Rosemary Hilary

By Rosemary Hilary FCCA, audit director, TSB

When I started my career I knew I wanted to have a respected qualification that would give me flexibility and choices.  As I was naturally attracted to the world of accountancy, ACCA seemed the number one choice for me.

I developed my early career in insurance (management accounting) and industry (financial accounting) and then I joined a commercial bank first as Internal Auditor then as Treasury Accountant.  From there I joined the Bank of England and that led to a fascinating period in financial services regulation, in a number of senior roles, transitioning to the Financial Services Authority and, briefly, the Financial Conduct Authority. In my last seven years at the FSA/FCA I was the Director of Internal Audit. My ACCA qualification provided an excellent foundation on which to develop the skills required for Internal Audit.

But in 2013, after working through the effects of the financial crisis, I decided it was time to return to my private sector roots in banking.

I joined the executive team at TSB, as Director of Internal Audit, in October 2013. Once again my ACCA qualification was a key factor that qualified me for the role and, on a day-to-day basis, I still draw on the skills and knowledge that I learned during my accountancy training.

TSB is a new challenger bank for Britain, but with a traditional and trusted brand and the capabilities of an established organisation. This sense of continuity and history is central to the new Bank’s culture – TSB is benefiting from the trust and reputation it built up over its long history and also setting out its own agenda as a straightforward and transparent bank pioneering a return to local banking for Britain. We still have a sense of the old TSB community and the essence of its values, but the new TSB provides an exciting opportunity to have a hard think about strategy and shape our role as a challenger bank.

I am now building up the Internal Audit function to the size and scale that we need for our operation in future. I’m doubling the size of the team to 40 internal auditors and will also bring in specialists when necessary. Apart from sheer intellectual ability, I am looking for the team to have the core skills that I feel I developed as part of my ACCA training. Top of the list is good communications skills. You must be able to write down findings clearly and be impactful when talking to colleagues.  Next is good stakeholder management – knowing how to convey messages as a ‘critical friend’ and with gravitas and ‘clout’ and the ability to inspire respect from colleagues across the organisation, including the Board of Directors. Internal Audit gives you a great, 360-degree view of the business-constantly taking the pulse of the organisation.

In addition to my work at TSB I also feel privileged to have been selected, four years ago, to be on the board of Shelter, the national homelessness charity.  As a member of its Audit, Risk and Finance Committee, my ACCA qualification provides the underlying skills and knowledge that I need.

Why is whistle-blowing such a critical issue and how important is it for businesses to have clear and coherent whistle-blowing policies? asks this video from VLearn. 

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By John Davies, head of technical, ACCA

There is no doubt that professional advisers have on occasions been implicated in money laundering schemes.

Numerous cases have been reported of solicitors being successfully prosecuted for being involved, innocently or otherwise, in such activities; there have been other cases where solicitors have been found to have been actively complicit.

Given the expertise that is called for in order to devise and execute the more sophisticated laundering schemes, it is perhaps only to be expected that criminals will seek out the advice of technical experts who understand how business works and how laws and practices can be manipulated to facilitate substantial transfers of criminal property.

The UK Government is conscious of this and is seeking to step up its efforts to tackle serious organised crime. In a new Bill, presented to Parliament last week, the Government has included a clause to make it a criminal offence to ‘participate’ in an organised crime group. While there is no express reference in the Bill to accountants and lawyers, the Home Office’s press briefings in advance of its publication made it clear that accountants and lawyers were very much the targets of the new measure.

The Bill would make it a criminal offence to take part in any activities that the person concerned knows or suspects are the activities of an ‘organised crime group’ or which would provide help to such a group.

Few would argue with the proposition that involvement in serious criminal activities should be actively discouraged by the law.

The question is whether we need another criminal offence in this area with the additional pressure and uncertainty it would impose on professional advisers.

Under the Proceeds of Crime Act as it currently stands, any person, whether a professional adviser or not, commits an offence if s/he becomes directly involved in holding or transferring criminal property or becomes involved in an arrangement which s/he knows or suspects facilitates such activity.

Accountants and lawyers have additional specific responsibilities to inform the authorities, again on the basis of either knowledge or suspicion, if they come across information suggesting that any of the aforementioned offences have been committed. While there is an exemption from disclosure to cover circumstances of legitimate professional privilege, that exemption is not available where the adviser is aware that the client’s motives in seeking advice are criminal.

In addition to the above, accountants and lawyers are obliged to take all reasonable steps to verify the identity of new clients, ascertain their motives and to monitor on an on-going basis the financial transactions of their clients.

Failure to comply with any of these requirements is already a serious matter and punishable by large fines and long prison sentences. The following comment by a solicitor jailed in 2006 for failing to satisfy a court’s retrospective judgment about what he should have known about his clients sums up the force of the current law:

‘I made a simple mistake, amounting even in its worst interpretation, to no more than an error of professional judgement, from which I made no benefit … all sole practitioners and money laundering reporting officers (MLROs) in professional practices should take heed.’

So what will the new measure achieve that is not achievable under the present rules? As the above example shows, those who conduct professional work for groups of individuals who turn out to be criminals, already run a serious risk of prosecution and imprisonment, even if they make an honest mistake about the client’s motives. An accountant or lawyer who has even a suspicion that he has come across an organised crime gang in the course of his work will already be covered by an obligation to pass on his information to the authorities.

Rather than introducing stringent new offences which don’t appear to add much to what we have, we should surely be focusing on ensuring that we optimise the effectiveness of the existing framework. The regulated sector in the UK, one of the most comprehensive of its kind in the world, provides over 300,000 suspicious activity reports to the National Crime Agency every year, yet there remains a widespread perception that the extensive efforts that go into providing this information do not translate into effective enforcement action against serious crime.

A study by CCAB, to be published on 23 June, brings together the views of stakeholders on both sides of the fence about the operation of the UK’s anti-money laundering regime. It reports that some practising accountants are not convinced that the regime is as efficient as it might be. In particular some feel that there is too much regulatory focus on prosecuting cases of non-compliance with rules and too little emphasis on using the information advisers supply to clamp down on serious criminal activity. They call for a greater effort by regulators to share information with individual firms about how the system is working, with the intention of encouraging more of a shared commitment to the ultimate aims of the exercise.

The Government should heed the feedback from practitioners before it enacts its new Bill. Tackling money laundering is a cause that is vital to both the economy and wider society, and one that accountants and other regulated parties are generally happy to contribute to for that reason. But buy-in from those at the sharp end is crucial, and for that to happen the authorities need to resort to the carrot as much as the stick.

Jacob Soll

By Jacob Soll, Professor of History and Accounting at the University of Southern California and author of The Reckoning, published by Basic Books US and Penguin UK

For accountants, financial crises and scandals can seem bewildering. While some financial crises have roots in accounting fraud, many others stem from what we might call accounting blindness.  From ordinary citizens to bankers and politicians, people do not like to face their books or discuss accounting.  Indeed, with all our crises, we rarely hear about accounting or from accountants themselves.

A 2005 study by Lloyds Trustee Savings Bank of Britain showed that accounting anxiety has led to “balance denial syndrome,” in which bank customers so fear being in the red that they systematically ignore their bank statements. Ignoring accountants, however, is more than a syndrome. It is a long historical tradition that goes back to the very beginnings of finance.

Early pioneers of financial management recognised the inherent anxiety brought on by keeping account books. One of the richest merchants in late-medieval Italy, and a famed practitioner of double-entry bookkeeping, Francesco Datini (1335-1410) complained that keeping complex books was a “vexing” challenge that almost drove him out of his mind. He noted that other businessmen simply ignored their books, as the stress of keeping them, and facing their financial challenges were too much. The only way to face the challenges of keeping good books was by iron discipline. One would have to write in their books “all night” if necessary and not even get up from their chair “until all is done.”

One fact overlooked by historians was that both accounting education and public accounting took six hundred years to catch on in Europe.  In 1340, the Genovese government kept a central ledger to manage state affairs. Throughout Renaissance Italy, a financially literate population kept good books and used these skills for business, but also for public administration.  Yet with the decline of the Italian Republics and the rise of monarchies in 1500, this tradition faded.

This was often due to the fact that account books were a source of political accountability. Louis XIV, known as the Sun King of France, did learn bookkeeping from his finance minister, Jean Baptiste Colbert.  And at first, he was deeply interested in it as a tool of management.

For 20 years Colbert made miniature ledgers that Louis kept in his pockets. But as the building of Versailles and the maintenance of his army and navy during his wars against Holland and Spain strained the royal finances to the point of collapse, Louis stopped keeping the ledgers. His books began to reflect his own poor management and he chose not only to discontinue his miniature ledgers; he also undermined financial administration within the state so that no one could keep clear books.  Louis could not stand facing his books and considered himself only accountable to God. By the time he died in 1715, public debt was nine times the annual royal revenue.

In countries with more open government and with more business-friendly cultures, there was a higher degree of accounting literacy and government accounting. And yet, with hundreds of years of experience, Western governments did not adopt systematised double-entry financial management until the 1830s. Accounting doesn’t work unless societies engage with it and work for it to bring financial clarity and transparency.

With the bumpy history of accounting in mind, it is not surprising that we are back, in many ways to the old crises in accounting of the old European monarchies. The general population is, for the most part, ignorant of basic accounting techniques and even the US government does not use accrual accounting. Accountants have a tarnished image and little place in public discourse. Few would name accounting as a necessary element for good government.

Our own crisis in accounting, I believe, is one reason we have financial crises. The general population cannot understand accounts and few call for audits and demand higher standards as both shareholders and voters.

One way to stabilise private and public finance across the world would be not only to sponsor and promote accounting literacy, but also to try and improve the image of accountants. Indeed, leaders in accounting need to be more outspoken about financial standards and events. And we need to get to a point where, when there is a crisis, the public asks, “what do the accountants think?” For that to happen, the very profession of accounting needs to be rebranded and refocused towards public advocacy, education and service.  Only then can we move towards higher standards of transparency and accountability necessary for sustainable capitalism and democracy.

Petros Fassoulas-7519

By Petros Fassoulas, head of policy and public affairs – Europe, ACCA

It is this time again in the political circle when we are asked to step up and elect Members of the European Parliament (MEPs). Some view these elections as having little relevance to their everyday life, but that could not be further from the truth.

The European Parliament is, together with the Council of Ministers where member state governments are represented, the main decision-making body of the European Union. Its members decide on the rules and regulations that govern significant parts of the European economy.

The Single Market Committee, chaired by Malcom Harbour MEP, a British Conservative, has been instrumental in the design and adoption of many of the laws that govern the biggest common market in the world, where about 50% of British exports go, worth about £200 billion a year.

The Economic and Monetary Affairs Committee, chaired by another Brit, the Liberal Democrat Sharon Bowles MEP, played a key role in the decisions that re-engineered supervision of the banking and financial services sector in the EU.

The audit reform dossier was spearheaded in the European Parliament by Sajjad Karim, you guessed it, yet another British MEP, who was the rapporteur (the person who held the pen) while the EP’s Legal Affairs Committee scrutinised and amended the European Commission’s proposals.

So the European Parliament and its members play a crucial role and most British MEPs are usually at the core of the decisions made, decisions that affect British business. This is why the choice of who we send to Brussels is crucial. ACCA works closely with British MEPs on all the policy areas that affect our profession, so we know first-hand how important it is that our MEPs are influential, involved, active and constructive, prepared to engage, build alliances, lead, write reports, vote and be part of the decisions that affect us all.

The European Parliament Elections are not a mid-term assessment of the government or an opportunity to give mainstream parties a kicking. They produce the MEPs that represent us and our interests. It is imperative that we engage by showing up to vote so we can ensure that the people we elect are able and willing to do the job.

Voting for the European Elections takes place in the UK on Thursday 22 May and polls are open from 7am until 10pm.