Accountants need to keep up their guard when taking on new clients and make sure anti-fraud checks are rigorous enough to combat a potential increase in criminal activity driven by the global pandemic, says the Association of Chartered Certified Accountants (ACCA).
A new report from the ACCA has warned finance professionals against over-confidence in trusting their ‘gut feel’ about clients and strongly recommends considering if digital technology checks could help.
However, accountants who contributed to the survey have reservations about digital tools that aim to verify identities and check the financial records of prospective new clients and believe they are too expensive and not relevant for smaller practices.
Only 49% of respondents ran any form of online checks on new clients – preferring to verify passport and other identity details using traditional paper methods. The report showed that 65% still relied on manual record-keeping of physical documents.
Jason Piper, head of taxation at ACCA and author of the report Know your Customer: Is it time to digitalise the first line of defence? Surveyed 278 accountants for the small report, mainly in the UK, but with input from around the world.
Piper said: “For verification of identity, with so much business now operating on the basis of formal regulated frameworks rather than personal recommendation, is there a case to be made for accountants likewise to rely more on tools than intuition?
“For the vast majority of every accountant’s client base the global economic downturn consequent upon the Covid-19 pandemic will have increased the risk of non-compliance one way or another.
“As businesses struggle to survive and cash flow is squeezed, the temptation to cut corners or take advantage of some ‘too good to be true’ opportunity will increase.
“Clients who two years ago might never have considered any unlawful activity may now present a significant risk of involvement in money laundering, whether wittingly or otherwise.”