i) Auditors’ duty under money laundering laws and regulations:

• The anti-money laundering laws and regulations require auditors to report suspicious transactions and activities to the Financial Intelligence Centre. However, the code of ethics requires auditors to maintain confidentiality in client relationships. This can result in ethical conflicts, namely the duty to report to the authorities and the duty of confidentiality to the client. This conflict may be particularly sharp where an auditor suspects the client of money laundering.
• Under the anti-money laundering laws, there is a requirement to report even a suspicion of money laundering, which would likely conflict with the auditor’s duty of confidentiality to the client.
• The situation is further complicated by the need to avoid “tipping off” the client that the auditors suspect to be engaged in money laundering, which could make it very difficult for an auditor to decide whether they have a duty to report their suspicions, as it would be hard to gather evidence of money laundering without “tipping the client off.”
• If such an ethical conflict cannot be resolved, then the auditor may consider obtaining professional advice from the ICAG or from legal advisors. This can generally be done without breaching the fundamental principle of confidentiality if the matter is discussed anonymously with the ICAG, or under legal privilege with a legal adviser.
• The ethical rules also make provision for exceptions under confidentiality where the auditor can disclose information when required by the law, in this case, the anti-money laundering law.

(Any 4 points for 4 marks)

ii) Elements to be included in an anti-money laundering programme for an accounting firm:

1. Appointment of a Money Laundering Reporting Officer (MLRO): Implementation of internal reporting procedures to ensure suspicious activities are reported appropriately.
2. Training: Train individuals to ensure they are aware of the relevant legislation, know how to recognize and deal with potential money laundering, and understand how to report suspicions to the MLRO.
3. Internal Procedures: Establish internal procedures appropriate to forestall and prevent money laundering, and make relevant individuals aware of the procedures.
4. Client Verification: Verify the identity of new and existing clients and maintain evidence of identification as part of customer due diligence measures.
5. Record Keeping: Maintain records of client identification and any transactions undertaken for or with the client.
6. Reporting Suspicious Activity: Report suspicions of money laundering to the Financial Intelligence Centre (FIC).

(4 points @1.5 marks each = 6 marks)