Definition of "privileged circumstances"
Can you settle a "discussion" on what constitutes "privileged circumstances" for money laundering purposes please.
Is this *only* where a client seeks advice.
i.e. what if we come across an indication while preparing accounts/tax return that M.L. has taken place. If we "advise" the client of the law, he twigs as to the direction of the conversation, and he then puts things right. Is this "privileged circumstances"? Are we clear of reporting? What about the historical M.L.?
Supposing a client/potential client asks points on tax law, gets his answer, and asks us to help him come clean with HMRC. Is this privileged circumstances, or the fact that he historically has defrauded HMRC do we have to report once he has owned up but not while advice is being sought/given?
I personally feel the change is extremely narrow and 95% of the time we *must* report whereas the "wider" interpretation of the office is that it clears most clients from being reported so long as we discuss it during draft accounts review time under the umbrella of "giving legal advice"
Leslie Tonks
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Thanks David
Spot on. I have read so much on the term "legal privilege" I was going "bog eyed".
At least your concise reply has settled the office "discussion". ;-)
Privileged circumstances
Leslie
The extent of legal professional privilege is a complex legal issue which many lawyers do not fully understand. That may explain why the lawyers were not keen for privilege to be extended to non-lawyers!
My view is that for general practitioners the occasions on which a report had to be made to NCIS under the old rules, but will not be necessary under the new rules, will be few and far between.
Hopefully you have read the AccountingWEB item Changes put accountants in a position of privilege.
Dealing with your examples, if a client approaches / instructs you in the normal way to prepare accounts and / or returns then the information you receive from the client is not privileged. So in your first example a report to NCIS is required (if, as you say, you have a suspicion that there has been past tax evasion from which a benefit - tax 'saved' - has arisen).
This is because you have not received the information in connection with the giving or seeking of legal advice - you have received it in connection with the preparation of accounts and / or returns. It does not matter that, as a by-product, you may also give some legal advice.
In the second case the information is received in connection with the giving of legal advice and so (if you are a suitably qualified accountant or firm) the information is privileged and a report to NCIS should not be made (unless the crime / fraud exception applies).
The information remains privileged whilst you follow-through with advice to the client and complete consequent accounts and / or tax work to put his affairs in order. So you are not going to report this client to NCIS. (The same is true incidentally if he refuses your good advice and does not instruct you to do and accounts / tax work - again provided the crime / fraud exception does not apply.)
The crime / fraud exception means that if the client provides you with information for the purpose to facilitating further crime (e.g. tax evasion) then privilege is lost and you must report to NCIS. So, for example, if Mr Client says "I have got away with trading for years without declaring it - can you advise me how to invest the profits in ways which will not be detected by the taxman?" then you are obliged to report this to NCIS.
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
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