The Eurozone debt crisis

The global financial crisis which started in 2007-2008 caused problems with the liquidity of banks and, as a resu
economic growth faltered. However, many of the loans made to both governments and private organisations had
levels of growth and when these failed to materialise, problems arose with repaying and servicing the debts.

In particular, several countries within the Eurozone (notably Ireland, Portugal and Greece) had to be bailed out b
members of the European Union.

As the crisis developed, the loss of confidence in the countries affected led to rises in the bond yields required on

Given the amount of debt their governments had, bond yields quickly achieved levels at which the governments
to service their debt.

This loss of confidence was fuelled by downgrades from the credit rating agencies, media speculation and specu
the Euro and/or certain countries.
y of banks and, as a result, lending and
rivate organisations had assumed certain
servicing the debts.

e) had to be bailed out by the other

e bond yields required on their government debt.

which the governments could no longer afford

ia speculation and speculators betting against

Free movement of capital and money laundering

The removal of barriers to the free movement of capital

The free movement of goods, services and capital across national barriers has long been considered a key factor
stable and independent world economies.

However, removing barriers to the free movement of capital also increases the opportunities for international mo
and terrorist financing.

Money laundering is a process in which assets obtained or generated by criminal activity are moved or concealed
link with the crime.

The international fight against money laundering and terrorist financing

Ever since the second world war, organisations such as the international monetary fund (IMF) have been workin
multilateral framework for trade and finance.
However, terrorist activities are sometimes funded from the proceeds of illegal activities, and perpetrators must
launder the funds in order to use them without drawing the attention of authorities.

The international community has made the fight against money laundering and terrorist financing a priority. Am
- Protecting the integrity of the international financial system cutting off the resources available to terrorists ma
to profit from their crimes.
- The IMF is especially concerned about the possible consequences of money laundering on its members' econo
the soundness and stability of financial institutions and financial systems and increased volatility of internationa

Outcomes of the fight against money laundering and terrorist financing

One of the results of this activity is to create a wide definition of the offence of money laundering to include:
- possessing, dealing with, or concealing the proceeds of a crime attempting or conspiring to commit such an of
- failing to inform the national financial intelligence unit (FIU) of knowledge or suspicion of such an offence.

Furthermore, the international efforts to combat money laundering and terrorist financing have resulted
• the establishment of an international task force on money laundering (the international Financial Action Task F
• the issue of specific recommendations to be adopted by nation states
• the enactment of legislation by many countries on matter: sovering:
• the criminal justice system and law enforcement
• the financial system and its regulation
• international co-operation.

The implications for the financial manager

The regulatory framework recommended by the FATF and implemented in countries throughout the world, plac
and other professional advisors.

The rules are designed to ensure:

all customers are properly identified as legitimate and no anonymous accounts are permitted
any suspect financial activities are immediately reported to the appropriate authorities
- Records of all due diligence investigations and financial transactions are kept for the proscribed number of yea
policies and procedures are established to forestall and prevent operations related to money laundering or terrori
- sanctions for non-compliance are in place

The laws implemented by most countries have had a significant impact on professional accountants who are obli
- undertake customer due diligence (CDD) procedures before acting for a client
- keep records of transactions undertaken and of the verification procedures carried out on clients
- report suspicions to the relevant financial intelligence unit (FIU) e.g. the Serious Organised Crime Agency (SO

Professional accountants are not in breach of their professional duty of confidence if, in good faith, they report a
laundering to the appropriate authorities.

Penalties for non-compliance can be imposed by the regulator (such as the financial services authority in the UK
In addition, the ACCA may take its own disciplinary action against its members. It is therefore essential for all a
monitor developments in legislation stay abreast of the requirements implement all recommended protocols.
ong been considered a key factor in establishing

opportunities for international money laundering

al activity are moved or concealed to obscure their

ary fund (IMF) have been working to establish a

activities, and perpetrators must find ways to

terrorist financing a priority. Among the goals of this effort are:

esources available to terrorists making it harder for criminals

laundering on its members' economies, which could include risks to

ncreased volatility of international capital flows.

money laundering to include:

r conspiring to commit such an offence
or suspicion of such an offence.

rrorist financing have resulted in:

rnational Financial Action Task Force on money laundering (FATF))

untries throughout the world, places significant responsibilities on accountants

are permitted

t for the proscribed number of years adequate and appropriate

ed to money laundering or terrorist financing including staff training

essional accountants who are obliged to:

 rried out on clients
ious Organised Crime Agency (SOCA) in the UK.

nce if, in good faith, they report any knowledge or suspicions of money

ncial services authority in the UK) on any firm or individual.

s. It is therefore essential for all accountants to:
nt all recommended protocols.