ACCOUNTING AND AUDIT

CHUMAKOVA Iryna ¹, KRAVCHENKO Yuliia

¹SESE “The Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0003-3432-3177

Problems of formation of internal financial monitoring system in the context of prevention of money laundering risks

In order to take into account new FATF Recommendations, which are the main source of international standards in the sphere of counteraction to legalization (laundering) of proceeds from crime, terrorist financing and proliferation of weapons of mass destruction, a comply of antilegalization legislation with these Recommendations and Methods of conducting a national risk assessment of legalization (laundering) of proceeds from crime and terrorist financing is carried in Ukraine. The object of this assessment is established in Ukraine national system of counteraction to money laundering, which main actors are the primary financial monitoring entities that are not directly related to the financial transactions of their customers, but they can be involved to ensure the visibility of legitimacy of their laundering of ""dirty” money operations. Based on an integrated analysis of the country’s degree of compliance with FATF’s Recommendations, the article revealed the causal relationship between the national risk assessment of legalization (laundering) of proceeds from crime and terrorist financing and risk assessment at the level of its individual components — the primary financial monitoring entities (including auditors and audit firms). The authors studied the system of risk assessment of legalization (laundering) of proceeds from crime and terrorist financing in terms of the components of internal control using the COSO ERM risk management model and displayed the content of internal financial monitoring measures in their relationship with the components of the internal control system of an audit firm. The article describes the essence of three-level evaluation of duties performance by audit firms as primary financial monitoring entities and provides the proposals to address the shortcomings of existing system of external evaluation of their activities by the Ministry of Finance as a state financial monitoring entity that regulates and oversees the auditors (audit firms) in the sphere of counteraction to legalization (laundering) of proceeds from crime, terrorist financing and by the Audit Chamber of Ukraine as the supervisory authority for quality of audit services.

Keywords:internal financial monitoring, risk, laundering of ""dirty” money, legalization of proceeds from crime, audit firm, internal control system, a state financial monitoring subject, the primary financial monitoring subjects.

JEL: M42, M48

CHUMAKOVA I. . Problems of formation of internal financial monitoring system in the context of prevention of money laundering risks / I. . CHUMAKOVA, Y. . KRAVCHENKO // Фінанси України. - 2014. - № 2. - C. 54-69.