Chartered Accountants Ireland is pleased to announce the publication of the draft AML Guidance for the accountancy sector.This is draft guidance pending approval from HM Treasury. This guidance is based on the law and regulations as of 10 January 2020 – this incorporates amendments required as a result of the UK’s transposition of the 5th Money Laundering Directive. A brief overview of the main changes is available here.

Our Individual Annual Return 2020 is available for completion online.  Please ensure it is submitted by 30 October 2020.Click here for your Individual Annual Return.

The Government has just issued a Consultation on the new Economic Crime Levy announced in the March 2020 Budget. The levy will fund new government action to tackle money laundering, and help deliver the reforms committed to in the 2019 Economic Crime Plan.  The consultation seeks views on what the levy will pay for, how it should be calculated and distributed across the anti-money laundering (AML) regulated sector, and how the levy should be collected. The closing date for responses is 13th October 2020.

On 31 January 2020 the UK left the EU in accordance with the terms of the withdrawal agreement and entered a period of transition until 31 December 2020.  This provided a short period of certainty for audit registrations in Ireland and the UK which continue uninterrupted by Brexit until at least the end of the transition period.  All possibility of an extension of the transition period ended on 30 June 2020 when that date passed without the UK government seeking any such extension from the EU.  As yet another key Brexit date approaches on 31 December 2020, auditors in Ireland and the UK need to be aware of the possible scenarios which might arise in relation to audit registration after the transition period. UK audit registration – after the Brexit transition period After 31 December 2020, audit registration in the UK will continue without interruption for audit firms registered by Chartered Accountants Ireland given the status of the Institute as a Recognised Supervisory Body in the UK, regardless of whether the audit firm is based in the UK or Ireland. Irish audit registration – after the Brexit transition period In advance of the original Brexit deadline of March 2019, the Institute shared [1] with its audit registered firms advice received from the Irish government and the Irish Auditing and Accounting Supervisory Authority (‘IAASA’) that auditors who are considered to be ‘UK based’ (we are still seeking clarification as to what this term means) would not be eligible to retain Irish audit registration in the event of a ‘hard’ Brexit.  Unless a Brexit agreement, addressing audit registration in Ireland, is reached by 31 December 2020 auditors will effectively be facing a ‘hard’ Brexit scenario with regards to Irish audit registration on that date. On the basis of legal advice taken by the Institute, the Institute considers that it is not legally empowered to remove auditors from the Irish audit register at the end of the transition period. Therefore, as things stand at the time of writing, the Institute does not intend to remove auditors from the Irish audit register on 31 December 2020 or thereafter.   Audit firms should be aware, however, that if there is a relevant change in Irish company law or a legally binding regulatory instruction to the Institute in that regard, the Institute may have no choice but to withdraw the Irish audit registration of auditors, and therefore audit firms, who are considered to be ‘UK based’.  Re-registration The Institute has been working with relevant stakeholders to explore ways to facilitate re-registration in Ireland of ‘UK based’ auditors in the event that circumstances change such that these auditors are removed from the Irish audit register as a consequence of Brexit and corresponding changes in Irish company law.  In those circumstances ‘UK based’ auditors would be considered to be third country auditors from an Irish perspective. The Companies Act 2014 in Ireland provides for the approval of third country auditors as Irish statutory auditors where certain criteria are met.  These criteria include the existence of reciprocal arrangements regarding auditor approval between Ireland and the third country concerned as well as the completion of an aptitude test by the third country auditor.  The Companies Act 2014 also allows for exemption from that aptitude test to be granted in certain circumstances.  We understand that IAASA and the Financial Reporting Council (‘FRC’) in the UK are working on developing reciprocal arrangements which would support the operation of a regime in Ireland for approving third country auditors from the UK.   The Institute currently administers an aptitude test for third country auditors and is engaging with IAASA in relation to guidelines for granting exemptions from the aptitude test. Statutory audit firms – Irish audit registration In Ireland, a firm’s audit registration is dependent on the firm’s compliance with the eligibility criteria set out in section 1473 of the Companies Act 2014 and reflected in the Institute’s Audit Regulations at chapter 2.   Audit firms with Irish audit registration will need to be cognisant of possible implications for their compliance with those eligibility criteria should it transpire that events related to Brexit as described above impact on the eligibility for responsible individual (‘RI’) status in Ireland for those signing audit reports for Irish registered companies and for audit approval of individuals in the ownership and management structure of the firm. What does this mean for a ‘UK-based’ audit firms registered by the Institute? If you are a an audit firm included on the Irish audit register by the Institute and are based in the UK, the following is relevant: The Institute does not currently expect to withdraw your Irish audit registration on 31 December 2020 as a consequence of Brexit. The Institute may nonetheless be forced, by a change in Irish company law or a regulatory instruction, to withdraw your Irish audit registration some time after 31 December 2020. If your Irish audit registration is withdrawn as a consequence of the circumstances above, you will be able to apply for re-registration in Ireland.Re-registration of an audit firm would require the approval as third country auditors of the firm’s responsible individuals signing Irish audit reports as well as ensuring that the ownership structure of the firm is composed of the appropriate number of individuals eligible for approval in Ireland. All third country auditor applicants must either sit and pass an aptitude test or be granted an exemption from that aptitude test.The aptitude test consists of two exams being corporate and business law and tax law as they pertain to statutory audit in Ireland. It is likely that exemption from the aptitude test could only be granted to third country auditors who can demonstrate that they have sufficient recent experience of performing Irish audit work and have undertaken appropriate Irish relevant audit CPD. It is important to note that it is not clear to the Institute what factors determine whether an auditor is ‘UK based’ (for example residential address of the firm’s partners or responsible individuals? business address of the firm?).We have raised a number of queries with IAASA in this regard. What next? Unfortunately the uncertainties created by Brexit in recent years remain unresolved.  The Institute continues to engage with government departments in Ireland and the UK, with IAASA and the FRC and with other recognised accountancy bodies to prepare for the possible outcomes of Brexit with regard to audit registration.   The Professional Standards Department will keep audit compliance principals informed of any developments arising. Auditors and audit firms who may be ‘UK based’ and who currently undertake Irish audit engagements should continue to be mindful of the possible implications of Brexit for their audit registration in Ireland and plan for scenarios that may arise for auditors and their Irish clients in 2021. Further information – Accountancy Ireland Podcast Listen here. 1] Letters to audit compliance principals in November 2018 and again in February 2019.  Regulatory Bulletin February 2019 

The thirteenth Annual Report of CARB has now been published.  The CARB Annual Report 2019 can be downloaded via the following link: CARB Annual Report 2019.

The Corporate Insolvency and Governance Bill is likely to receive Royal Assent on 26th June 2020. The Bill, once it has been made law, will introduce the biggest reforms to the UK’s insolvency framework for almost 20 years. This emergency legislation will:  introduce new corporate restructuring tools to the insolvency and restructuring regime to give companies the breathing space and tools required to maximise their chance of survival during these uncertain times;  temporarily suspend parts of insolvency law to support directors to continue trading through the emergency without the threat of personal liability for wrongful trading and to protect companies from creditor action;  amend Company Law and other legislation to provide companies and other bodies with temporary easements on company filing and annual general meetings.  Although this new legislation is primarily of relevance to Insolvency Practitioners, members in practice are also encouraged to participate in the webinars. Joint virtual training events have been organised for:  30th June to talk about the corporate governance changes being introduced by the Bill; and  7th July to talk about the insolvency aspects of the new Bill.  These webinars are FREE and available to both R3 members and Non-members, but you must register.    For more information on key speakers and how to register please see links below.  30th June Corporate Governance  7th July Corporate Insolvency 

At its meeting on 22nd May 2020, the Institute Council consented to the merging of the responsibilities of the Regulatory Policy Board and the Chartered Accountants Regulatory Board (CARB) into a single Board – the Professional Standards Board (‘the PSB’). The PSB will assume responsibility for the development and approval of relevant Bye-laws, Regulations, and associated policies and guidance which underpin the Institute’s regulatory and disciplinary obligations and for oversight of the Professional Standard Department.  This move marks the end of the process of reforming the Institute’s regulatory governance structures to reflect changes in responses to changes in the external environment govern regulation of the profession. Over the coming weeks and months, changes will be made to the PSD pages of the Institute website and documentation to reflect these changes. The Regulatory Policy Board and CARB Board have now ceased, with the new PSB commencing on 22nd May 2020.

The new Insolvency Code of Ethics has now been approved by IAASA and will be effective from 8 June 2020. The Insolvency Code of Ethics constitutes Part 5 of the Code of Ethics for members of Chartered Accountants Ireland and replaces Part D of the previous Code of Ethics.  Parts 1 to 4 of the revised Code of Ethics are effective since 1 March 2020.  The full Code of Ethics (Parts 1-5) are available to read in the Ethics Resource Centre. The code has been updated following a consultation on possible revisions and to adopt the drafting format used by the International Ethics Standards Board for Accountants (IESBA). The accountancy Recognised Professional Bodies (RPBs) use the IESBA approach in their main ethical codes. What is different? The new format differentiates between requirements (identified by an R) and application material (identified by an A). There is an entirely new section on the insolvency practitioner as an employee which emphasises that an insolvency practitioner is required to comply with the Insolvency Code of Ethics irrespective of their status within a firm. The sections on obtaining specialist advice and services, agencies and referrals, referral fees and commission and inducements have all been expanded. There is a new section on Responding to non-compliance with laws and regulations based on IESBA material. There are new examples specific to the Republic of Ireland. Although the new Insolvency Code of Ethics does look a little different, the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour remain as the key concepts in the code.

The UKFIU has implemented three new SAR Glossary Codes for MLROs as a result of the increased threat posed by organised crime groups (OCGs) seeking to exploit the COVID-19 situation by means of fraud. The Glossary Codes Note document can be found on the NCA website, also included at the below link; https://www.nationalcrimeagency.gov.uk/who-we-are/publications/443-sar-glossary-codes-note-april-2020/file The Glossary Codes and Reporting Routes document can be found on the NCA website also included at the below link; https://www.nationalcrimeagency.gov.uk/who-we-are/publications/442-sar-glossary-codes-and-reporting-routes-april-2020/file     

Our 25th edition of the Regulatory Bulletin is now available. For previous issues, please see our Archive folder.

The Joint Insolvency Committee (JIC) is consulting on changes to Statement of Insolvency Practice 3.2 - Company voluntary arrangements, Statement of Insolvency Practice 3.1 - Individual voluntary arrangements, Statement of Insolvency Practice 9 - Payments to insolvency office holders and their associates and Statement of Insolvency Practice 7 - Presentation of financial information in insolvency proceedings. READ MORE

Chartered Accountants Ireland, in conjunction with CCAB, has published Covid-19 Supplementary AML Guidance – Click on the following link to access - Completion of Client Due Diligence (CDD) during urgent work (Regulation 30 of Money Laundering Regulations 2017).

The current emergency situations in Ireland and the UK undoubtedly give rise to heightened risks and challenges to Institute firms and their compliance with their anti-money laundering (AML) obligations in both jurisdictions. Our colleagues in ICAEW have prepared useful information and guidance on the implications of the COVID-19 situation and AML issues.  While this material is written in a UK context, the guidance it sets out is also relevant to Ireland.  The ICAEW information can be accessed here.

The National Crime Agency (NCA) have uploaded the latest UKFIU SARs In Action magazine.  Click here for access.

  PSD recognises that regulatory compliance and associated issues may not currently be a high priority for firms.  Where firms are involved in specific regulatory or disciplinary processes, the Institute will work with you to find appropriate solutions and agree appropriate timelines for specific matters to be addressed.  We shall be adopting a reasonable and pragmatic approach to this.  Firms that are due a Quality Review visit in the near future will have been notified (or are in the process of being so) of the deferral of such ‘face to face’ visits.  PSD may suggest that such visits be conducted on a desktop or remote basis but only where this is appropriate and with the agreement of the firm.  Changes to authorisations/licensing requirements can be notified to authorisations@charteredaccountants.ie. If possible, please avoid sending in a hard copy.  We will do our best to respond to your queries as soon as possible but please be aware that there are likely to be delays due to the current disruption to normal work practices.  For general regulatory queries or information please email us at professionalstandards@charteredaccountants.ie.  

The UK Money Laundering Regulations (Reg 46(2)) require the Institute to provide an effective mechanism to allow reporting to the Institute of actual or potential breaches of the aml legislation. Should you suspect that a firm supervised by the Institute for aml purposes is not complying with aml legislation you may contact the Institute via the AML Confidential Disclosure Form. You do not have to disclose your personal details, although should the Institute wish to clarify any information, contact details would be helpful. Irish aml legislation does not provide a specific requirement for the Institute to provide a similar mechanism but should  you suspect that a supervised  firm in Ireland is not complying with aml legislation you may also disclose the information via the AML Confidential Disclosure Form. For more information

On 31 January  2020 the UK left the EU under the terms of the withdrawal agreement and commenced a transition period, which is currently expected to end on 31 December 2020.  The FRC and Department for Business, Energy and Industrial Strategy (BEIS) in the UK have published joint letters for accountants and auditors with information regarding auditing, accounting and corporate reporting standards in the UK during the transition period following the UK's exit from the EU.  The letter to auditors confirms that auditors who are members of Chartered Accountants Ireland will continue to have their audit qualification recognised in the UK during and after the transition period as Chartered Accountants Ireland is a professional body recognised in this regard in the UK.  The letters are available to read on the FRC's website here. The Institute is working with the Institute of Chartered Accountants in England and Wales ('ICAEW') and the Institute of Chartered Accountants of Scotland ('ICAS') to develop Audit Regulations which will apply to auditors authorised by members of those bodies in the UK after the transition period.

Please be advised that notification emails will be issued in the week commencing 17 February in respect of firm's regulatory fees for 2020.

The Institute’s Code of Ethics for members has been revised and restructured and this revised Code will take effect from 1 March 2020 replacing the current Code of Ethics (effective September 2016). The revised Code of Ethics is available to read here. The Institute’s Code of Ethics has been closely aligned for many years to the Code of Ethics issued by the International Ethics Standards Board for Accountants (‘IESBA’).  In 2018 IESBA finalised a significant project to clarify and restructure its Code of Ethics.  IESBA’s primary intention behind this restructuring of the Code was not to fundamentally change the substance of the Code, but to improve clarity and navigation.  Some key features of the restructuring include: a more consistent approach to each section, including separating out material into requirement paragraphs and related application material; reordering material, dividing larger sections and including more sub headings; simplifying the more complex sentences; changing numbering to clarify the intent of each paragraph, and to allow for further changes without having to renumber existing material; and Introducing a “Guide to the Code” to explain how it works. The Institute’s Code of Ethics has now been revised to align with the restructured IESBA Code and so the format and layout of the revised Institute Code of Ethics will look completely different to members.  To help members become familiar with the revised Code of Ethics we have made available a table of destinations which shows where each paragraph in the 2016 Code appears in the revised 2020 Code.  This table of destinations can be accessed here. The new structure, compared to the old structure, is as follows: Revised Code of Ethics for members of Chartered Accountants Ireland (effective 1 January 2020) Extant (‘old’) Code of Ethics for members of Chartered Accountants Ireland (effective 30 September 2016) Guide to the Code This is a new section in the revised Code of Ethics Part 1 – Complying with the Code, Fundamental Principles and Conceptual Framework Sections 100–120 Part A – General application of the Code Sections 100-150 Part 2 –Professional Accountants in Business Sections 200-299 Part C – Professional Accountants in Business Sections 300-350 Part 3 –Professional Accountants in Public Practice Sections 300-399 Part B– Professional Accountants in Public Practice Sections 200-280 Part 4A – Independence for Audit and Review Engagements* Sections 400-800 Part B – Professional Accountants in Public Practice Sections 290 Part 4B – Independence for Assurance Engagements other than Audit and Review Engagements Sections 900-990 Part B – Professional Accountants in Public Practice Sections 291 Part 5** - Applicable to Insolvency Practitioners Part D – The Practice of Insolvency Section 400  *        The Institutes’ Code of Ethics does not apply to the performance of statutory audit work.  Independence and other ethical requirements for auditors are contained in the Ethical Standard for Auditors issued by the FRC and IAASA in the UK and Ireland respectively. **     The revision of the part of the Code of Ethics applicable to the practice of insolvency is still ongoing and is expected to be published in the first half of 2020.  Non- IESBA content – ‘add-on’ material The Institute’s Code of Ethics has historically contained ‘add-on’ material (shown in italics in the Institute’s Code) over and above the provisions of the IESBA Code of Ethics.  Where the revised IESBA Code of Ethics now addresses the matters included in Institute ‘add-on’ material or where the add-on material has been assessed to be descriptive in nature rather than core to the Code of Ethics,  such ‘add-on’ material has been removed as part of the revision project.  The revised Institute Code of Ethics is now closer than ever to the IESBA Code of Ethics.   Removed ‘add-on’ material which is considered useful but not core to the Code has been made available for members in a series of Ethics Releases on the following topics: Code of Ethics and changes in professional appointments; Code of Ethics and confidentiality; Code of Ethics and corporate finance advice; Code of Ethics and marketing.  These Ethics Releases are available in the Institute’s online Ethics Resource Centre. Key developments in the revised Code As well as the significant restructure there have been some enhancements of the content in the revised Code of Ethics although there is no fundamental change to ethical requirements.  These include the following: “Guide to the Code” This new introductory section does not form part of the Code but provides some useful information on the purpose of the Code, it’s structure and how it is to be used. Enhanced and overarching conceptual framework There is a clear emphasis on the fundamental ethical principles and the use of the conceptual framework for applying those principles underlying every section of the Code.  In this context there is also new guidance to emphasize the importance of understanding facts and circumstances when exercising professional judgment and new guidance to explain how compliance with the fundamental principles supports the exercise of professional skepticism in an audit or other assurance engagements. Safeguards Revised ‘safeguards’ provisions better align to threats to compliance with the fundamental principles.  A new definition of ‘safeguards’ clarifies that ‘safeguards’ are specific actions (no longer ‘actions or measures’) to be taken to reduce threats.  Additional guidance is provided in the revised Code of Ethics in relation to example ‘safeguards’. Application of relevant Code provisions to all professional accountants Clear guidance that relevant provisions for professional accountants in business are also applicable to professional accountants in practice, in the context of their role other than when providing professional services to clients.  The converse also applies where appropriate.  This is not a change to requirements of the Institute’s 2016 Code of Ethics but rather provides clarification as to how the provisions of the Code apply. Professional accountants in business (‘PAIBs’) New and revised sections dedicated to PAIBs relating to: preparing and presenting information (extended new section 220); and dealing with pressure to breach the fundamental principles (new section 270) These changes add additional explanation to existing requirements in the Institute’s 2016 Code of Ethics and have, for the most part, been regarded as implicit in the 2016 Code.   Non-compliance with laws and regulations (‘NOCLAR’) Dedicated sections on non-compliance with laws and regulations (‘NOCLAR’) (new sections 260 and 360).  The 2016 Code of Ethics includes specific permission to breach confidentiality in the public interest and so the NOCLAR provisions can be seen as a change of detail, rather than of substance.  The new sections provide additional guidance in this area. Inducements Additional guidance is provided in relation to the threats posed by gifts and hospitality and more broadly now referred to as inducements.  The revised Code of Ethics introduces an ‘intent’ test.   The acceptance of any inducement which is offered with an intent to influence inappropriately is prohibited whereas there may be possible safeguarding actions to take in relation to inducements where there is no intent to influence inappropriately.

Shane McAleer writes: “That would be an ecumenical matter!” The Ethics Research Report, published by Chartered Accountants Ireland in January 2019, reported that “94% of respondents have ‘observed or encountered’ some level of unethical behaviour during their professional career”. Due to the nature of their business, members working in practice can be more exposed to certain ethical dilemmas. In my experience, the following are two typical dilemmas that can arise and, unless appropriately managed, may potentially lead to unethical behaviour. Business & professional client relationship vs close personal friendship Over time, practitioners can develop a good professional relationship with their client. On some occasions this can develop into a closer personal friendship which, in some circumstances, can expose the practitioner to a threat to their professional ethics. The level of threat can vary. For example: Acting for two clients, both friends of the practitioner, on opposite sides of the same transaction can present a greater threat to independence (breach of objectivity) than perhaps having two bookkeeping clients who happen to be competitors Casually discussing a client’s affairs over a drink with a mutual friend can present a breach of confidentiality. There are safeguards in the Code of Ethics, or the Ethical Standard for Auditors, to help manage these. The ultimate safeguard is resignation, but only insofar as the threat arises between the client and the practitioner. Where the misconduct arises through an action of the client, then this can lead to specific professional responsibilities, e.g. whistleblowing or reporting suspicious transactions under Anti-Money Laundering legislation. Such scenarios can present an ethical dilemma where the practitioner is torn between the value of friendship and their professional obligations. For some, the dilemma can deepen where the client pleads for discretion. This segues to another typical dilemma, below. Expectations to deliver vs Undue pressure/influence from the client or management Situations can arise where practitioners are put under undue pressure/influence from the client to “turn a blind eye” on certain matters. This pressure may also come from management within the practice. In my experience as an insolvency practitioner, I have come across scenarios in companies where a potential ethical threat existed for the practitioner previously advising or auditing the company. In one scenario, a sole practitioner provided audit and tax advice to a large family company for many years. There was a good relationship with the client, given that the client had followed from a firm where the practitioner had previously worked. Over time, the owner/director amassed a significant director’s loan. The practitioner was aware of the loan but for several years it was not disclosed correctly in the accounts. The relevant taxes associated with the loan were not submitted. In another scenario, a practitioner prepared management accounts, showing a solvent position, for the purposes of providing these accounts to a secured lender. The practitioner was aware that the accounts were materially different from the actual position, i.e. an insolvent one. The client was insistent that failure to present a solvent position would result in financial support being withdrawn, with the potential loss of the business and jobs. The facts of the cases in scenario one and scenario two suggested that the practitioner had, perhaps inappropriately, succumbed to pressure from the client to agree with the client’s rationalisation that it was in the best interests of the company to account for matters in this way, and even that the company’s survival may depend upon it. Perhaps, the decision to accommodate the client was influenced out of a sense of loyalty. Perhaps it was out of fear of losing a client. Or, perhaps it was out of a lack of awareness of the relevant requirements! In addition to the safeguards outlined in the ‘Code of Ethics’, there are a number of supports available to all Members and their staff from the Institute, including the Ethics Resource Centre which contains a number of articles and publications to assist members to reach a decision. The Practice Consulting team will always be willing to advise members in practice in dealing with ethical issues and, in addition, CA Support is open to all members to assist them in times of difficulty. Shane McAleer is a director in Somers Murphy & Earl Corporate Services Limited. He is a member of Council, the Institute’s Ethics and Governance Committee, and the Members in Practice Committee. He is also a member of the CCAB-I Insolvency Committee.

The latest publication from the UK Financial Intelligence Unit (UKFIU) titled the 'SARs Reporter Booklet' contains a sanitised summary of feedback from law enforcement agencies (LEAs) on their use of SARs and includes pertinent information and updates from the UKFIU. The UKFIU sits within the National Crime Agency (NCA) and receives over 470,000 SARs a year. This Booklet highlights the work of LEAs in utilising SAR intelligence to initiate investigations and informing existing ones. More information about the UKFIU, the SARs regime and further guidance notes can be found at the NCA website with helpful Guidance Notes reproduced below. Submitting A Suspicious Activity Report (SAR) within the Regulated Sector – Guidance Note Introduction to Suspicious Activity Reports (SARs) – Guidance Note