Role of the professional services sector in financial crime

This is a paper that focuses on the role of the professional services sector in financial crime. The paper also discusses the types of behavior to view as a cause of concern by accounting profession.

Role of the professional services sector in financial crime

Question 1

Accountancy giant EY covered up evidence after a gang used black market gold to launder dirty money, according to a recent BBC documentary highlighting the role of the professional services sector in financial crime.
The documentary by BBC Panorama and French media company Premières Lignes claims that EY failed to report that a shipment of gold bars had been disguised as silver to avoid export limits on gold.

According to the programme EY’s lead auditor in Dubai, Amjad Rihan, wants to report the suspicious activity but was told not to by his superiors. A compliance report was also rewritten by EY to cover up the crime, the documentary claims.

EY denies the allegations and also said it delivered its findings to the relevant regulator in Dubai. Meanwhile, Rihan is taking EY to court, arguing he was forced out of the company after he identified the violations.  In a related incident, EY allegedly failed to report evidence of smuggling after conducting a review into a company’s supply chain compliance. The BBC claims Renade International, which was owned by a member of a crime gang which collects cash from drug dealers, sold 3.6 tonnes of gold to a refinery in 2012.

a)    Firstly, this type of behaviour is increasingly view as a cause for concern by the accounting profession and commentators. What types of risk may have influenced  EY behaving in this way?                                                (10 marks)
b)   Secondly, should regulators step in to force companies to behave in a more responsible manner. Or should that be left to shareholders and a voluntary code?                                                                                                       (7 marks)
Using Kohlberg’s CMD scale, at what level of moral development do you think EY is operating at? Also, what should they do to make their behaviour more socially acceptable?

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