FINANCIAL MONITORING IN AN AUDIT FIRM: EVALUATION OF GRANT RECIPIENTS

Abstract

This article focuses on the current issues of organising primary financial monitoring in audit firms, particularly the evaluation of risk profiles of clients who carry out grant activities and/or have non-profit status. The article discusses modern approaches to combating money laundering and financing terrorism, as defined in the legal framework of the European Union, as well as in the requirements of the Ukrainian Law ‘On the Prevention and Counteraction of Money Laundering and Financing Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction’ of 06.12.2019 No. 361-IX, and the provisions of the Ministry of Finance of Ukraine’s Order No. 465 of 28.12.2022. ‘Approval of the Risk Criteria for the Legitimisation (Money Laundering) of Income Obtained by Criminal Means, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction’. The enhanced reporting requirements for primary financial monitoring entities, as set out in the Ministry of Finance’s decree of 25.12.2025, are also examined. No. 654.

The authors have proposed a structured initial request from the audit firm to the client (or their representative), which allows them to determine the individual risk profile of the grant recipient. Additionally, a working document has been developed for audit firms to ensure systematic risk assessment in the field of financial monitoring for non-profit organisations receiving grants, and to support a risk-based approach to making professional decisions.

The proposed methodological materials are aimed at improving the quality of financial monitoring procedures and ensuring the compliance of audit firms’ activities with legislative requirements in the field of preventing the legalisation of income obtained through criminal activities. They provide a practical toolkit for identifying and evaluating client risks, strengthening the quality management system and internal control in audit firms, and enhancing the ability of audit professionals to effectively combat money laundering, terrorism financing, and the proliferation of weapons of mass destruction.