Duties of an auditor in relation to money laundering

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Anti-money laundering law is now an important issue for auditors to be aware of. Auditors must abide by the requirements of Ethics Pronouncement 200 (EP 200) Anti-Money Laundering and Countering the Financing of Terrorism – Requirements and Guidelines for Professional Accountants in Singapore.

In this article, we will briefly list down the obligations and duties of an auditor in relation to money laundering.

Many countries have now made money laundering a criminal offence. In some countries, such as Singapore, the UK, Australia and the US, the criminal offences include those directed at public accountants.

Auditors have the following duties in relation to anti-money laundering in Singapore:

  • Train staff in the relevant anti-money laundering legislation, such as how to recognize cases of money laundering and the action they should take (including avoiding tipping off potential fraudsters before they can be apprehended).
  • Establish internal systems and controls to address money laundering concerns.
  • Verify the identity of new clients (Know your customer / Customer due diligence) also known as KYC/CDD.
  • Maintain all evidence of identification and all client transactions for at least five years after the client relationship has ended.
  • Aware of the possibility of money laundering while conducting the audit.
  • Establish clear internal reporting procedures to that staff know to report suspicious
  • Establish compliance management arrangements and establish an independent audit function to assess the effectiveness of the internal policies, procedures and controls and compliance with AML/CFT requirements.
  • Screen new employees when hiring.
  • Report suspicious to the relevant national authority, which is Commercial Affairs Department (CAD) in Singapore. However, it is an offence to tip off fraudsters, so care must be taken in how this reporting is done.

For further reading, please refer to the Audit Practice Bulletin (APB) 2 of 2017 published by ACRA in December 2017. It is designed to provide more practice guidance to practicing accounting firms to implement their internal policies, procedures and controls as part of compliance with EP 200.

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