Money laundering

Money laundering

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Hi all

A builder client has been getting loans
From a friend paid into his account £10000 plus from John Smith. Used to buy materials then he said he pays him back from the job. No promissory notes etc. pays back cash apparently.

my concern is as this has happened on more than one occasion should my client have this documented. Do I need evidence From the other person where the money has come from? Should I be doing anything else?

Sorry if this appears to be a silly question but as its for large amounts I wanted a second opinion and would appreciate your views

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By zaidi
11th Jul 2013 10:30

I suggest you to ask your client to give you a signed statement with full explanation that why he is getting loans from his friends and he undertakes a responsibility to provide an evidence to the tax authorities if they ask for it in future as in the absence of reliable evidence, the loans will be treated as Income.

You can also ask your client to provide you a statement from his friend that how much he owes to his friend at the year end. 

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David Winch
By David Winch
11th Jul 2013 10:51

An odd arrangement

This does seem to be an odd arrangement.  What (if any) is the sensible commercial reason for the friend not putting this money through his own bank account?

There is an obvious danger that HMRC might regard these deposits as additional sales income of the client (with tax & VAT consequences).

There is also the danger that the friend is involved in some criminality and the monies being banked in the client's account are proceeds of crime.  If the police get involved the client could find himself in court for money laundering.

So I would suggest you point the dangers out to the client and strongly discourage him from continuing to do this.

You also need to consider whether you have a reportable suspicion under s330 PoCA 2002 / MLR 2007.

David

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