U.S. wants CPAs to help fight money laundering.
The report advocates better enforcement of existing laws against money laundering and greater cooperation between the public and private sectors and among federal, state and local governments and the international community. It also calls for a study group, made up of representatives of the IRS, the SEC, the Commodities Futures Trading Commission and the FDIC, as well as the Treasury and the Justice Department, to examine how accountants and auditors could best help detect and deter money laundering.
The illicit funds problem is of no small proportion. Michel Camdessus, former managing director of the International Monetary Fund, said the annual global volume of money laundering is at least $600 billion--2% of the world's gross domestic product--and that it could be as much as $1 trillion. How do money launderers get such vast sums past the watchful eyes of regulators? By sophisticated concealment of fraudulent transactions in the vast flow of international financial traffic passing through communications networks. Just as legitimate businesses take advantage of the speed and voluminous capacity of these systems, criminal groups exploit them to disguise illegal proceeds and finance their ongoing activities.
The federal government requested the cooperation of industry and professional groups, including the AICPA. In January, AICPA representatives met with members of the federal study group to discuss the role and responsibilities of CPAs and ways the AICPA can work with federal agencies to provide more communications and training to members.
The federal study group's goal in the year 2000 is to heighten auditor awareness of possible money laundering and develop additional guidance, training and educational materials that address money laundering vulnerabilities. In addition, the study group wants to continue monitoring various measures undertaken by the accounting profession in other countries to determine their applicability in the United States.
Under GAAS, independent auditors consider money laundering as having an "indirect" effect on financial statements that, if detected by an auditor, must be communicated to management. The 1999 AICPA Audit Risk Alerts, issued for auditors of the banking, securities brokerage, investment company and insurance industries, included segments on money laundering.
By September 2000, the Director of the Treasury's Financial Crimes Enforcement Network (FinCEN) intends to report on progress in developing additional responses to money laundering that can be integrated into the work of both internal and external accounting professionals. The study group also plans to review the professional responsibilities of lawyers and accountants with regard to money laundering and make recommendations--ranging from enhanced professional education, standards or rules to legislation--as necessary.
Also in March, a House bill (HR 3886, the International Counter-Money-Laundering Act of 2000) was introduced with provisions that affect independent auditors (for example, safe harbor for those who report suspicious activity to the authorities and a prohibition against informing suspects such activity has been reported), but the bill does not explicitly require independent auditors to report suspicious activities. The bill's congressional sponsors are James A. Leach (R-Iowa), John J. LaFalce (D-N.Y.), Marge Roukema (R-N.J.) and Bruce F. Vento (D-Minn.), who referred it to the House Banking and Financial Services Committee. The committee may chose to amend the bill and submit it for a vote by the entire House.
Sources on Capitol Hill say it's too late in this session of Congress for anti-money-laundering legislation to have more than a slim chance of passing. But the bill's bipartisan support is evidence of the seriousness with which both sides of the aisle view financial crime. "It's an issue that won't go away, regardless of which party wins the presidential election" said one observer.
Financial institutions already must comply with two requirements of which CPAs should be aware. One is a long-standing provision of the Bank Secrecy Act of 1970 that financial institutions must report cash transactions over $10,000. The other is a newer requirement that, so far, applies to banks only. If a bank's management observes suspicious activity, which the requirement defines, it must report the activity to the Treasury. Industry sources estimate there are hundreds of thousands of such reports each year, with companies like Citigroup filing approximately 6,000 of them. Sources also note that if the government expands the reporting requirement to dealers, brokers, casinos and other organizations as has been rumored, CPAs will be responsible for reporting suspicious activity in a greater variety of settings.
Following the revelation in 1999 that $7 billion, possibly originating in the Russian underworld, had passed through the Bank of New York, the Clinton administration began a high-profile war against international financial crime. U.S. regulators, working in conjunction with their counterparts in the G-7 nations (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) and representatives from the Organization for Economic Cooperation and Development (OECD), established a "gatekeepers" working group to strengthen and coordinate measures against money laundering. Each member state of the European Union currently does, or soon will, require accountants and auditors to report suspicious financial activity; Italy and the Netherlands do not.
The National Money Laundering Strategy for 2000 is available at the Treasury's Web site (www.treas.gov/ press/releases/docs/ml2000.pdf)
Nothing Small About Leap-Year Numbers
The IRS could collect as much as $5.3 billion more in taxes as a result of the additional day of economic activity this year. On February 29, U.S. workers ...
Contributed $25 billion in gross national product Worked 1.1 billion hours Earned $6 billion in extra pay (hourly wage earners) Sent 1.1 billion e-mails Drank 82 million additional cups of coffee
Securities Industry Shatters Profit, Revenue Records
Pretax profit for the securities industry surged to an all-time high of $16.3 billion in 1999. far surpassing both the 1998 total and a record $12.2 billion reached in 1997. Industry revenue also soared, reaching peak levels in asset management fees, commissions, margin interest, trading gains and revenue from mutual fund sales, underwriting and research.
Asset Mutual Revenue Management Margin Fund Sales (in millions) Fees Commissions Interest Revenue 1998 $ 8,995 $24,188 $12,119 $6,213 1999 $11,450 $29,311 $13,416 $6,663 Revenue Research Trading Underwriting (in millions) Revenue Gains Revenue 1998 $ 55 $19,703 $14,651 1999 $157 $36,423 $16,026 Revenue Total Pretax (in millions) Revenue Profit 1998 $170,805 $ 9,790 1999 $183,367 $16,270
Source: Securities Industry Association, New York City.
Make Mine Football, CFOs Say
Baseball may be the national pastime, but when it comes to spectator sports, CFOs prefer football to any other game, says a new survey. In fact, baseball--which only one out of seven finance chiefs, whether stadium- or couch-based, put at the top of the list--trails basketball, the game ranked second.
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|Publication:||Journal of Accountancy|
|Date:||May 1, 2000|
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