unsubstantiated by the figures.

2.4         Whist it might be argued that the accountancy sector is not equipped to identify money laundering, the sector, partly due to OPBAS supervision, is ever strengthening the accountant client relationship through PBS supervision, and enabling the accountant to spot suspicious activity. It could be argued that the rational outcome of this might naturally be fewer SARs from the sector as accountant members of the PBSs reject more potential clients, on the basis of inability to complete due diligence. It is inevitable that these clients will turn to the unregulated sector for the preparation of their accounts. It is the view of CIMA that the accountancy generated figure of 0.93% of SARs in 2020 is more an indicator of the low level of money laundering in the businesses serviced by the small practitioners and simply does not justify the introduction of a levy with the accompanying financial administrative burdens on the sector and the possible effect upon the willingness of the sector to engage with the SARs regime. We look forward to receiving some verifiable evidence that money laundering to a greater extent exists in this sector.

2.5         We welcome the increasing use of SARs by HMRC through the data matching tool and the introduction of a new strategic aim of Target Operating Model (TOM) and organisational design which will move the UKFIU to a more intelligence, engagement and strategically focussed way of working (page 18). We note that this will be instrumental in enabling the UKFIU to deliver its SARs Reform commitments (utilisation of new and uplifted resources to deliver tangible benefits). It is not clear however how funds from the proposed Levy will be targeted given the reforms already in place, with the effectiveness of these, as yet, unknown.

2.6         We suggest that trust in the Economic Crime Plan will be enhanced by ringfencing funds raised through the levy to support contributing sector. Otherwise if bodies are required to pay the levy but see no return it may be perceived as simply a further tax on hard pressed SMEs within the sector. Ringfencing will also facilitate accountability by allowing accurate reporting on how the funds are spent.

2.7         CIMA will only be able to facilitate the provision of funds for SARs reform when there is primary legislation to require this. We cannot impose this cost to our members without being able to pass on the message that it is a government requirement to do this. Any mandatory levy must ensure that the funds raised will be accounted for and performance indicators should be publicly available for scrutiny.


  1. The work of OPBAS and the professional body AML supervisors


3.1         The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. The FATF monitors countries to ensure they implement the FATF Standards fully and effectively and holds countries to account that do not comply. This is essential to cross-border action on economic crime, helping to ensure that the criminal community has no place to hide. It is particularly important as the world moves ever more towards cashless transactions and ease of fund transfer via electronic means. FATF evaluates individual countries for compliance with its recommendations and all action against money laundering stems from these recommendations. FATF reviews each country’s implementation of its recommendations and publishes the results. The legislative framework enabling the UK to take action to counter money laundering stems, ultimately, from the FATF recommendations. The UK is known to have the strongest results in the FATF evaluation of countries, and our successes should be recognised.


3.2         However, this is no reason to be complacent. Economic crime damages the most vulnerable people in all societies and CIMA is committed to assisting the UK legislative framework in remaining ahead of the criminal community that exploits society for their own gain. Whilst professional body supervision enables accountancy practices to have strong controls over documentation & processes, client due diligence and client risk assessment, this is only part of the equation. Legislation is essential and appropriate government investment should be the driver to stamping out economic crime.


3.3         The focus on money laundering should be just as much upon the clients of accountants as the accountants themselves – i.e. the businesses that they support and indeed any business operating within the UK. It remains a fact that banks are in the best position to identify suspicious transactions because they have far greater access to those transactions than accountants.


3.4         The Professional Bodies need solid, accessible, effective reporting mechanisms to give confidence that the reports of accountants that speak up will be acted upon. We have high hopes for the proposed accountancy sector fraud charter which will articulate three government commitments in the accountancy sector to combat economic crime.


3.5         Sanctioning a supervised accountant may have the effect of removing them from the supervised population, but it does not stop them from providing accountancy services. CIMA believes that wherever possible (i.e. where the problem is a minor compliance default rather than misconduct) it is better to keep accountants falling short of the anti-money laundering regime within the supervised population in order that they may revise their processes and attitudes to make them more effective disrupters of money laundering. This is an aspect of good regulation that OPBAS appears to fail to recognise.


3.6         Since 2016 CIMA has encountered very few instances of misconduct connected with money laundering concerning members of its (relatively small) supervised population. There was only one expulsion of a member having been convicted of a money laundering offence during this period (the member was subsequently expelled by our Disciplinary Committee). There have been eight expulsions for misconduct unrelated to money laundering where a member had been found to be practising whilst unregistered for supervision. This presents a potential risk to the public as these former members are highly likely to continue to offer accountancy services outside the supervision of a professional body. A further small number of members were found to have inadequate documentation and practice management processes which might have implied a risk of unintentional involvement in money laundering in that they were at risk of criminal exploitation. These members remain under the supervision of CIMA which allows us to help them improve their compliance with the Money Laundering Regulations and provide ongoing supervision.


3.7         CIMA keeps a record of all members sanctioned for misconduct. Those that remain under the supervision of CIMA are scrutinised more closely under our processes to ensure that they undertake any remedial action to achieve compliance. These remedial actions, more often than not, include a requirement to undertake training and to train any staff they may have. Subsequent supervision visits will check on this.


3.8         CIMA takes the view that it is generally better where possible to keep members under its supervision in order to strengthen their processes and guide them into full compliance with money laundering regulations. We take prompt and robust action when we see instances of non-compliance and we seek out non-compliance through our risk-based supervision processes. There will be instances where misconduct is so serious that under our conduct regulations (under CIMA’s Charter and Byelaws) that expulsion is the only option and we inform HMRC when this has been done. This leaves former member accountants outside the supervisory regime as anyone can call themselves an accountant, they may be operating unsupervised and “under the radar” of any supervisory authority. Whilst individuals offering accountancy services should be supervised by HMRC when not supervised by a professional body, it is the policy of OPBAS that most should be supervised by a professional body, leaving an already hard pressed HMRC to supervise the rest.

3.9         There are other sanctions available to professional bodies for accountants who have been found in breach of regulatory standards. These include fines and costs awarded towards the cost of a disciplinary case. The difficulty with these sanctions is if they are significant, they may prompt the accountant subject to them to take the decision to resign and continue to offer the same services to the same clients outside the supervisory framework of CIMA.

3.10     The above again shows the need to regulate who can be called an accountant to support the existing professional body regulatory framework already in place.

3.11     There is some concern on the part of OPBAS that accountants leaving the regulatory framework of one professional body may seek to join another, and this is one of the reasons for the requirement to share information between the professional bodies. However, the nature of professional body membership does not allow accountants qualified through one body to move to another easily, as there is a qualification/examinations element to professional memberships that can take some years. Each body will require different qualifications for membership so an accountant seeking to join a new body may have to start again in terms of study and examinations.

3.12     It is OPBAS’ view that significant sanctions and fines may act as a deterrent to money laundering activity. This, however, depends on accountants knowing the sanctions they will face upon breaking the code, standards and law of the profession. CIMA already communicates with its members on the potential sanctions and on best practice to prevent money laundering through a programme of regular communications and alerts.

3.13     Much of CIMA’s resource has been directed in attempting to educate OPBAS on the role of the professional body in order that CIMA can regulate its supervised population effectively. We welcome the opportunity to continue that dialogue as OPBAS’s regulatory outlook matures.


  1. Emerging trends in consumers facing economic crime as a result of the COVID crisis


4.1         The main recent trend observed by CIMA is that of misuse of the Job Retention Scheme – commonly known as Furlough Fraud. The reports we have received suggests that it seems to be business owners who are perpetrating this rather than their accountants. Our members encounter such behaviour through their engagement with clients and mindful of their professional duties raise these issues with us for guidance. We support them (principally through our Ethics Helpline) to challenge businesses about such abuses and to make formal reports to the relevant authorities as appropriate.

4.2         We have similarly received reports of members in middle tier jobs being asked to sign off accounts that include reports on the furloughing of company staff when it is clear to the member that the relevant staff members have been working. CIMA has provided and will be continuing to provide guidance to its members on this issue.

4.3         HM Treasury should provide clearer guidance of where cases of suspected fraudulent use of the Job Retention Scheme monies and other Covid-19 financial support for jobs, businesses and other organisations can and how this should be reported.

4.4         Other trends that are not necessarily new or emerging may have changed in nature as criminals seek to exploit opportunities presented by the COVID crisis and change their approach to avoid detection. CIMA has been providing members with bespoke COVID related guidance on these and more. These include:


4.5         The Head of Counter Fraud and Investigation at the Government’s Internal Audit Agency has stated that Brexit could lead to a lowering in fraud prevention standards due to uncertainty and disruption. This was reported by Public Finance and the full article is here. CIMA recommends that the government ensures that any levels of control continue to match that within the EU to prevent the UK from becoming a “go to destination” for fraudsters.


4.6         CIMA has a programme of regular communications and we keep website guidance behind a secure member login (to prevent access by the criminal community) which includes guidance generated by CIMA as well as signposting to trusted sources such as the National Crime Agency.

November 2020