MONEY laundering is a big-time activity of criminals, drug syndicates, terrorists and other illegal groups. In May 9, 2018, the Anti-Money Laundering Council approved the adoption of the Anti-Money Laundering and Counter-Terrorism Financing Guideline for Designated Non-Financial Businesses and Professions (DNFBS), which is based on Republic Act 10365, which includes as covered persons jewelry dealers, company service providers who deliver fund/securities management services for other persons, and persons and entities who as a business provide services to organize, create and manage companies and arrangements.
Whereas before, those required to monitor are only the banks and financial institutions, with the approval of the adoption for DNFBS to implement, the accountants and lawyers are among those mandated to monitor and report.
For the accountants, I think it is more for those who are employed in the private firms rather than the independent ones because the former is closely working on a day-to-day basis on the transactions, which are transpiring in a particular company. The scheme is often too complicated; it can hardly be detected as money laundering. There are three phases or a cycle, which starts with placement, layering and integration.
A report by the United Nations Office on Drugs and Crime (UNODC) estimates that in 2009, criminal proceeds amounted to 3.6 percent of global GDP, with 2.7 percent (or $1.6 trillion) being laundered.
While these activities often just appear in the contingent liabilities section in the financial reports and thus do not have a direct effect on the financial statements, if the auditor has suspicions of money laundering and a good reason to believe that it may have a material effect on the financial statements although it is just a contingent account, that auditor should take additional procedures to make sure these are not “laundering” activities.
On the other hand, more responsibilities are faced by the accountants in private firms because of their detailed exposure. Nonetheless, it is not easy to detect these activities, so there is a need to train our accountants on how to effectively detect it.
A classic example is by the use of the “black market money exchange” system (source: Journal of Accountancy dated 6.1.2001 “THE CPAs ROLE IN FIGHTING MONEY LAUNDERING”). A drug dealer or cartel in Colombia for instance, exports drugs to a foreign land where they are sold for US dollars. A person who belongs to the cartel based in the US delivers these dollars collected from drugs to a US-based representative of a Colombian market peso exchanger, who deposits an amount (based on the exchange rate agreed upon for Colombian money) in the cartel’s account in Colombia.
The dollars received by the money exchanger are then introduced into the US economy by means of transactions falling below the $10,000 currency to avoid being detected as money laundering. Once it has been laundered by the exchanger, he sells these dollars to Colombian importers who use to buy them goods in the US or anywhere where the currency is accepted.
The cycle ends with the imported goods arriving in Colombia, but which is first started with drug exported to the US.
The layering makes it difficult for an accountant with no training on money laundering to detect, especially for an independent accountant or external auditor. But for those in management positions and those who perform compliance and operational audits and in similar positions whose work involve a lot of details, more are expected from them.
These may be added responsibilities for accountants to handle, but we just have to equip ourselves to be capable of detecting these activities. Our job is no longer just a means of livelihood or a professional pursuit but an advocacy to help the world become a better place to live in by helping stop these criminal, terroristic and similar activities which will ultimately destroy our world.
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Wilma Miranda is the managing partner of Inventor, Miranda and Associates, and CPAs, board of director member of KPS Outsourcing Inc. and treasurer of Negros Outsourcing Service Inc. The views expressed herein do not necessarily reflect the opinion of these institutions..