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Money Laundering

Hi All,

Have an unusual situation that I don't quite know which way to go with.

I am engaged for accountanct services for Company A.  Run by Mr A although his brother is the director and owner.

Mr A used to be involved in another Company in the same industry - Company B - but I never acted for them.

When doing the Accounts for year 2 of trade to 31 May 11 I noticed there were no longer any wages in the accounts.  There was a small amount last year but I know the business has grown and they have at least 3 members of staff.

Upon asking the question of where have the wages gone I am told that they have been out through Company B.  Company B however was dissolved in August 2010.  My suspicion is there is potentially un-declared income and an SAR is required.

Under tipping off I believe I can still make enquireies such as asking the director if he knew the company was dissolved I just can't tell him about reporting him if I do.

Arrgghh Clients!

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By BKD
28th May 2012 14:28

Not really enough knowledge about the set-up

But I think you'd be quite entitled to ask why the wages had been processed through Company B. Depending on the answer, you may well have sufficient grounds for a report.

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28th May 2012 14:32

Yes

I agree it looks suspicious, but there is no harm in you asking a few polite questions.

Bear in mind that the money laundering regime does not require you to investigate a suspicion nor to ask any questions which ordinarily you would not ask.  All it requires you to do is to report a suspicion of money laundering (by anybody) if you have one as a result of information which has come to you in the course of your professional work.

David

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28th May 2012 15:19

Are the wages not an accrued liablity or have I missed something?

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By morgani
28th May 2012 15:44

The two companies are not really related. A replaced B after a divorce. B was dissolved nearly 2 years ago but has paid the wages for the staff who technically work for A. The problem is I believe there was additional income generated to pay these wages.

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28th May 2012 15:47

i think it is more likely that they have been paid cash without deductions bernard

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28th May 2012 15:54

Am I missing something?

How can a company that no longer exists pay anyone? Are you sure the client refers to the dissolved company?

In any case .. the company that did pay the staff should be invoicing Company A and the expense claimed through Company A.

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By morgani
28th May 2012 16:15

Exactly. The client is sure the dissolved company has paid the wages. However the staff could technically work for either company but are contracted to A. B can't invoice A if B does not exist?

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28th May 2012 16:01

Irrespective whether they were paid by cash or cheque it is still an accrued liablity. The additional income to pay the wages are sales in A represented by a debtor due  by B offset by the wages. It is seeeemple!!!!!!!!!! I don't understand why the accounting for this is causing you problems

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By BKD
28th May 2012 16:09

I'm sorry, Bernard ...

... but I can't see how you arrive at that analysis from the very limited information provided. You may well be proved to be right, but it involves a number of significant assumptions.

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28th May 2012 16:16

I would ensure when then you think they said company B it is really company B, they are not in fact talking about lets say company C(ie a new company that you are not aware of, of similar name etc). It maybe self employed business now. So many possibilities to be honest.

 

I would ask more questions personally and just show an interest in the company, as it could be future business for you, and you are showing an interest in their businesses, as you should do as their accountant.

 

You havent really given enough facts to know if this could be the case(ie how the monies were paid, if it was cash or transfers or cheques)

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28th May 2012 16:29

Whether Co B can invoice or

Whether Co B can invoice or not is immaterial you should still accrue the liability in A otherwise the profits are overstated and additional CT will be paid

If anyone was of a mind to restore the company B they could come looking for the wage payments due from A

Also HMRC may notice that wages are shown in Co A for which they have no details. Did Company B file a P35?

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By BKD
28th May 2012 16:34

Why not ...
... just file the darn report and be done with it. Your role as accountant/tax adviser is to prepare accounts and returns based on information and explanations provided by your client. If you suspect that there is any wrongdoing, you simply report it - you do not need to investigate to the nth degree. By not putting the wages through Company A there is the probable lack of a tax deduction. If that lack of deduction is balanced by an omission of income, so be it - report, and let the authorities take the time and effort to investigate, leaving you to get on with more productive activity.

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30th May 2012 11:54

Double his fees

You dont want clients like this and if you have to have them...

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30th May 2012 14:22

Confusing

What about company Z?

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31st May 2012 11:58

Money Laundering

Sorry to be depressing, but come the stage when you were told that Company B had previously been dissolved, your correct - if reluctant - course of action should have been:

First, ensure that the work that you had carried out for the Company A to date was beyond reproach (and render an invoice for any outstanding fees), then, second, inform the director of Company A with regret that your lack of experience prevented you from carrying out any further work & provide him with one or two alternative sources of accountancy and tax support that you feel he might research.  This avoids the situation where you might come across some "reportable" event & having to rack your brains about how to avoid any charge of tipping-off.

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01st Jun 2012 08:20

Tipping off

I really don't see tipping off as a problem in this case.  Why on earth would the OP want to tell the client that a report was being made?

The OP correctly understands the position re tipping off, which he describes in his original query.

If the OP were to 'sack' the client that would not remove his obligation to report a suspicion which he already has.

David

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