AML & Auditing

Interview: “You never know your customer well enough”

Sven Cristea, authorized auditor, partner and Head of Clients & Markets Big Cities Enterprise at KPMG, answers questions about KYC in accounting and auditing.

Sven, also known under the hashtag #Tillväxtrevisorn (translates to: The Growth Auditor), has made a name for himself in accounting and auditing, through his work with companies experiencing rapid growth. By offering businesses expertise in financing solutions in the startup and scaleup phase, as well as before an IPO, Sven has taken a new approach to financial calculations.

"What separates me from many other auditors is a forward-thinking approach to auditing - meaning we should learn from the past and improve going forward. Historical data is important, but proactive and forward-looking auditing and guidance is crucial to many businesses, especially when in a stage of rapid growth. A common problem is not having the right information at the right time, which makes decision-making difficult. In turn, this makes profitability and sustainable growth more problematic to achieve.” Sven says.

 

Sven Cristea KPMG

Sven Cristea, KPMG

The application of the Money Laundering Act – a big challenge in accounting & auditing

Auditing and accounting as an industry has recently been put in the spotlight for other reasons than their work in proactively aiding businesses. The application of the Money Laundering Act (Penningtvättslagen in Sweden) means sharper compliance requirements, especially in customer knowledge, which poses great challenges for everyone in the industry.

"The application of the law is still new to the industry, which leads to a lot of people still being a bit lost in the dark so to speak. And while more education and knowledge is required, a lot of smaller firms don't have the resources or network to form a complete insight in the law and how to apply it to their work. My advice for everyone would be to ask around and get help, for example if you are affiliated with FAR or Srf, or get a legal counsel." 

"Creating efficient processes for your KYC is important to all accountants and auditors, to avoid reputational damage and legal sanctions."

Initial checks - the KYC process

So what should an accountant or auditor focus in when performing a KYC or initial check of the customer? The answer depends on who you ask, but according to Sven the focus should be on the company itself, closely related companies and all representatives.

"In my opinion, a solid onboarding, KYC and risk process is the most important thing to minimize risk. Understanding the client or potential clients business, ownership- and company group structure is also important, as well as ensuring the identity and engagements of the company representatives. Examples of representatives are the beneficial owners, board members and CEO of the company."

Red flags

  • Client is always late handing in paperwork/basis for financial statements.
  • Client does not hand in an adequate basis for e.g. financial statements/final accounts.
  • Difficult to retrieve information from the bank, e.g. transaction data.
  • Client information does not match basis for financial statements.
  • Businesses in "cash businesses" or trading in cryptocurrencies.

"You never know your customer well enough"

Many in the industry feels that the KYC- process is time-consuming and that they rather not ask their clients all the questions that you are required to do, as they already know them "well enough". However, Sven says that all types of companies and people are exposed to the risk of being used in money laundering activities.

"It doesn't matter if you known the business, owner or entrepreneur for more than 20 years. People and conditions change constantly. Even the best of people could end up in situations or be affected by social circumstances, leading them on the path of poor decisions. In that sense, one could say that you never know your customer well enough. This makes the KYC and risk work very important, and it is important to stay vigilant and pay attention when working with the clients.

Finally, Sven sends a message to those who feel that the work with customer knowledge and the Money Laundering Act is difficult to grasp.

"Make sure to ask for help and dare to be stupid, asking stupid questions. It is better to be stupid now, than to be perceived as stupid for the rest of your life."

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