Date posted: 30/01/2023 5 min read

Why ESG must assess money laundering

Five reasons why it’s become essential for accountants to consider AML when taking on new clients. Brought to you by First AML.

Australia’s weak money laundering laws put it at risk of becoming a haven for both domestic and international criminals, according to compliance experts. Along with Madagascar and Haiti, it’s one of only three countries that has so far failed to commit to including accountants and lawyers in counter terrorism finance (CTF) laws, despite promises to do so.

But the lack of legislation shouldn’t stop accountants addressing anti-money laundering (AML) in ESG, First AML chief compliance advisor Jessie Mao argues. “Some firms say it’s too costly so might turn away clients, but the risks of not doing it are very real,” she says.

Mao has identified five significant reasons why it should be integral to every accountancy firm’s ‘know your customer’ (KYC) checklist.

1. ESG is more important than ever

It’s now central to business strategies and building trust with stakeholders. It’s also seen as a good indicator of bottom line success. No firm can afford to be noncompliant in any aspect of ESG, and that includes AML.

“If you want good business insurance, or are looking to get acquired, then you’ll need to demonstrate a strong ESG policy that includes due diligence in onboarding new clients,” she says.

2. Awareness of AML is growing

A number of high profile AUSTRAC litigations against banks and casinos have combined with the Pandora Papers exposé to make the media and public more attuned to the dangers of money laundering.

“Recent data breaches make it even more critical. If details of your identity are leaked then people can use them to start a company to funnel money from modern slavery, terrorism or child trafficking. It’s much easier to do in Australia than elsewhere.”

3. More pressure from stakeholders

Investors, customers, suppliers and employees are all increasingly demanding compliance with strict, often selfimposed ESG targets and will take a dim view of any firm failing to take action on AML.

Investors will regard inaction on the issue as an unnecessary risk, while for customers and staff, it’s about ethical concerns.

4. Reputational damage

A brand may struggle to recover if the media reveal unethical money laundering has taken place unchecked. It also wouldn’t reflect well on the firm of chartered accountants who had audited the company’s books.

“You could lose your accounting licence if blatant money laundering has occurred. Clients won’t want to be associated with accountants who turned a blind eye.”

5. International pressures

Even though Australia doesn’t enforce AML audits, the international community does. “Larger companies with overseas operations won’t risk their own reputation by using an accountant who isn’t across AML concerns.”

Mao says that AML should be seen as a necessary investment rather than a cost. Often it can seem overwhelming for a medium or small firm of accountants as it’s costly, time consuming and strenuous.

“Engaging a company like First AML means that it’s done more efficiently as we understand international regulations, complex corporate structures and the tactics used by criminals.

“We take the heavy lifting and give them back hours every week so they have more time and energy to achieve revenue and growth targets.”

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