Sampa Sawmill Ltd. is a company located in the Eastern Region of Ghana, involved in the exportation of wood products to overseas countries. Sampa Sawmill Ltd. is of late being accused of involvement in money laundering. Sampa had been an audit client of Tetteh and Associates, a firm of Chartered Accountants for the past three years.
Required:
i) As an Audit Manager of Tetteh and Associates in charge of Sampa Sawmill Ltd., evaluate the issues you will consider to prove or disprove the allegation. (5 marks)
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The indications of possible money laundering are;
- Broadly, transactions that appear inconsistent with a client’s know legitimate (business or personal) activities or means: unusual deviations from normal account and transactions patterns.
- Any situation where personal identity is difficult to determine.
- Unauthorised or improper recorded transactions; inadequate audit trails.
- Unconventionally large currency transactions, particularly in exchange for negotiable instruments or for the direct purchase of funds transfer services.
- Apparent structuring of transactions to avoid dealing with identification requirements or regulatory record-keeping and reporting thresholds.
- Transactions passed through intermediaries for no apparent business reason.
- Introduction of a client by an overseas associate or financial institution based in a county or jurisdiction known for drug trafficking and production, other financial services are bank secrecy. (1 mark each for any 5 valid points)
ii) Discuss the need for ethical guidance for professional accountants on money laundering. (5 marks)
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- There is the need for ethical guidance on money laundering because there is conflict between the accountant professional duty of confidentiality in relation to his client’s business.
- The duty to report suspicions of money laundering to the appropriate authorities is required by law.
- Disclosures in bad faith or without reasonable grounds would possibly lead to the accountant being sued for breach of confidence.
- Professional Accountants are not in breach of their professional duty of confidentiality if they report in good faith their knowledge or suspicions of money laundering to the appropriate authority.
- Auditor’s duty of confidentiality will be breached if they report in good faith, any money laundering knowledge or suspicions to the authority. Statutory protection also applies where reports are made in good faith.