WHAT IS TO BE DONE?

Successive governments will have the public believe that they are effectively combating the laundering of money. The reality is different. A lot of legislation, such as the Criminal Justice Act 1993, has been introduced. But robust, independent and effective regulators have not accompanied it. Money laundering, like other white-collar crime, thrives on secrecy. The biggest check against it is greater openness and increased public accountability. Yet the UK governments have been devoted to rolling back corporate accountability. Deregulation has been the dominant ideology of the 1980s and the 1990s and spokespersons for big business want even less public scrutiny and accountability (Committee on Corporate Governance, 1998). Not surprisingly, the UK government has been unable able to check organised white-collar crime.

The government has relied upon accountants and auditors to report suspicious transactions to the regulators. The World Bank advocates this policy even though the alleged/real involvement of accountants in white-collar crime is often reported in the press³. It encourages governments to place greater reliance upon accountants/auditors to monitor company transactions and inform the regulators of any suspicious transactions (Wolfensohn, 1998), especially as accountants claim to have the necessary expertise to identify, investigate and report suspicious transactions (Bond, 1994; ICAEW, 1994; Auditing Practices Board, 1997). This advice presupposes that accountants themselves are not a party to money laundering transactions. Yet the National Criminal Intelligence Service (NCIS) and the Financial Action Task Force (FATF) state that accountants are increasingly involved in laundering money.

The World Bank edicts resonate with the UK practices⁴ where the government places considerable reliance upon accountants/auditors to monitor the activities of financial businesses and report suspicious transactions to designated regulators, even without the knowledge of their clients (Bingham, 1992; Power, 1993; Sikka and Willmott, 1995; Auditing Practices Board, 1995; Sikka et al, 1998). Yet at the same time, a large number of real/alleged audit failures (e.g. BCCI, Maxwell, Polly Peck, Astra, Queens Moat Houses, Atlantic Computers and many others) have raised questions about the public spirit of major auditing firms. For example, the US investigation of the 1991 closure of the Bank of Credit and Commerce International (BCCI)⁵ concluded that "By the end of 1987, given Price Waterhouse (UK)'s knowledge about the inadequacies of BCCI's records, it had ample reason to recognise that there could be no adequate basis for certifying that it had examined BCCI's books and records and that its picture of those records were indeed a "true and fair view" of BCCI's financial state of affairs...... the certifications by BCCI's auditors..... had the consequence of assisting BCCI in misleading depositors, regulators, investigators and other financial institutions as to BCCI's true financial condition" (Kerry and Brown, 1992, p. 259).

Calls for the continued reliance upon accountants are based upon a mistaken image of accountants as altruistic and public spirited individuals. This ignores the fact that as managers and owners of significant businesses accountants are not immune from the structural pressures to make quick `private' profits. Public service does not form any part of professional accountancy education or training. Based upon a study of the internal workings of major accountancy firms, Hanlon (1994) concludes that the socialisation processes within accountancy firms are mainly concerned with "being commercial and on performing a service for the customer rather than on being public spirited on behalf of either the public or the state" (p. 150). Indeed, in pursuit of private gains, accountancy firms have shown a long history of "turning a blind eye on the wholesale abuse by client company directors of [legal] provisions" (Woolf, 1983, p. 112) and "disclosing considerably less than what they actually know" (Woolf, 1986, p. 511; also see Sikka and Willmott, 1995).

The reluctance of accountants to act in a socially responsible way is aided by the absence of an independent and robust system of regulation. Successive governments have indulged accountants by relying upon self-regulation, more commonly known as `chaps regulating the chaps'. The accountancy trade associations (e.g. the Institute of Chartered Accountants in England & Wales) are expected to combine trade association and regulatory roles. These bodies were formed to secure niches and markets for their members rather than to prosecute them. Their instinct is to shield their members by sweeping things under their dust-laden carpets. This is borne by the fact that little effective action has been taken against firms implicated in audit failures (Sikka and Willmott, 1995) or even those who violate the ethical strictures issued by the accountancy bodies (Mitchell et al, 1994).

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