Suspicion of money laundering reporting obligations: auditor compliance, or sceptical failure to engage?

Money laundering has become of increasing concern to law makers in recent years, principally because of its associations with terrorism. Recent legislative changes in the United Kingdom mean that auditors risk becoming state law enforcement agents in the private sector. We examine this legislation from the perspective of the changing nature of the relationship between auditors and the state, and the surveillant assemblage within which this is located. Auditors are statutorily obliged to file Suspicious Activity Reports (SARs) into an online database, ELMER, but without much guidance regarding how suspicion is determined. Criminal rather than civil or regulatory sanctions apply to auditors’ instances of non-compliance. This paper evaluates the surveillance implications of the legislation for auditors through lenses developed in the accounting and sociological literature by Brivot and Gendron, Neu and Heincke, Deleuze and Guattari, and Haggerty and Ericson. It finds that auditors are generating information flows which are subsequently reassembled into discrete and virtual ‘data doubles’ to be captured and utilised by authorised third parties for unknown purposes. The paper proposes that the surveillant assemblage has extended into the space of the auditor-client relationship, but this extension remains inhibited as a result of auditors’ relatively weak level of engagement in providing SARs, thereby pointing to a degree of resistance in professional service firms regarding the deployment of regulation that compromises the foundations of this relationship

Suspicious activity reporting in the United Kingdom and the United States: statutory obligations of auditors and optimal harvesting of information

Purpose: This study aims to evaluate the advantages and disadvantages of auditor mandatory suspicious activity reporting versus the exercise of professional judgement in the anti-money laundering regimes of the UK and the USA. Design/methodology/approach: The research draws upon the following sources. Firstly, statistics provided by the UK National Crime Agency, 2019 (NCA) regarding suspicious activity report (SAR) filing rates. Secondly, anti-money laundering legislation in the USA and UK. Thirdly, statements made in the political domain in the USA, particularly those which raised constitutional concerns during the progress of the Patriot Act 2001. Finally, statements and recommendations by a UK Parliamentary Commission enquiring into the effectiveness of the suspicious activity reporting regime. Findings: The UK reporting regime does not accommodate professional judgement, resulting in the filing of SARs with limited intelligence value. This contrasts with discretionary reporting in the USA: voluntary reporting guides and influences auditor behaviour rather than mandating it. Defensive filing by UK auditors (defence to anti-money launderings [DAMLs]) has increased in recent years but the number of SARs filed has declined. Originality/value: The study evaluates auditor behavioural responses to legislative regimes which mandate or alternatively accommodate discretion in the reporting suspicion of money laundering. Consideration of constitutional and judicial activism in this context is a novel contribution to the literature. For its theoretical framework the study uses Foucault’s concept of discipline of the self to evaluate auditor behaviour under both regimes

Free banking theory: literature review and relevance to the regulation of cryptocurrencies debate

Purpose: Free banking theory, as developed in Adam Smith’s 1776 treatise, “The Wealth of Nations” is a useful tool in determining the extent to which the “invisible hand of the market” should prevail in regulatory policy. The purpose of this study is to provide a timely review of the literature, evaluating the theory’s relevance to regulation of financial technology generally and cryptocurrencies (cryptos) specifically. Design/methodology/approach: The methodology is qualitative, applying free banking theory as developed in the literature to technology-defined environments. Recent legislative developments in the regulation of cryptocurrencies in the UK, European Union and the USA, are drawn upon. Findings: Participants in volatile cryptocurrency markets should bear the consequences of inadvisable investments in accordance with free banking theory. The decentralised nature of cryptocurrencies and the exchanges on which these are traded militate against coordinated oversight by central banks, supporting a qualified free banking approach. Differences regarding statutory definitions of cryptos as units of exchange, tokens or investment securities and the propensity of these to transition between categories across the business cycle render attempts at concerted classification at the international level problematic. Prevention of criminality through extension of Suspicious Activity Reporting to exchanges and intermediaries should be the principal objective of policymakers, rather than definitions of evolving products that risk stifling technological innovation. Originality/value: The study proposes that instead of a traditional regulatory approach to cryptos, which emphasises holders’ safety and compensation, a free banking approach combined with a focus on criminality would be a more effective and pragmatic way forward

Perception versus reality: Iranian banks and international anti-money laundering expectations

Purpose Iran has been ranked by the Basel Committee on Banking Supervision and the Financial Action Task Force (FATF) as one of the foremost countries in the world for money laundering. However, Iranian banks claim that they comply with international standards for reporting suspicious activity, risk management and training. This paper aims to investigate this dichotomy between perception and reality. Design/methodology/approach A Wolfsberg-style questionnaire was sent to partners in Iranian accounting firms, which have audited domestic banks over the past five years to investigate the adequacy of risk management systems. Findings Most Iranian banks have anti-money laundering (AML) systems, which compare favourably with those of international counterparties. Banks take a risk-based approach to potential criminal behaviour. The negative perception of Iranian banks is principally attributable to the government’s unwillingness to accede to “touchstone” international conventions. In spite of having in place AML laws, which are comparable in intent with those of the UK and the United States of America (USA), weak enforcement remains a significant impediment of which the political establishment is aware. Practical implications Measures required to bring Iranian banks into compliance with international standards may be less extensive than perceptions suggest. However, failure of the government to accede to conventions stipulated by the FATF means that banks may remain ostracised by foreign counterparties for the foreseeable future. Originality/value This study provides a unique insight into the extent of AML compliance in Iranian banks as verified by external auditors

Taxonomies of money laundering: an Iranian perspective

Purpose This study aims to identify the sources of laundered money in Iran and the destinations to which it is transferred, independently verified by auditors. Based on such data, the study aims to develop a simple model of endogenous and exogenous factors facilitating money laundering in developing countries, which can inform domestic and international legislative and regulatory responses. Design/methodology/approach Questionnaires were sent to Iranian certified public accountants who worked for auditing firms in 2019 and who have encountered suspected money laundering during their work with clients. Findings The government and public officials are the primary sources of money laundering activity in Iran. The main destinations of laundered funds are investments abroad, gold, foreign currencies, real estate and purchases of luxury goods. Domestic legislation, while bearing similarities with that found in other jurisdictions such as the UK and the USA, is flawed in several ways, including an inability to determine beneficial ownership of funds and weak enforcement. Originality/value Because of international sanctions and the prevailing political situation, it is difficult to obtain data for money laundering and other financial crimes in Iran. The data obtained is of importance to international bodies in understanding the nature of money laundering in Iran, and how to negotiate in the future to address mutual concerns. Given the country’s perceived high association with money laundering, the data obtained is of value in identifying the specific characteristics of the problem

Audit committees in financial institutions in Saudi Arabia: a dichotomy of perceptions of functional independence and the reporting of financial crime

Purpose Audit committees (ACs) have an important role to play in banks in Saudi Arabia in detecting and reporting weaknesses which may make financial crime possible. The Saudi Arabian Corporate Governance Code of 2016 comprises recommendations for ensuring the effectiveness of these committees, but cultural and behavioural factors can constitute impediments. This paper aims to explore these factors and makes recommendations. Design/methodology/approach The methodology is qualitative, using data derived from responses to a questionnaire administered to 180 current and former members of internal and external audit teams of Saudi Arabian banks. Findings ACs in Saudi financial institutions enjoy a high degree of functional independence of boards. Boards tend to regard ACs as part of the organisation: in contrast, AC members perceive their first duty as being owed to stakeholders. Disagreements between boards and ACs regarding disclosure of findings of systemic weaknesses which facilitate money laundering (ML) are made publicly available; this engenders transparency and avoidance of collusion. Professional qualifications and experience of AC members have improved substantially in recent years, equipping them to better discharge statutory duties regarding the detection and reporting of suspected ML. Research limitations/implications: The regulatory body, the Saudi Arabian Markets Authority, should be diligent in ensuring the presence of non-executive directors in sufficient numbers to counterbalance influence by boards. Disagreements between boards and ACs regarding internal systemic changes to prevent ML and other financial crimes should be formally recorded in minutes and made public as a matter of record. Originality/value Questionnaire responses by past and present members of ACs are unique and contribute to the literature

Analysis of post-operative changes in serum protein expression profiles from colorectal cancer patients by MALDI-TOF mass spectrometry: a pilot methodological study

Background: Mass spectrometry-based protein expression profiling of blood sera can be used to discriminate colorectal cancer (CRC) patients from unaffected individuals. In a pilot methodological study, we have evaluated the changes in protein expression profiles of sera from CRC patients that occur following surgery to establish the potential of this approach for monitoring post-surgical response and possible early prediction of disease recurrence. Methods: In this initial pilot study, serum specimens from 11 cancer patients taken immediately prior to surgery and at approximately 6 weeks following surgery were analysed alongside 10 normal control sera by matrix-assisted laser desorption ionisation time of-flight-mass spectrometry (MALDI-TOF MS). Using a two-sided t-test the top 20 ranked protein peaks that discriminate normal from pre-operative sera were identified. These were used to classify postoperative sera by hierarchical clustering analysis (Spearman's Rank correlation) and, as an independent `test' dataset, by k-nearest neighbour and weighted voting supervised learning algorithms. Results: Hierarchical cluster analysis classified post-operative sera from all six early Dukes' stage (A and B) patients as normal. The remaining five post-operative sera from more advanced Dukes' stages (C1 and C2) were classified as cancer. Analysis by supervised learning algorithms similarly grouped all advanced Dukes' stages as cancer, with four of the six post-operative sera from early Dukes' stages being classified as normal (P = 0.045; Fisher's exact test). Conclusions: The results of this pilot methodological study illustrate the proof-of-concept of using protein expression profiling of post-surgical blood sera from individual patients to monitor disease course. Further validation on a larger patient cohort and using an independent post-operative sera dataset would be required to evaluate the potential clinical relevance of this approach. Prospective data, including follow-up on patient survival, could in the future, then be evaluated to inform decisions on individualised treatment modalities

Sulforaphane represses matrix-degrading proteases and protects cartilage from destruction in vitro and in vivo:Sulforaphane is protective in the articular Joint

Sulforaphane (SFN) has been reported to regulate signaling pathways relevant to chronic diseases. The aim of this study was to investigate the impact of SFN treatment on signaling pathways in chondrocytes and to determine whether sulforaphane could block cartilage destruction in osteoarthritis

The thermal emission of the exoplanets WASP-1b and WASP-2b

We present a comparative study of the thermal emission of the transiting exoplanets WASP-1b and WASP-2b using the Spitzer Space Telescope. The two planets have very similar masses but suffer different levels of irradiation and are predicted to fall either side of a sharp transition between planets with and without hot stratospheres. WASP-1b is one of the most highly irradiated planets studied to date. We measure planet/star contrast ratios in all four of the IRAC bands for both planets (3.6-8.0um), and our results indicate the presence of a strong temperature inversion in the atmosphere of WASP-1b, particularly apparent at 8um, and no inversion in WASP-2b. In both cases the measured eclipse depths favor models in which incident energy is not redistributed efficiently from the day side to the night side of the planet. We fit the Spitzer light curves simultaneously with the best available radial velocity curves and transit photometry in order to provide updated measurements of system parameters. We do not find significant eccentricity in the orbit of either planet, suggesting that the inflated radius of WASP-1b is unlikely to be the result of tidal heating. Finally, by plotting ratios of secondary eclipse depths at 8um and 4.5um against irradiation for all available planets, we find evidence for a sharp transition in the emission spectra of hot Jupiters at an irradiation level of 2 x 10^9 erg/s/cm^2. We suggest this transition may be due to the presence of TiO in the upper atmospheres of the most strongly irradiated hot Jupiters.Comment: 10 pages, submitted to Ap