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IR vs. MLRO

PAYE inspection resulted in errors in my clients favour. Is this a reportable Money Laundering offence?

A client has had a recent PAYE inspection in which the Revenue raised an assessment for what they deemed to be 'employees' which were being treated as 'subcontractors'. The assessment has been made for Employees and Employers NIC, with relief given for the Class 2 and Class 4 NIC's already paid by the relevant individual.

The problem is that the Revenue has vastly overstated the relief for Class 4 NIC's already paid (by over £20k!!) and as a result the settlement figure is some £20k less than we were expecting.

My question is that if we advise the client to pay the amount calculated by the Revenue, which is clearly incorrect, are we committing a reportable money laundering offence?
Rob Easby

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06th May 2005 18:28

Report the IR to the NCIS ...?
Surely we should also be debating whether to report the IR to the NCIS for short-changing us all as tax-payers.

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09th May 2005 11:33

David we are never going to agree on this
it is absolutely unneccessary, the ends do not justify the means as you are implying, causing untold disruption and expense to catch a few criminals is a huge waste of resources

there are other better ways of dealimg with 'crime'

this law is an ass, i could rant on and on but my views as well as yours are well known i however have no vested interest

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09th May 2005 08:49

Response to Nicholas

Nicholas

The reporting provisions of the Proceeds of Crime Act 2002 have been amended by the Serious Organised Crime and Police Act 2005 which received the Royal Assent last month.

The relevant amendments are not yet in force. No doubt we shall see commencement orders coming through after parliament reassembles.

These amendments will remove some of the more ridiculous implications of the 2002 legislation - the 'Spanish bullfighter' reporting requirement and the 'Sainsbury's stock shrinkage' one, for example.

However we have the EU Third Money Laundering Directive making its way towards us.

There is absolutely no prospect of the repeal of the requirement to report suspicions of relevant criminal activities and there is, as far as one can tell, no significant opposition to this basic principle - in parliament or outside.

As to it "all being absolutely unnecessary", there have been instances of significant criminal activity, such as drug dealing, fraud and tax evasion, coming to light following reports made to NCIS under these provisions.

Whether the legislation is properly focussed is quite another question!

There are also, still, numerous instances of professional firms failing to report matters which they ought to be reporting or failing to put into effect proper office procedures to comply with the legislation. By way of a couple of examples: A firm of accountants carried out extra work for a client to collect evidence indicating theft of shop takings by an employee of the client's - but failed to report the matter to NCIS! An insolvency practitioner reported the director of an insolvent company to the DTI for suspected fraudulent trading - but did not submit a report to NCIS! A solicitor received £50,000 in cash (folding money) for a property purchase which subsequently fell through, but the client left the cash with the solicitor for the next 3 years - but the solicitor did not report this to NCIS!

In each of these cases relevant criminal behaviour has since come to light via another route - and the professional firms involved are left with egg on their faces!

(I know these are 3 examples, not 'a couple', but counting was never a strong point of mine!)

David
[email protected]

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09th May 2005 09:01

Response to Richard

Richard

I am not sure whether your suggestion of reporting the Inland Revenue to "NCIS for short-changing us all as tax-payers" was tongue-in-cheek or serious.

Please accept my apologies if I am suffering from humour-failure this morning!

A key issue in deciding whether a report is required is the question of whether the suspected person has been dishonest.

The legal test of dishonesty for this purposes is: "whether the accused was acting dishonestly by the standards of ordinary and decent people and, if so, whether he himself must have realised that what he was doing was, by those standards, dishonest".

I think we can take it that there has been no dishonesty on the part of the Revenue in the case quoted originally by Rob.

David
[email protected]

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05th May 2005 17:45

Are we ever to be rid of this nonsense
its all absolutely unnecessary we should still all be trying to the get the law repealed.

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05th May 2005 14:19

Thanks

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04th May 2005 14:11

Don't do it !

Rob

The short answer to your question "if we advise the client to pay the amount calculated by the Revenue, which is clearly incorrect, are we committing a reportable money laundering offence?" is PROBABLY.

The longer answer depends on what the client's understanding of the position is. Does the client already understand that the Revenue's calculation is incorrect and understates the true liability?

If he does then, if he retains the sum under-assessed he does so dishonestly, and (although he came by it innocently) would appear to be guilty of theft under section 1 Theft Act 1968. By, in effect, advising the client to do this you would be guilty of criminal conspiracy to steal, or of aiding, abetting or counselling the theft by the client.

You would also be guilty of a money laundering offence of becoming concerned in an arrangement which facilitates the acquisition or retention of criminal property by your client (assuming you did not report the matter to NCIS yourselves and receive consent for this action).

If the client is at present unaware of the Revenue's error and you advise him untruthfully that the Revenue's figure is correct, or alternatively that he is legally entitled to pay only the incorrect sum assessed and retain the under-assessed amount (which, of course, he is not), then you are deceiving your client and would appear to be guilty under section 15 Theft Act 1968 of 'obtaining property by deception' for your client. (For this purpose 'obtain' includes enabling another to retain.)

In this case it is not clear that you would be committing a money laundering offence. The reason is that, if the client actually neither knew nor suspected that the amount under-paid was a benefit of crime then it would not be 'criminal property' in his hands. Where there is no criminal property there can be no money laundering. So in this case you would not be committing a money laundering offence - just a Theft Act one. The good news is that this carries a maximum of 7 years imprisonment, rather than the 14 year maximum for money laundering!

But perhaps I am taking your question a little too literally!!

In any event - don't do it!

If you are an MLRO you can get confidential one-to-one email support, information and NewsAlerts from my website www.mlrosupport.co.uk.

David
[email protected]

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04th May 2005 14:30

What if . . .

Rob

You may be wondering "What if I advise the client to tell the Revenue about their error but he declines to do so?"

In that event the client is guilty of the theft of the sum under-assessed, and of possessing criminal property (which is a money laundering offence), and you have to report the client's money laundering to NCIS.

David
[email protected]

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04th May 2005 16:15

Are the Revenue "clearly incorrect"?
Is it possible they have further information about the Class 2 and 4 contributions already made which is not available to Rob and his client? And if so can it be argued that Rob's advice is based on the best evidence available to him (ie the Revenue's figure) - ie no money laundering (or theft!) involved?
Or will David say "nice try but it won't work"?

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