AML report needed?

AML report needed?

Didn't find your answer?

Probably a basic query but not a scenario I have encountered before so would appreciate some reassurance from the more knowledgeable on these matters.

In short, I have a client with an SA enquiry. So far, so normal.

I now learn from the client that the Revenue have suspended this enquiry because he had previously (and unbeknownst to me) made an LDF disclosure via a specialist firm of solicitors and sorting out that disclosure first effectively trumps the SA enquiry.

My issue: I presume that I still need to make an AML report regarding what I have learned even though the Revenue already know all about this? Like I said, basic stuff probably but the reassurance would be nice before I go ahead.

Replies (7)

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By johngroganjga
05th Jul 2015 12:35

Not sure what you would be reporting if it was appropriate to do so. You just say your client was under enquiry, which is not in itself a crime.

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By adam.arca
05th Jul 2015 20:12

*
Apologies if I wasn't clear.

It's not the enquiry which is my AML concern. Rather, it's the fact that my client has made an LDF disclosure and therefore presumably has overseas assets and income of which I was previously unaware and which probably should have been reported on his tax returns over several years. My presumption is that I need to report this even though HMRC already know about it but a word from the wise before I do that wouldn't go amiss.

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Locutus of Borg
By Locutus
05th Jul 2015 21:15

Client seems to be rectifying previous evasion

From what you are saying, the client has evaded tax in the past, but has since taken steps to rectify that using the LDF.

In the fullness of time, there will be no underpayment of tax as, through the LDF process that has already been initiated, the client will pay the correct amount of tax that would have been due, plus the appropriate penalty under the LDF.

Consequently, I would take the view that an AML report is not necessary.

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Replying to paul.benny:
David Winch
By David Winch
05th Jul 2015 21:35

I would respectfully disagree

Locutus wrote:

From what you are saying, the client has evaded tax in the past, but has since taken steps to rectify that using the LDF.

In the fullness of time, there will be no underpayment of tax as, through the LDF process that has already been initiated, the client will pay the correct amount of tax that would have been due, plus the appropriate penalty under the LDF.

Consequently, I would take the view that an AML report is not necessary.

I would disagree.  By analogy, if I steal your wallet today & in a few years time give you the money back it does not mean that I did not steal your wallet (even if I pay you interest).

There is a further, somewhat technical, issue with tax evasion.  Because in evading tax the 'taxpayer' evades a liability (in the terminology he obtains a 'pecuniary advantage') he is 'deemed' to acquire a sum of money of value equivalent to the tax evaded, see s340(6) PoCA 2002.  But there is no identifiable actual money.  So in effect all the 'taxpayer's' assets become 'criminal property', see s340(3), due to the "in whole or part & whether directly or indirectly" rule.  So he will continue to be a money launderer even after he has repaid the tax.

David

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Replying to ann1987:
Locutus of Borg
By Locutus
05th Jul 2015 21:42

Thank you for clarifying, David

davidwinch wrote:

Locutus wrote:

From what you are saying, the client has evaded tax in the past, but has since taken steps to rectify that using the LDF.

In the fullness of time, there will be no underpayment of tax as, through the LDF process that has already been initiated, the client will pay the correct amount of tax that would have been due, plus the appropriate penalty under the LDF.

Consequently, I would take the view that an AML report is not necessary.

I would disagree.  By analogy, if I steal your wallet today & in a few years time give you the money back it does not mean that I did not steal your wallet (even if I pay you interest).

There is a further, somewhat technical, issue with tax evasion.  Because in evading tax the 'taxpayer' evades a liability (in the terminology he obtains a 'pecuniary advantage') he is 'deemed' to acquire a sum of money of value equivalent to the tax evaded, see s340(6) PoCA 2002.  But there is no identifiable actual money.  So in effect all the 'taxpayer's' assets become 'criminal property', see s340(3), due to the "in whole or part & whether directly or indirectly" rule.  So he will continue to be a money launderer even after he has repaid the tax.

David

Interesting to know.

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David Winch
By David Winch
05th Jul 2015 21:24

Dishonesty

The issue is one of dishonesty.  Do you suspect that the client has in the past dishonestly (i.e. knowingly & deliberately) submitted tax returns which fail to reveal all his taxable income?

I am expecting that you will say 'Yes' to that.  (But if you say 'No' then you should not make a Suspicious Activity Report.)

The next question is whether the information has come to you in the course of the client seeking legal advice from you.  I think the answer to that is 'No' (he was seeking legal advice from the solicitors but apparently did not involve you in that).

However it is possible that the enquiry which you have been dealing with was kicked off by the client making a disclosure to you & instructing you to make that disclosure to HMRC (rather than by HMRC writing to you 'out of the blue' saying they were commencing an enquiry).  In that case there might be an applicable exemption from making an SAR.

If the legal advice exemption does not apply, the next question is whether in the circumstances you have reasonable grounds not to submit an SAR.  My own view is that the existing knowledge of HMRC does not provide reasonable grounds for not making an SAR.  This is because an SAR is a report to the NCA & the wider law enforcement community & not simply to HMRC.  It might be the case that, say, the police have an interest in this client (for some reason unrelated to tax) & the information may be useful to them.

So I think you should make an SAR & submit it to the NCA.  But I think the SAR may be relatively brief & refer to the LDF negotiations with HMRC.  You should make it clear that you are not reporting any suspicion that the LDF disclosure is incomplete, simply that you are aware that an LDF disclosure has been made.  Obviously you need to quote the client's tax references (NI no, UTR, CT ref & VAT no if applicable) as well as the usual ID stuff (full name, date of birth, passport number if known, address, landline & mobile phone numbers, company name / business name & address if applicable).

Don't forget the SAR double-X glossary code from the list at

www nationalcrimeagency gov uk/publications/30-glossary-codes/file .

David

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By adam.arca
05th Jul 2015 22:30

Many thanks...
...for your answers. I can see the logic of what you are saying, Locutus, and I might well have been swayed by that had David not made a very good case for the other side!

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