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Purchase accruals - report to NCIS?

A company purchases goods for resale and accrues for the cost in its accounts.

The supplier fails to submit an invoice and the goods remain unpaid for.

If the company that bought the goods does not take steps to obtain an invoice from the supplier despite knowing that they should have paid for those goods, would that amount to dishonesty and lead to the requirement for a report to NCIS?

Might the answer differ depending on whether the company purchasing the goods retained the accrual in its accounts or wrote it off at some point?

Any thoughts gratefully received!

Edward C Rands

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12th Dec 2005 17:27

Payment of over-estimated utility bills
David Winch's example prompts a query on a closely related topic.

Suppose a utility company submits an estimated bill that is too large and the customer then pays it in the expectation that the utility's prices will have risen before the next (measured) bill arrives. Is this dishonest appropriation of the difference in the prices?

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08th Dec 2005 23:12

Dishonest appropriation

Edward

The legal point here is: "Has there been a dishonest appropriation of the goods?"

In law dishonesty means that someone behaves in a way that by generally accepted standards is dishonest and that the dishonest person knows that he is behaving dishonestly by those standards.

Simply keeping quiet can be dishonest.

Note also that section 2(2) Theft Act 1968 provides that: "A person's appropriation of property [which means any asset] belonging to another may be dishonest notwithstanding that he is willing to pay for the property".

If it helps, suppose someone found £10,000 credited to his bank account. Further suppose it is obvious to that person that there has been some sort of mistake, perhaps by the bank, but he says nothing. After a few months the mistake remains uncorrected and the person spends the money on a world cruise. I think most people would think that dishonest and as a result the person would be convicted of theft in such a case.

Is the company being dishonest in a similar fashion?

Another example, suppose a company invoices its customers and follows up with monthly statements. Some customers pay both the invoice and the statement, resulting in an overpayment. The company keeps quiet about the overpayments and has a policy of not sending statements where there are credit balances. I suspect that would be regarded as dishonest and hence theft.

It's your call. If you suspect the company of dishonesty then you must report it to NCIS under section 330 Proceeds of Crime Act 2002. If you do not suspect, and there are no reasonable grounds to suspect, the company of dishonesty then you need not report to NCIS.

Of course, the risk to you if you do not report is that you could be prosecuted, or subject to disciplinary action by your professional body, for failure to report.

If you decide not to report then (i) make a full file note of the information which you have and your reasons for concluding that a report is not required, (ii) discuss it with your MLRO and make a file note of the discussion, (iii) consider getting an independent expert opinion (which you can do without cost at the MLRO Support Free Trial page).

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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08th Dec 2005 15:41

where is the crime?
does not sound like this is theft, and there does not appear any intention to deceive. Surely the responsibility for issuing an invoice rests with the supplier?
The accrual issue is purely an accounting issue. Accounting properly for stolen goods does not make theft legal!

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