Should I report my client to SOCA

Should I report my client to SOCA

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I have posted on this particular client previously and two minds rather to report my client to SOCA 

Just to recap

Client processed a Sales order to their customer. Customer paid in advance for 200K GBP.

 Customer cancelled the order and asked for a refund.  My client refused not sure on what grounds,  There were no terms and conditions sent with the order

I am filing the 2015 accounts which are late. The amount as of today is still outstanding

Client is claiming a dispute over the admin fee and is willing to show me legal papers proving this.  They did for some reason pay prematurely very high commission to their Sales guys on this deal so maybe want to offset some of the admin fee against this cost incurred,

Though the client has absolutely no funds to pay the amount and has been taking dividends.  I do not think the client has any intention of paying the money back and the dispute over the admin fee is just a delaying tactic for the inevitable.  My client is technically insolvent

Should I report this to SOCA anyway to protect myself in case the company is wound up by the creditor ?  I know the directors have no money so wouldn't want their client / Insolvency practitioners coming after me.

OR

Should I give the client the benefit of doubt and wait to see what happens on the legal side ?

Would appeciate any inputs.

 

 

 

 

 

Replies (9)

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By johngroganjga
19th Aug 2016 12:49

Not sure why you are worrying about anyone coming after you? Is it because you have concerns about being held to be a shadow director?

I am not sure what suspicions you have to report. Client is involved in a civil dispute over the return of the deposit money. That is not a crime.

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Replying to johngroganjga:
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By JimLittle
19th Aug 2016 14:26

It wasn't a deposit - it was for the full amount of order that was paid to my client. Its tantamount to stealing i.e taking one monies and not delivering any goods. Then using the money to fund the company and keep it afloat as well as paying the sole director and shareholder ultra vires dividends.

Just doesn't seem right someone can be in business take orders and then does not pay the money back when an order is cancelled. While I am no legal expert - it seems fraudulent to me.

I am not involved in anyway but only the fact was that I knew about this transaction but did not report it and wondered about the possibility the insolvency practitioners could come after me.

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Replying to JimLittle:
Melchett
By thestudyman
19th Aug 2016 14:40

JimLittle wrote:

It wasn't a deposit - it was for the full amount of order that was paid to my client. Its tantamount to stealing i.e taking one monies and not delivering any goods. Then using the money to fund the company and keep it afloat as well as paying the sole director and shareholder ultra vires dividends.

Just doesn't seem right someone can be in business take orders and then does not pay the money back when an order is cancelled. While I am no legal expert - it seems fraudulent to me.

I am not involved in anyway but only the fact was that I knew about this transaction but did not report it and wondered about the possibility the insolvency practitioners could come after me.

Its a civil matter between the client and the customer. The customer should be instigating legal action if the service/product was not delivered after paying for it.

But that is not for you to get involved. Unless - you want to create a contigent liability in the accounts for a potential refund/payment in the future

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By accountaholic
19th Aug 2016 13:15

I agree with John, I think it's nothing to do with SOCA.

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Red Kite
By Red Kite
19th Aug 2016 13:56

If this was my client, given the brief background you've described here, I'd be giving him the "Dragon's Den" - I'm out!
Sounds like a complete prat, which unfortunately, you can't report him for.

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By itp3asso
19th Aug 2016 14:00

This is compkete bs. You are confusing everyone .

A) Your client issued sales inv for gbp 200k.

b) he she it has been paid 200k for what oroduct or service we know not but he us oresumably happy with having received the cash

c) what us his / your problem what has SOCA to do with anything???!

Amplify !

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Eagle
By Financial Eagle
19th Aug 2016 15:53

You say that "Client is claiming a dispute over the admin fee and is willing to show me legal papers proving this.". To put your mind at rest why not take him up on this offer and get copies of these papers. Then if anyone does approach you at a later date you have proof that you were right to simply assume this was a civil dispute and cannot be implicated in any way.

Once you have these papers I suggest you ensure you get any outstanding fees and dump this client as he is obviously more trouble (and worry) than he is worth.

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David Winch
By David Winch
21st Aug 2016 18:57

I would not be too quick to conclude that no report is required in respect of a suspicion of money laundering.

Let's go back to basics. The legislation which requires a report to the NCA (National Crime Agency - the replacement for SOCA) is s330 Proceeds of Crime Act 2002 (as amended). If you don't have a copy you can find one HERE.

In essence you have to report in this case if you suspect money laundering by the company or its director/shareholder (I understand one individual is the sole director & shareholder).

There can only be money laundering if there has been a crime which has generated proceeds. In this case the most likely crimes appear to be fraudulent trading contrary to s993 Companies Act 2006 (copy HERE) or fraud by false representation contrary to s2 Fraud Act 2006 (copy HERE).

Note that neither of these offences require the company to be insolvent or in liquidation. The implied false representation relevant to the Fraud Act 2006 could be that the company was able & willing (through its director/shareholder) to supply the goods/services to the customer under the contract (if actually it was not).

Both these offences however require dishonesty on the part of the offender. That is crucial.

You can read my blog article on the meaning of dishonesty in criminal cases HERE.

So the issue in this case (determining whether or not you need to submit a report to the NCA) boils down, I suggest, to whether you suspect the sole director/shareholder of dishonesty. If you do, then I suggest you need to submit a report.

Whether you suspect that the sole director/shareholder has been dishonest will depend on your knowledge of matters which have not been covered in your posts on here. They include your assessment of his character & his intentions in his dealings with this customer & others, and what you know of his personal financial position, & on the present financial position of the company.

His dishonesty / honesty depends on what is in his mind. Of course you do not know what he is thinking but you can draw inferences about what he is thinking from his actions/inactions. Ultimately if you suspect he is being dishonest you will be obliged to report to the NCA.

Thinking of the possible extremes - at one end if you find that, for example, the customer's money is held safely in a separate bank account, the terms of the customer's contract were clear & were agreed, the company was ready, willing & able to supply the goods/services under the contract, the company is dealing honestly with other customers & in other matters (such as tax matters), the company is obtaining & following competent professional advice, etc. Then you would conclude that the company & its sole director/shareholder were being conspicuously honest (although of course there would still be a - purely civil - legal dispute going on).

At the other extreme - if you find that there was never any realistic possibility of the company completing the contract, the customer's monies have been used/spent personally by the sole director/shareholder, there is no realistic prospect of the company repaying the customer whatever is due to him (even, for example, by the sole director/shareholder putting money into the company to enable that to be done), the company is not dealing honestly with other customers and in other matters, the company is not obtaining or not following appropriate professional advice, etc. Then you would conclude that you have a suspicion that the company & its sole director/shareholder were behaving dishonestly.

Between those extremes you would have to make a judgement based on what you know.

Irrespective of your decision on a report to the NCA, you also need to consider of course how the customer's payment should be treated in the accounts & whether you should write to the client suggesting that advice be obtained urgently from an insolvency practitioner.

David

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Eagle
By Financial Eagle
22nd Aug 2016 10:30

We are not paid to snitch on other people, and unless I’ve not noticed it, I’m pretty certain that we are not paid by the government to act as a financial police force.

I have no inclination to report others for what they might, or might not, be doing that might, or might not, be considered a money laundering offence.

When faced with any situation where a report might be necessary my first and only concern is to cover myself, and if I can do this by keeping copies of information that a reasonable person would consider shows that nothing untoward is going on, then that is what I do.

Some people might make a very good living out of helping to prosecute, or defend, those subjected to what are very often malicious accusations. I have no wish to be involved as I know how much damage being falsely accused can cause, so I look for any good reason not to file any reports.

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