Musah Diara is a Malian resident in Ghana. He has established Tagoe Company Ltd (Tagoe) which engages in trading in West African countries; Ghana, Nigeria and Mali. Musah is always funded by his brother who is also a resident in Ghana. Musah’s brother does not have a bank account in Ghana. He always gives huge cash to Musah who buys goods in Ghana and sells it in Nigeria or Mali. He pays the profit into Tagoe’s account in Ghana and bank the amount given to him by his brother into his brother’s account in Mali.
Required:
You have been engaged to audit Tagoe. Discuss the risk you are likely to encounter in this audit, specifying your expectation of the risk format and the action you have to take. (10 marks)
View Solution
The scenario fits Money Laundering activity.
- Musah is given huge cash to buy his goods by his brother
- Musah’s brother does not have bank account in Ghana
- The proceeds of the transaction is not paid to his brother in Ghana, but paid into his account in foreign country.
- Though we are not sure how his brother get his money, the modus oprandi, fit money laundering.
Expectation of the risk format
In Money Laundering,
- There’s placement of illegal funds into the financial system. Here huge cash is given to Musah to buy goods and sell outside Ghana.
- Layering-Passing the money through a number of transactions, selling the good outside the country which is engagement of economic activity
- Integration-Integrating the proceeds into legitimate economy by banking in other countries.
Actions to be taken by the auditor
The auditor is then exposed to money laundering activity
- The auditor has an obligation to know the source of the money being given by Musah’s brother.
- The auditor must perform due diligence on the customer and the brother to confirm the activity of the brother.
- If the suspicion is confirmed, the matter should be reported to the authorities.
- The auditor should avoid tipping of the client during his investigation to confirm the suspicion.