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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Money laundering

Marlowe Partners is accepting Vantage Holdings, a new audit client with a complex ownership structure involving a trust and a company in a secrecy jurisdiction. Which step is most consistent with the firm's client due diligence obligations under anti-money laundering regulations?

The firm should identify and verify the client and take risk-based steps to identify its beneficial owners and understand the ownership and control structure. The trust and secrecy-jurisdiction company raise the risk, so enhanced due diligence is needed before acceptance, not reliance on others or delay.

  1. ARely on the prior auditor's opinion that the client is reputable and perform no identification work
  2. BIdentify the client and take risk-based measures to identify the beneficial owners and understand the ownership and control structure, applying enhanced measures given the higher riskCorrect
  3. CVerify only the identity of the director who signs the engagement letter
  4. DDefer all identification procedures until after the first audit report is signed

Explanation

Customer due diligence requires identifying and verifying the client and its beneficial owners, and understanding ownership and control, on a risk-sensitive basis. Opaque structures and secrecy jurisdictions are higher-risk factors calling for enhanced due diligence. Relying on a predecessor, checking only one director, or delaying until after reporting do not meet the requirement.

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