From 1 April 2019, criminal conduct by ICAEW members will be dealt with according to the new version of the Guidance on Sanctions, which simplifies, as well as amplifies, the 2018 version. Further changes will follow in July 2019, with the introduction of new guidance for Anti-Money Laundering breaches where the relevant conduct has not resulted in a criminal conviction.
The new guidance is binding on all the Committees of the ICAEW when considering complaints against ICAEW members, students, affiliates and member/regulated/contracted firms. It is an important reference document for those regulated by the ICAEW, helping them to understand the sanctions that may be imposed by the regulator should they come into contact with the criminal justice system.
Changes effective 1 April 2019
The Guidance has introduced three key changes which:
- Simplify the approach that the Disciplinary Committee will take to dealing with criminal offences;
- Bring summary only offences within the fixed penalty regime; and
- Clarify how inaccurate annual returns ought to be dealt with.
CRIMINAL OFFENCES AND POLICE CAUTIONS (CHAPTER 4)
In the previous iteration of the Sanctions Guidance (2018), criminal conduct was divided into four strata, meant to represent the differing levels of seriousness of offending, with each having a different sanction entry point, namely:
- Convictions involving dishonesty/breach of trust/money laundering: sanction of exclusion;
- Convictions not including dishonesty/breach of trust/money laundering where the member receives a custodial sentence (suspended or not) or is given a community penalty: sanction of exclusion;
- Convictions not including dishonesty/breach of trust/money laundering where the member does not receive a custodial sentence or a community penalty: sanction of reprimand; and
- Police cautions for any type of offence: sanction of reprimand.
This earlier guidance, addressed only those offences involving dishonesty, breach of trust and money laundering; it did not capture the full range of potential criminal potential conduct. In the Guidance, criminal conduct is separated out by reference to the outcome for the practitioner (rather than the type of offence committed):
- Any offence where the member receives a prison sentence (suspended or not): exclusion.
- Indictable offence (an offence which must be tried in the Crown Court) where the member receives a non-prison sentence: reprimand/severe reprimand.
- Summary only offence (an offence which is triable only in the Magistrates Court) where the member receives a non-prison sentence: reprimand.
- Police cautions and any offences leading to a conditional or absolute discharge: reprimand /unpublicised caution.
The aggravation and mitigation commentary in the Guidance has been substantially simplified, with committees now being told that “[f]actors that may influence the starting point (sanction) should be arrived at by considering the sentencing remarks”. This approach replaces the previous finite list of factors that committees were required to have regard to (such as any admission or denial of guilt, whether the member had cooperated with the prosecution authorities etc.). Practitioners might find that points in mitigation not raised (or taken up by the sentencing court) in the criminal proceedings cannot be so readily relied upon in the disciplinary proceedings that follow.
INCREASE IN FINES FOR INACCURATE ANNUAL RETURNS
A further change introduced is an increase of the financial penalty for a complaint type ‘f’ in the ‘Other Regulatory and Compliance Issues’ chapter of the Guidance. Complaint type ‘f’ provides for ‘inaccurate annual return submitted to ICAEW (significant error)’. Whereas previously, a complaint of this nature was subject to a reprimand, a category F financial penalty and/or order for remedial training, the revised type ‘f’ complaint is now a category E financial penalty, meaning an increase in fine from £1,000 to £3,000.
ADDITIONS TO THE FIXED PENALTY REGIME
Practitioners may already be aware of the Fixed Penalty Regime that enables the ICAEW to deal with low-level criminal conduct by way of fixed penalty, without the need for lengthy disciplinary proceedings. This regime already captures conduct such as not having a practising certificate and the misuse of the description ‘Chartered Accountants’. The new additions to this regime will tessellate with the changes to the criminal offences in the Guidance by bringing within its ambit:
- summary only offences where the respondent receives a non-custodial sentence for which a reprimand will be the fixed penalty; and
- police cautions and any offences leading to a conditional or absolute discharge for which an unpublicised caution will be the fixed penalty.
The fixed penalty scheme continues to apply to minor complaints which the ICAEW Regulatory Board determines suitable for the process and where the respondent firm or individual agrees to the proposed penalty.
No huge changes here but subtle differences that may make a big difference to those Practitioners, students, affiliates and firms that find themselves on the wrong side of the criminal justice system.
Changes effective 1 July 2019
In addition to the changes above, on 1 July 2019, the ICAEW will introduce a new chapter in the Guidance to deal with anti-money laundering (‘AML’) sanctions. These changes may well be part of the renewed focus on AML that is occurring across the regulated sector, in response to the setting up of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS).
The new chapter on AML (Chapter 19) is intended to provide for money laundering failures which have not attracted criminal censure and are therefore not captured by Chapter 4 (which provides for Criminal Offences and Police Cautions).
The new guidance captures all AML failures by firms and individuals and provides guidance as to the relative seriousness of the various types of failures; it deals separately with ‘Failures by a Firm’ and ‘Failures by Individuals’ and tailors the complaint-types to those groupings.
DEFINITION GUIDANCE ON FAILURES BY A FIRM AND THE FINANCIAL PENALTIES FACED
The guidance for firms divides AML failures as follows:
- Failure by a firm to:
- have appropriate policies, controls and procedures (Regulation 19 and 20, and Parts 3, 4 and 5)
- have appropriate training for staff (Regulation 24)
- Failure by a firm to:
- implement the firm’s policies and procedures; and/or
- have appropriate internal controls to monitor compliance with policies, controls and procedures (Regulation 21)
Financial penalties for firms include as a starting point, a fine of £2,000-£3,000 per principal with a capped fine of £150,000 for firms with a turnover of more than £100 million for complete failure conduct (lower caps apply to firms with a lower turnover).
DEFINITION GUIDANCE ON FAILURES BY AN INDIVIDUAL
For individuals, there are five separate complaint categories as follows:
- failure to report
- deliberate tipping off
- tipping off without intent
- failure to follow firm’s policies, controls and procedures
- any other significant breach
The ICAEW will take all AML breaches seriously and individuals are ultimately liable to exclusion the most serious breaches.
SOME STEPS TO TAKE BY FIRMS AND INDIVIDUALS TO BE COMPLIANT WITH AML LEGISLATION AND REGULATIONS
Firms and individuals can and should take steps to ensure they are compliant with AML legislation and regulations by ensuring:
- they have compliant policies, controls and procedures in place as well as appropriate training for staff;
- they have processes to monitor compliance with the policies, controls and procedures and AML supervision;
- they are compliant with their reporting obligations for criminal convictions; and
- individuals understand personal obligations they hold to report concerns, follow firm policies, controls and procedures and to not tip off a person they suspect or know is money laundering.