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Vat on stolen takings

Client called this morning to advise that her pub was broken into last week.

As it happens two days takings were stolen as well as the cash in the games machines.

The till receipts have also went missing and they can not provide evidence as to what the takings were for the two days, (they can of course make a best estimate).

Insurance policy is only paying out max £500 in total.

I have not came across this before, how should we account for the lost takings (if at all), in particular the vat element? 

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06th Dec 2010 11:58

VAT is accountable

As your client has made a supply and received the consideration, then the VAT is accountable no matter what happens to the money after they receive it. In this sense having the money stolen is no different to the client spending it, or putting it in the bank, or putting a match to it as far as the VAT is concerned.

This basically means you'll need to find a reasonable way of estimating the value of the takings. If they've only lost two days wother of till receipts won't they be able to just take a current grand total from a 'z' reading and then deduct the previous grand total from an earlier 'z' to find the takings in the missing portion, or have they somehow got some non-VATable income in there that they'd then need to find a way to estimate. Other than that HMRC should be happy with an average based on the same period in the prior and following week or some other reasonable estimation. But as I say the first thing I'd be doing if I was an HMRC officer is looking at the GT readings from the surrounding 'z's to see what's been rung up.

Games machines is a different matter and will depend on how the agreements with the owners are set up, probably best to talk to the leasors of the equipment and see what they can do on this.

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06th Dec 2010 12:09

Been there & done it

You must account for the VAT - BUT, you can then reclaim this in much the same way that you can reclaim the VAT on a bad debt.

HMRC will accept the police report as evidence of the theft.  Of course, if takings were, say £1,200 and the insurance pays £500, you could only claim bad debt relief on the balance (£700).

 

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By blok
06th Dec 2010 12:52

Thanks

VAT - its never straighforward is it!

 

The two days takings were c£3k.

So in summary we need to

Enter Sales of £2553 in box 6Enter outputs of £447 in box 1.Enter purchases £2553 in box 7.Enter inputs of £447 in box 4.

Do we then just bank the £500 insurance money with no vat consequence?

I am leaving them to look at the money in the games machine, god knows how that will work out!

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06th Dec 2010 14:13

Don't forget that you may need to make a Suspicious Activity Report to SOCA (under MLR 2007 / s330 PoCA 2002) in connection with the theft from your client.

David

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06th Dec 2010 14:26

@CD

Please can you point me towards the authority for recovering VAT on stolen assets as though under the bad debt relief scheme, or was this a one-off agreement with an inspector?

 

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By blok
06th Dec 2010 14:35

.

Hi David,

The client has informed the police and they have taken a full report on the break in.

Is that not enough?

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06th Dec 2010 15:02

I think CD may have been in a different situation

In this case there's no Bad Debt or similar claim. The trader made a supply and recevied consideration; VAT is due, if money is stolen after they've received it then there's no supply to them for them to recover VAT on and there's no bad debt as they've recevied full payment.

However if the money was diverted prior to receipt by the trader then that can be subject to a claim, i.e. employee sells stock and pockets cash, in this case the money has never reached the trader so they've actually lost stock rather than money they recover the Input tax but have no Output Tax to payover. Or in the case where money is diverted to another bank account without going to the trader then they still have a debtor and hence a bad bedt claim.

In situations where all liabilities are agreed to be met by both parties then there's no way to recover the VAT. This is basically no different to if the trader had banked the money and then found his account drained six months later, that wouldn't give rise to a claim for VAT and as far as I can see neither would this.

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06th Dec 2010 15:28

.

Bad debt relief can be claimed where payment has "not been received".

If, for example, I pay you by cheque, you are not deemed in law to have "received payment" until such time as that cheque is cleared by your bank. Until then it is merely a promisory note, of no more value than an IOU scribbled on a beer mat. 

As regards cash, the question is at what point has the business owner received payment. Is it when the money is put in the till, or, is it when the owner cashes up the till and takes possession of the cash himself ready to bank it or whatever.  

We have succesfully argued that until the till is actually cashed up the money is actually "in transit" as it is not in the owners possession, and indeed the owner has no way of knowing whether or not staff actually took the money until he balances the till. 

HMRC tend to look at these cases on a "one by one" basis, but it is certainly worth approaching them. 

 

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By blok
06th Dec 2010 15:29

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Just as I had feared.

Not only does the trader act as a unpaid collector of taxes , they are also required to keep the vat safe , but even in the event of theft are liable to repay this to HMRC with no recourse.

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06th Dec 2010 15:41

Reporting (or not)

Blok

On the face of it you have received (in the course of your professional work) information causing you to suspect someone (the thief) has committed a money laundering offence.  So, other things being equal, a report is required.

But even so a report may not be required in certain circumstances.

One is where you have no information which could be of use to the authorities in terms of them either identifying the launderer or locating any laundered assets. - You may well be in this situation and, if you are, no report to SOCA is required (although I would suggest you report to your MLRO - even if you ARE the MLRO - indicating the facts and why you believe no report is required).  [Legislation s330(3A) PoCA 2002 as inserted by s104 SOCPA 2005.]

Another circumstance in which no report is required is where there is a "reasonable excuse" for not reporting.  But no-one has really specified what a "reasonable excuse" is.  You may feel that the fact that the police have already been informed is a "reasonable excuse".  On the other hand information in a SAR submitted to SOCA is available to bodies (such as HMRC, DWP, etc) who do not get police reports.  So it might be argued that the fact the police have been informed is not a "reasonable excuse".  Again if you think you have a "reasonable excuse" for not reporting then I suggest you report to the MLRO with an explanation.  [Legislation s330(6)(a) PoCA 2002 as amended by s104 SOCPA 2005.]

If you decide, on reflection, that a report should be made to SOCA then you can keep it brief by referring to the police involvement.

I hope that helps.

David

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06th Dec 2010 16:38

Come off it CD

I cannot see any reasonable basis for an argument that cash in a till has not been received. Cashing up is just a system of counting it.

What is the difference between the till, the owners wallet or the bank account?

 

 

 

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06th Dec 2010 16:46

Come off it David

So a crime has been committed that you know absolutely nothing about, happened to somebody else and already reported to the police (who are highly unlikely to do anything about it other than provide a number for the insurance claim) but yet a report may be needed?

What possible use would this report be to anyone? The client has been the victim of a crime. If we knew who had obtained a finacial benefit from it the police would be able to go and arrest them (if they have nothing better to do).

 

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06th Dec 2010 18:36

Roland195

 cannot see any reasonable basis for an argument that cash in a till has not been received. Cashing up is just a system of counting it.

What is the difference between the till, the owners wallet or the bank account?

Posted by Roland195 on Mon, 06/12/2010 - 16:38

 

I own a shopI employ you to run itAt close of business every day I arrive and take the days takings from the tillAt what point does the money come into my possession as the owner of the shop?

Cash takings are exactly that - the amount of cash taken for the day - and if its stolen before its counted and "received" then it isn't part of the cash takings.

Twice we have argued this with HMRC, and twice they have accepted our argument.

It's not what you see as a "reasonable basis" - its what HMRC accepts, that counts.

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06th Dec 2010 18:38

@Roland195

Roland

Neither you nor I know the full facts - indeed there may be relevant facts which are unknown to the original poster Blok (not just the 'known unknowns' but 'unknown unknowns' too - relevant circumstances which Blok doesn't know that he doesn't know about).

The legislation is quite clear - Blok would commit a criminal offence if he failed to comply with s330.

So what do you think I should do here:

1) Tell him there is simply no need to report

2) Tell him he may need to report and reference the relevant factors with links to the legislation, or

3) Say nothing at all?

David

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07th Dec 2010 08:35

Don't rail at David...

Rail at the legislation.

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07th Dec 2010 09:47

Eh?

Roland

Neither you nor I know the full facts - indeed there may be relevant facts which are unknown to the original poster Blok (not just the 'known unknowns' but 'unknown unknowns' too - relevant circumstances which Blok doesn't know that he doesn't know about).

The legislation is quite clear - Blok would commit a criminal offence if he failed to comply with s330.

So what do you think I should do here:

1) Tell him there is simply no need to report

2) Tell him he may need to report and reference the relevant factors with links to the legislation, or

3) Say nothing at all?

David

Can you just think for a minute what you are suggesting that Blok does - write a report about an incident he only has second hand knowledge of (unless you are suggesting it was an inside job and Blok has an interesting sideline) regarding an event that in all likelihood the only person with an real knowledge is the thief themselves.

What exactly would SOCA want with this? What could they possibly do with it? If the police have little to no interest in this sort of crime why would SOCA? While devasting to the victim, I doubt the crime could be described as serious or organised.

And yes, I know that it is not up to us to decide and that the legislation is a piss poor collection of poorly drafted vagaries that is unfortunately "law" but still.

Of course, I'm just getting old but it is the things like this that seriously make me think about retirement.

 

 

 

 

 

 

 

 

 

 

 

 

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07th Dec 2010 11:01

The legislation is bizarre . . .

Roland

The legislation is bizarre but it is still legislation.  I wish I could say that in practice it always operates to produce outcomes which would be seen (by the vast majority of people anyway) as commonsense and fair.  I cannot give you that assurance.

Are you aware that, for example, under this legislation the thief is obliged to contact SOCA and request their consent for him to retain the proceeds of his crime?  Check it out, s329(2)(a) PoCA 2002.

The whole point of reporting a "suspicion" is that one is reporting something of which - as you put it - one "only has second hand knowledge".

"Money laundering" is defined in a way which means that it covers situations in which there is no money and no laundering either.  There was the case of the man found riding a stolen 50cc motorcycle who was convicted of "money laundering" as a result - see the case of Gareth Whitwam whose appeal against that conviction was dismissed.

There was also the case of Mr Ahmad who was convicted of failing to report a suspicion of money laundering although the alleged launderer was not found guilty of any offence.  Mr Ahmad appealled and was told "There is nothing in the language of section 330(2) which states or requires that money laundering is in fact taking place".  In short, he was legally obliged to report an apparently unfounded suspicion and was sentenced to imprisonment for his failure to do so.

It would be a mistake to suppose that reports are only to be made to SOCA in respect of crime which is serious and / or organised.  The legislation, quite deliberately, follows an "all crimes" approach.

One of the major 'products' which accountants in general practice 'sell' to their clients is compliance with complex tax laws.  Would it be good for our 'brand' if at the same time we practiced non-compliance with other legislation because 'we know better than the legislators' what the legislation ought to require?

David

P.S. If you read my earlier responses carefully you will see that I am pointing to a distinct possibility that the OP may be able to comply with the letter of the law without submitting a report to SOCA - in effect by making a file note instead.

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07th Dec 2010 11:39

I do take your point but...

I am not being argumentative for the sake of it but I believe that so long as we live in fear of money laundering compliance and follow the path of least resistance - making the report in this case to be on the safe side then we are only going to make life more difficult in the future when the latest dodgy legislation is drafted.

Being practical, in Blok's case it would probably take less than 5 minutes to write and send the report (less time in fact than I have been debating it here) but while this report may save him from prison or a beating with a rubber hose (or whatever the penalty is these days) it will only serve to reinforce the attitude of blind obediance.

I will admit that when reading the post, not once did I consider Money Laundering as an issue for the stolen takings (Could I request a show of electronic hands who did?). This worries me as I would consider myself fairly representative of the average Chartered Accountant in practice (at least of a certain vintage - client confidentialty as sacrosanct was drummed into me along with double entry). I suppose I can expect to be carted off to jail then. I might even see the pub thief there (ha ha).

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By blok
07th Dec 2010 11:51

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As much as I sympothise with David (and I do), at no time did it ever occur to me that this is a reportable offence.

Also, I can say with absolute cetainty, at no time in the future would I ever consider this a reportable offence in the context of the case as is set out.

Our MLRO is in his early sixties, if I mentioned this to him he would tell me to go away and not be silly.  INfact knowing him as a person, he would be happy to "do some time" just to prove a point. 

Sorry David.

 

On the vat aspect, I now have to explain to the client why they must suffer the vat on the takings as well as the loss of income.  I will explain to her CD's views that there may be a doubt about when takings are officially takings.  I will also explain the strict view that HMRC would argue that these are takings (i.e. cash is in the till).  She can then make her own mind up.  I think I know which view she take however.

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07th Dec 2010 12:16

A common misconception

Roland & Blok

There is a common misconception that money laundering compliance by accountants is about checking the passport / driving licence of new clients and reporting suspicions of tax evasion by clients.

The problem is that the legislation in the Money Laundering Regulations 2007 and Proceeds of Crime Act 2002 goes far, far beyond that - and I have a concern that accountants (including AWEB members) are at risk of finding themselves subject to disciplinary action or, worse, criminal proceedings as a result of failing to appreciate what the legislation says.

Accountants - more than bankers or lawyers - are in a position to understand their clients' financial affairs.  They have access to clients' records that other professionals do not have.

One would expect an accountant to be uniquely well placed to form a suspicion of something untoward going on and, hence, to report it.

So, for example, if you have a client whose business one would expect to generate receipts of monies in the form of cheques and bank transfers (for example a haulage company serving business customers) and yet actually substantial amounts are received in cash (i.e. folding money) that would be obvious from a brief flick through the client's paying-in books.

So a police officer might reasonably expect an accountant to spot that oddity and file a Suspicious Activity Report.

In truth, how many accountants would (i) spot it, and (ii) report it?

Yet the example is not far-fetched.  A few years ago I saw exactly that.  The haulage company was in fact engaged in the smuggling into the UK of cigarettes on which no duty had been paid.  The cigarettes were then sold to wholesalers - quite literally "off the back of a lorry" - in return for payment in cash.  The haulage company then banked the cash in its business bank account.

The danger is that a police officer who sees what he considers to be a clear failure to report by an accountant may form the suspicion that the accountant is 'one of the bad guys' - a conspirator in the crime.

Being subject to that sort of police investigation is not something that I would wish on any reputable firm.  At the very least it is stressful, time consuming and bad for the accountant's reputation in the community (because rumours of the investigation will get out).

So I am suggesting that accountants need to be much more alert to the possibilities of crime going on - and to the real requirements of the legislation - than many of us are.

David

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08th Dec 2010 11:37

Reporting to SOCA

I found £5 on the pavement on Monday evening. Given the proclivities of the population in the area where it is found there is at least a suspicion that this £5 could be the proceeds of a theft. I have been remiss - I must immediately report it. Where do I go to carry out this important function? 

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08th Dec 2010 11:55

MPs

Let's face it - MLR is a sick joke.  There are laws, bad laws, and then totally stupid laws - and this falls into the latter category.

Firstly we are being expected to carry out unpaid work - why should we?

Secondly we are being ordered to place ourselves & our families at risk - and leaks DO happen (how long before every report asppears on Wikileaks? )

Thirdly we are being ordered to pay for the privalege - compliance costs etc.

Fourthly it is a charter for sneaks and malicious allegations.

 

Ultimately the only answer is to get it repealed or modified, and the only people who can do that are the politicians - so bombard them with your objections, demand that they change this appalling law, and keep hammering home that they are placing you at risk.

 

 

 

 

 

 

 

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08th Dec 2010 12:00

Difficult one

I found £5 on the pavement on Monday evening. Given the proclivities of the population in the area where it is found there is at least a suspicion that this £5 could be the proceeds of a theft. I have been remiss - I must immediately report it. Where do I go to carry out this important function? 

The crucial point here is were you on your way to or from work? If on your way to work then this could be seen as happening in the course of your business and so be reportable. If any the way home, it would not be.

What if I seen you pick up the fiver? I would have to suspect that you would not report this to SOCA and then report you myself. Of course I don't know your name or anything else about you other than a vague description but a rules is rules.

 

 

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08th Dec 2010 12:19

Cash received

 In this particular case as the till has been emptied surely the owner has taken possession of the cash even if its not counted. Is counting also critical? 

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08th Dec 2010 12:20

Schrodinger's cat?

The seems to be a distinct similarity between the famous cat in the box being neither alive nor dead until observed, and the cash in the till being neither quantified nor belonging to the pub until the cash reconciliation is done.

If the cash is stolen before the end of day takings reconciliation is done, is it effectively stolen from the punter who handed it over in exchange for a pint, or is it stolen from the pub landlord?

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08th Dec 2010 12:31

Difficulties on difficulties (and a serious point too)

The crucial point here is were you on your way to or from work? 

Hmmm. I work from home. What then? I was at the supermarket buying items for personal use - but I also bought items for my car, which is a business rental. I think I should turn myself in to be safe. And also report the man at Asda that I handed the fiver in to..........

Seriously though - recently the government announced a review of excessive tax laws, and I submitted to them that the tax and NI treatment of mileage payments over 40p per mile was something they should be embarrassed to retain. Under the old government I believe they had such a website for all laws, and I remember dobbing the MLR laws in as a travesty. And of course there was that website to petition the PM, but I bet all these websites are ignored by the powers that be.

As a payroll agent I have to pay £140 a year to be allowed to do my job and all it achieves is to make me promise to obey a law that I have to anyway! Add on the ICO registration........ Thank goodness I don't have to pay to register as an HMRC agent - no, don't put ideas in their head!

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08th Dec 2010 12:34

C_D, I assume HMRC 'caved' before it went anywhere official did they?  i.e. there is no precedent for us to quote?

Not had this happen to a client yet but it would be a useful tool to have in case any of their tills go missing, I've always marveled at the idea you have all your money stolen but you still owe the VAT.  Surely HMRC should be chasing the thief (or is the theft of the till an exempt transaction?).

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08th Dec 2010 14:07

Straw poll

My curiosity is piqued. Can everyone who read the OP's thread indicate if they considered there were grounds for a money laundering report?

I freely admit that it never crossed my mind until David brought it up. My own belief is that in this instance, such a report would be a ludicrous waste of time for everybody invoved but do appreciate that this may be the letter of the law. I certainly doubt it is within the spirit of that law however.

Assuming Blok does not make the report, I refuse to believe that he could possibly face disciplinary action for this. I for one will leave the profession if officialdom confirm that they honestly would expect a report in the given circumstances. 

 

 

 

 

 

 

 

 

 

 

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By blok
08th Dec 2010 14:23

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To add insult to injury, I have been informed that the insurance company does not insure against the vat element. 

Because it appears that the vat element is uninsurable -      if the numbers had been much larger, the business could potentially be put out of business by having to pay over the vat it had stolen from it.

Whilst I have doubts a court would follow this through, by the letter of the law it could be enforced. 

Can you imagine the situation whereby the figures are much larger?

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By blok
08th Dec 2010 14:46

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I believe that the act of "theft" would not be exempt from vat, but probably outside the scope.

I think that means that you probably can't even opt to tax it then.

 

 

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08th Dec 2010 15:12

Insurance

'Insurance policy is only paying out max £500 in total.'

Perhaps your clients should look at the level of cover!!

By the sounds of things they are a public house, which, with games machines could make them a hihg risk for breakins/theft.

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By jndavs
08th Dec 2010 15:14

Vat on takings

So who owns the money in the till or can it be 'removed' with impunity?

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08th Dec 2010 15:24

Not always

... "is charged on the supply of goods...".  So once goods have been supplied there is a VAT liability, based on the then known value of that supply, regardless of what has then happened to the consideration provided.

 

Posted by Kanye Fleesom on Wed, 08/12/2010 - 15:11

 

Unless using a cash accounting scheme.

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By blok
08th Dec 2010 15:31

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the client runs a pub, t/o £350k.

CD - interesting concept about cash accounting scheme however!

The insurance payout was negotiated, the insurance provider (loss assessor) did not like the way the takings were kept within the property overnight, so the client had to concede on that point, or may not have got anything at all.

 

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08th Dec 2010 16:06

@Roland

Roland

If I understand you correctly (and please put me right if I am misunderstanding your point) I think you are saying that if, in the course of your professional work, a client informed you that he had been a victim of theft (in this case his premises were broken into and some cash was stolen) you would not consider making a Suspicious Activity Report under MLR 2007 / PoCA 2002 (or even referring the matter to your firm's MLRO).

Is that the essence of your point (put simply)?

Or are you saying that you would regard that as reportable ordinarily - but not where the client had already reported the matter to the police himself?

Or are you saying something else?

David

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08th Dec 2010 16:24

I wouldnt bother reporting
Straw poll

My curiosity is piqued. Can everyone who read the OP's thread indicate if they considered there were grounds for a money laundering report?

 

Posted by Roland195 on Wed, 08/12/2010 - 14:07

 

I wouldn't - but then I'm in a better position than most in that I can happily tell the Institute to get stuffed without it having any adverse effect on my business. Although, in fact, I would probably drag them through every court there is just for the hell of it first.

I don't see any basis whatsoever for this requiring a ML report as it has already been reported to the police and recorded. Indeed if anyone has a duty to report it - it is the police. 

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08th Dec 2010 16:36

theft

of course it's a money laundering reportable offence, don't report at your own risk.

be fantastic if you were in the way ! e.g Wiki leaks

I do however agree with the sentiment that these rules are pants, but your clients voted for the government that makes the rules because they had red shirts no doubt. lol

not the society I want to live in but there you go, rules are rules

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08th Dec 2010 16:44

ML regs are crazy but be sensible!

Mr Winch, I admire your expert knowledge and enthusiasm for all things ML related.  You have obviously based your current business/career on such matters and all power to you for that.  However common sense should prevail in such a case as that provided by the OP?

Facts are OP's client has , it would appear, suffered a theft of cash amounts unknown and by persons unknown.  Police have been informed and an insurance claim has been made.

If an ML report was made  by an accountant or their client every time a client suffered such a loss, SOCA would be swamped in the resultant reports.  If there was benefit in SOCA having notification of every such loss surely  would the police would be best placed to do it (perhaps they do).  They know as much of the facts as the accountant in this case.

(The Haulage case you mention involves unusual levels of cash, wher other payments types were the norm, which ought to raise suspicion and therefore an ML report but it has little bearing on the OP original case here)

If  the accountant had other reasons to be suspicious, for example the client suffered such cash losses regularly, say it was everytime the client was in or near a cashflow problem, the accountant might have reason for suspicion and to make an ML report. 

However in the case presented by the OP here there is no need to report it all.  A particularly cautious person might make a file note to to the effect : " One-off loss, already reported to the police by the client, given consideration to facts, no other indications to suggest any suspicious circumstances. Therefore no need for MLR."  However even without a file note I would suggest this would be a reasonable defence.

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08th Dec 2010 17:11

Sorry

You can't claim bad debt relief for VAT because the customer did pay.  Income or Corporation Tax is a different matter though.

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08th Dec 2010 17:28

Swamping SOCA with reports

Just out of interest - in the year to 30 September 2010 (in round figures) SOCA received 240,000 Suspicious Activity Reports, of which 6,400 were from accountants (and 5,000 from lawyers).

The vast majority of the reports - approximately 194,000 - were from banks and building societies.

In total 5,100 different organisations submitted one or more reports to SOCA during the year (but the top 20 reporting organisations accounted for roughly three-quarters of all reports submitted).

David

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08th Dec 2010 18:00

I'll name names

In total 5,100 different organisations submitted one or more reports to SOCA during the year (but the top 20 reporting organisations accounted for roughly three-quarters of all reports submitted).

 

Posted by davidwinch on Wed, 08/12/2010 - 17:28

 

The moral of this is - don't put your ill gotten gains in your bank because the High Street Banks are the worse snitches of the lot, and if you want to get it out of the country smuggle it out in your luggage because Western Union are snitches too.

 

 

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08th Dec 2010 18:35

Cash in hand (or luggage)!

C_D

Don't forget that anyone in possession of more than £1,000 in cash may have it seized by police (or customs officers) if it is reasonably suspected to be "property obtained through unlawful conduct".

The seized cash may then be forfeit if the owner cannot satisfy magistrates that (on the balance of probabilities) it is legitimate monies.

David

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10th Dec 2010 13:02

Reply To David

Roland

If I understand you correctly (and please put me right if I am misunderstanding your point) I think you are saying that if, in the course of your professional work, a client informed you that he had been a victim of theft (in this case his premises were broken into and some cash was stolen) you would not consider making a Suspicious Activity Report under MLR 2007 / PoCA 2002 (or even referring the matter to your firm's MLRO).

Is that the essence of your point (put simply)?

Or are you saying that you would regard that as reportable ordinarily - but not where the client had already reported the matter to the police himself?

Or are you saying something else?

David

Nearly. I am saying that the need for a SAR etc would not even occur to me as my client has been the victim of the theft, regardless of if it has been reported or not (with the possible exception of unless I thought the client was lying about the theft).

I would not have any notes on the file regarding why I did not see the need for a SAR etc as it would not have crossed my mind that I would have had to do one is these circumstances anyway. I would hope that most of us would have felt the same.

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10th Dec 2010 13:39

I agree with Roland

If I have no reasonable reason to suspect ML or similar unreported financial crime, I have no need to report.

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10th Dec 2010 13:56

@Roland

Roland

Thanks for your reply.

If you check the accountants' money laundering guidance, or your own firm's training materials or money laundering policies manual, or the MLR 2007 or PoCA 2002, you will see that the obligation to report does not depend upon whether the money laundering which you suspect is being undertaken by a client or non-client.

The issue is - Do you know or suspect (or are there reasonable grounds to suspect) "that another person is engaged in money laundering". (Per s330(2) PoCA 2002.)  That means anyone other than yourself.

So it matters not a jot that in this case your client is the victim and not the suspect.

If your training did not make that clear then I can only say I hope you didn't get your training materials for me! ;-)

However (for various reasons outlined in earlier posts in this thread) the circumstances in Blok's particular case may result in him having no obligation to report.  Hence the need for him to think it through and act appropriately (possibly by simply making a file note).

David

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10th Dec 2010 14:05

Logical conclusion

The issue is - Do you know or suspect (or are there reasonable grounds to suspect) "that another person is engaged in money laundering". (Per s330(2) PoCA 2002.)  That means anyone other than yourself.So it matters not a jot that in this case your client is the victim and not the suspect.If your training did not make that clear then I can only say I hope you didn't get your training materials for me! ;-)

Posted by davidwinch on Fri, 10/12/2010 - 13:56

 

Sorry David, but following that logic then - we have ALL read newspaper reports of MP's fiddling expenses, they are not clients, but we suspect they are fiddling their expenses.

Shouldnt every accountant in Britain immediately file a report about every MP and senior civil serpant?

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10th Dec 2010 14:09

@ChrisBurr

Chris

I am a bit concerned by your reference to "financial crime".  Sadly 'money laundering' is so widely defined in PoCA 2002 that it need not involve money and it need not involve laundering either!

The shoplifter who steals a tin of biscuits from M&S commits a money laundering offence (possession of the stolen biscuits contrary to s329 PoCA 2002) and so if, in the course of your work, you receive information causing you to suspect this then you have an obligation to report it (unless one of the exemptions applies).

The same is true if you suspect, based on information received in the course of your work, - to give a couple of examples plucked from nowhere - that someone is knowingly employing illegal immigrants, or selling 'pirate' DVDs.

David

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10th Dec 2010 14:14

@C_D

C_D

You are only obliged to report if the knowledge or information came to you in the course of an activity falling within the 'regulated sector' - see s330(3) PoCA 2002.

At present reading newspapers is not an activity falling within the regulated sector  - but providing accountancy etc services by way of business is.

David

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10th Dec 2010 14:34

David

I do understand your points and I think we are well into mountains out of molehills territory.  But for example suppose I am auditing M&S and they have an expense account to cover thefts and losses.  As auditor I ask them to provide me with an analysis of what the total charges for this expense line are made up of. They then tell me that the total charge of , say,£750k is made up of c10,000 diferent incidents of theft and provide files detailing circumstances for each incident, actions taken, confirmation of police reports and insurance claims whererelevant. Do I have 10,000 reports to make?  I think common sense would say No.  I doubt that I would end up in court unless it could be shown that I knew or ought to have known tha there were circumstances to suggests that crimes were going unreported that were of some reasonable substance.

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10th Dec 2010 15:13

Thefts from M&S

Chris

The law was changed in 2005 (by s104 Serious Organised Crime & Police Act 2005) in part to deal with the point you raise.  What is the point of the auditors of M&S (and similar companies) reporting to SOCA each year along the lines of "there appears to have been some 'shrinkage' of stock, some of which we suspect will be due to theft of something by somebody, somewhere at some time during the year"?

However that was the effect of s330 as originally enacted.

So s330 was amended to include a provision (see s330(3A)) that no report was required if the reporter had no information which would assist the authorities to either identify the launderer or locate the laundered assets.

That is one of the reasons why I suggested Blok may not be obliged to file a report.  Another exemption covers 'reasonable excuse' which may be relevant to Blok's case.

In any event, the official guidance is to the effect that in such cases (if you have to make a report at all) you can make a single report at the end of the audit rather than 10,000 individual reports - one every time you see come across another suspicious matter.

David

P.S. My 'tin of biscuits' example was chosen to illustrate a point (about non-financial crime) but I am told than SOCA did once receive a report of "suspected abuse of the 3-for-2 offer on Wheatypops"!  I understand they took action of which you would approve ;-)

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