ACCA Advanced Audit and Assurance (AAA) Practice Exam

What obligation do members have if they suspect money laundering or terrorist offences?

1. Report it to the client

2. Disclose information to a competent authority

3. Ignore it to protect client confidentiality

4. Consult with other members about the issue

The correct answer is: Disclose information to a competent authority

When members suspect money laundering or terrorist financing, they are obligated to disclose this information to a competent authority. This requirement is grounded in legal and ethical standards that promote transparency and accountability in financial practices. The rationale behind this obligation is to ensure that suspicious activities are investigated thoroughly by the appropriate agencies, allowing for a coordinated response to combat illicit financial activities. Reporting to a competent authority helps in the early detection and prevention of money laundering and related crimes. It is a critical component of the anti-money laundering (AML) framework that protects the integrity of the financial system and enhances public trust. Members must navigate the delicate balance between client confidentiality and legal requirements, opting to prioritize reporting in situations of suspected money laundering or terrorist financing. In contrast, reporting to the client, ignoring the suspicion, or merely consulting with other members would not fulfill their legal obligations and could potentially facilitate ongoing criminal activities. These alternatives undermine the primary duty members have to report suspicions to the relevant authorities, thus diminishing the effectiveness of anti-money laundering efforts.