What are my legal responsibilities

What are my legal responsibilities

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Hello everyone

Could I please get some advice on what my legal (if any) obligations are for reporting the following:

I am aware that a client has been paying fake invoices.  The scenario is that these invoices are for a client of hers that provides "Consultancy"

services.  This client has provided these services for approx 3 years, and has then discovered she was pregnant, in order for her to be retained

by my client, she agreed to pay her "Consulting Client" half of her monthly consultancy fees has maternity pay.  They agreed that the consultancy client would use

her parents dormant company to submit invoices to my clients company in the said amount of "half her normal consultancy fee", whilst she

was off on maternity leave.  What I have discovered since after some investigations is that the parents company is a dormant company and has submitted accounts 

to companies house under a dormant company not showing any invoices.  The consultancy provider to my client has also claimed self employed maternity payments.

This has only recently come to light and I have been involved in this deception, unbeknown to myself.   Have I any obligations to report this to protect myself, is

this clasified as montey laundering through the POCA 2002 etc, and also my client the Director of the Company under False Accouting or Evading Tax on the Criminal tax offences S144.  I am of course extremely worried how this leaves my position.  Thanks in advance for any directtion/help.

Replies (31)

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By Matrix
28th May 2015 18:22

I am not sure I follow what is in it for your client if they have been paying these invoices.

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By johngroganjga
28th May 2015 18:35

Your explanation is not very clear. You keep referring to your client making payments to a client, but presumably you mean to a supplier.

So everything from your client's side is in order. She has simply been paying agreed sums under a normal commercial agreement, and accounting for them correctly. Your concern is that you have reasons to believe that the supplier has not been accounting for its receipts correctly, or perhaps at all.

I am not at all sure why you are worried that you have unwittingly involved in a deception. If you were the accounts to the supplier company I would understand it, but that does not seem to be the case.

So your issue is just about whether to make a MLR report isn't it?

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By Poppy28
28th May 2015 18:56

 

 

Apologies it is a little confusing.

My question is i have found out that this has been going on whilst I have been undertaking the paperwork.  The consultancy is of course a supplier.  What I wanted to try and gain clarification on is that if I was unwittingly involved in this where would I stand

the consultantcy invoices have been put through my clients books I have paid the consultant for 3 years no problem through my client, i was then asked to set up a new customer which i did the consultant is purely self employed to my clients business i then paid the new supplier of consultancy services no problem so i thought.  it turns out that these invoices are actually fake invoices put through my clients accounts with the knowledge of my client paid to the self employed consultant as a maternity payment whilst she was on maternity leave, the invoices are produced in her parents dormant business name, so my client is fully aware of what is going on and agreed to do this. I just want to be sure there is no come back on myself and if i need to do anything MLR etc. thanks in advance

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boxfile
By spilly
28th May 2015 19:09

Some punctuation
would make this easier to read and understand.

How did the OP become aware that the invoices were fake? This may give more of a clue whether any liability is on them.

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By johngroganjga
28th May 2015 19:12

And why are the invoices fake? You say they are for sums your client has agreed to pay.

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By Poppy28
28th May 2015 19:24

The invoices that are in question are for maternity payments my client is paying the self employed consultant whilst she is off work.  I do not have a problem with this it is an agreement between the two of them.  What I am asking for clarification on is, the invoices are disguised as consultancy fees from a so called new supplier which is in fact her parents dormant company.  I have both administered and paid these invoices.  The self employed consultant admitted this to me when she asked me to take care of her SA, she said she didnt want to pay tax on the payments and it was an agreement between herself and my client.  I think I will just disengage with this situation, my query is I now know what was going on and my client has put in accounts and hmrc statements, would there be any come back on myself, and should I report anything.

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By Matrix
28th May 2015 19:31

Did you file the consultant's SA?

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Replying to lionofludesch:
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By Poppy28
28th May 2015 19:36

Hi,

No I refused, because of what she told me, but she has filed it via another accountant.  

TYI

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the sea otter
By memyself-eye
28th May 2015 20:17

Not your problem

Your client agrees to pay someone

That payment is made

It's nothing to do with you whether that payment is properly declared BY THE RECIPIENT

Life is too short- you are not the FBI, this is not FIFA. Move on.

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By johngroganjga
28th May 2015 21:04

But you seem to have a MLR reporting obligation.

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By ShirleyM
28th May 2015 21:05

It could be a problem

If tax relief is being claimed on a non-business expense. You couldn't legitimately claim tax relief on maternity pay given to a self-employed person could you?  If that person is being treated as an employee, then I hope your client isn't a ltd company.

I don't see how this is different to bunging your mate a few quid and claiming tax relief on it. Of course, if the client isn't getting tax relief then no problem.

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Replying to Matrix:
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By Poppy28
28th May 2015 21:54

Thanks Shirley

The thing is it is a limited company, and thus receiving tax relief!

Thank you for your reply, this is what I have been thinking about.

This is why I raised the issue as I have confirmation from the horses mouth that this is what happened, plus this

brings up the issue of benefit fraud also.

I only want to clarify my position, what they do as individuals is purely up to them.  Being part of this situation worries me in the fact that, false accouting

as a company director, i.e. my client, money laundering report paying into 2 different bank accounts.  Thank you for you reply Shirley this helps.

 

 

 

quote=ShirleyM]

If tax relief is being claimed on a non-business expense. You couldn't legitimately claim tax relief on maternity pay given to a self-employed person could you?  If that person is being treated as an employee, then I hope your client isn't a ltd company.

I don't see how this is different to bunging your mate a few quid and claiming tax relief on it. Of course, if the client isn't getting tax relief then no problem.

[/quote]

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By ShirleyM
28th May 2015 22:22

Thanks for the confirmation, Poppy

I agree that it is wrong, and they must know that themselves else they wouldn't product fake invoices for 'consultancy services' from a totally unrelated company.

They are compromising your honesty and integrity.

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By Poppy28
28th May 2015 22:32

Action
Thanks again Shirley i now know what action i need to take. Thank you everyone for your input.

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David Winch
By David Winch
29th May 2015 07:14

MLR reporting

As far as making a Suspicious Activity Report to the National Crime Agency is concerned your responsibilities are governed by s330 Proceeds of Crime Act 2002 (as amended) & the Money Laundering Regulations 2007 (as amended).

Essentially the position is that if, as a result of information that has come to you in the course of your professional work, you suspect that a person (which is not restricted to clients & includes a legal 'person' such as a company) is engaged (which includes past & present activities) in money laundering (which is widely defined to catch any dealing with the proceeds of any crime) then you are obliged to file an SAR unless one of the exceptions applies,

Here you suspect that income is deliberately & dishonestly not being declared for tax.  That is a crime & the proceeds of that crime are the tax evaded.  Someone using the proceeds of tax evasion commits a money laundering offence (if they have knowledge or suspicion of the evasion).

None of the exceptions (such as legal professional privilege) appear to apply here.

So it seems to me, based on what you have posted, that you do have a legal duty to file an SAR with the NCA.

Whether the authorities will take any action as a result is another matter.

David

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By JDBENJAMIN
02nd Jun 2015 13:00

Poppy28, I am sure I am one of many who could not make....

....head or tail of what you were saying, and therefore could not answer your question. Try using proper punctuation and grammar, and also stop calling everyone 'the client'. Try lettering the various parties A,B,C etc.

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Replying to lionofludesch:
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By Poppy28
02nd Jun 2015 13:43

Thank you for your comment!

I have now had several responses from people that understood quite clearly, and I have taken the necessary action they advised.

I take into account what you are saying, regarding punction also, this was written in a rush!

This was my first visit here and my last, I came for help, not a lesson on my punctuation and grammar.

I was put in a difficult position, for which I was seeking advice and clarification, not judgement.

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By Roland195
02nd Jun 2015 13:59

Hold your horses

I would suggest that you take some time here to consider the facts before you go running off resigning and making reports.

If I understand correctly, your client is paying a subcontractor who may not be declaring the income based on the dormant accounts filed at Companies House?

I am not sure what the issue with the invoices being for "consultancy services" is as I struggle to see what else they would say. There may be an employment status argument but it does not prohibit this being a genuine deduction in the hands of your client.

This only leaves the issue of the subcontractor not declaring the income although I understand that they requested you file a SA return for her? You mention self employment more than once so can you be sure that she is not returning the payments to her parent's company as her own self employed earnings?

 

 

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By Poppy28
02nd Jun 2015 19:00

Thanks for your reply, although i consider i have dealt with this i will clarify.

Self employed person (a)  working for one sole limited company (b), (a) discovers she is pregnant, due to the fact that she cannot afford time off without her full payment, a asks b if there is any possibility of a maternity payment, whatever you want to call it, a does not want to invoice this herself because she does not want to pay tax on it, or for what ever other reason a decides.Introduce (c) parents dormant company, a and b agree that c will invoice b for the same services a provides to the company.  c obviously never steps foot or completes any services for b.  D is told to pay c;s invoices into three different accounts.  At the same time, a is claiming self employment maternity allowance.  C then submits dormant accounts with no trading or transactions with CH.  B then claims tax relief on the invoices that c invoiced and submits accounts to CH Meantime d, being me, is asked to administer all the above goings on. D wants to know, how this affects her if at all legally, if she should report anything legally.  a asks d to submit her SA.  D refuses.  The amounts are not exactly small fry. End of Story.

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By Anthony.Evans82
02nd Jun 2015 19:02

Roland may be right
I am not sure that there is a criminal offence here to be answered. It sounds like you may be being a little over-eager.

Also, regarding the punctuation, a great deal of your original posts do not make any sense whatsoever and so it is difficult for a reader to give an accurate opinion, the comments were not judging or critical.

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By Poppy28
02nd Jun 2015 19:34

Bowing out, thanks for everyones response, but I have done what I think was necessary, under what to me was a stressful situation, punctuation, grammer and all.  Legal advice suggested it is fraud.

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By johngroganjga
03rd Jun 2015 13:13

Yes of course as you have been told repeatedly the conduct of C is clearly fraudulent and that is where your reporting obligation arises.

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Replying to Matrix:
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By Roland195
03rd Jun 2015 13:37

What makes you say that John?

johngroganjga wrote:

Yes of course as you have been told repeatedly the conduct of C is clearly fraudulent and that is where your reporting obligation arises.

It is not clear to me the conduct of C is fraudulent. About the only definitive issue is the fact that dormant accounts have been filed which could have been for a period that ended before this arrangment started.

 

 

 

 

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David Winch
By David Winch
03rd Jun 2015 13:59

Suspicion

All of this gives the accountant 'D' (at least) reasonable grounds to suspect that 'C' is part of a dishonest arrangement to make payments which the recipient is not declaring for tax.

That is enough to trigger an obligation to report.

D is NOT obliged to investigate or seek out further information or explanations which may or may not prove that tax evasion has or has not occurred.  That is a job for the authorities (HMRC or the police) if they wish to follow it up.

David

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By johngroganjga
03rd Jun 2015 14:04

The fraudulent activity is C receiving income but omitting it from its accounts. The basis of the understanding is that the OP says that he has seen C's accounts, which say that it is dormant, which is no surprise in the light of a's apparent confession to the OP that it was her intention to evade tax on the sums in question.

Yes if the dormant accounts the OP has seen do not overlap with the period in which the fees were paid the OP's conclusion is misconceived.

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By Poppy28
03rd Jun 2015 14:12

This is where I was at when I asked for advice.

A received the funds from c as part of the arrangement between a and b as mat pay obviously not declared on SA.  A also claimed Mat Benefit as SE person.  Link if investigated is B paying C, C giving A into 3 sep bank a/c's. a, b & c were aware that this was suspicious before agreement comm.  C filed dorman a/c's with companies house after this arrangement ended, b also filed a/c's after period ended. FYI.

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By Roland195
03rd Jun 2015 14:22

Reasonable Suspicion

I am not suggesting the OP attempts any sort of investigation but surely prudence would dicate a review of the facts before making a report.

A simple check of Companies House may satisfy Poppy that the parent's company is only shown as dormant as it was at the last year end.

 

 

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Replying to jonibarnes:
Stepurhan
By stepurhan
03rd Jun 2015 14:29

No investigation but....

Roland195 wrote:
I am not suggesting the OP attempts any sort of investigation but surely prudence would dicate a review of the facts before making a report.

A simple check of Companies House may satisfy Poppy that the parent's company is only shown as dormant as it was at the last year end.

No need to investigate means no need to investigate. If the information you already have gives rise to a suspicion of money laundering you report it. If it doesn't then you don't.

A review of the facts would just be looking at the information held again before making a decision. A Companies House check would be an investigation.

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Replying to Red Leader:
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By Roland195
03rd Jun 2015 14:46

What about a duty?

stepurhan wrote:

No need to investigate means no need to investigate. If the information you already have gives rise to a suspicion of money laundering you report it. If it doesn't then you don't.

A review of the facts would just be looking at the information held again before making a decision. A Companies House check would be an investigation.

It's academic now given the response from the OP but using the example of the dormant accounts, I would think if I could either confirm or negate my initial suspicion by checking a few facts using publically available information then I would have a professional duty to do this. 

 

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Replying to Rgab1947:
Stepurhan
By stepurhan
03rd Jun 2015 16:45

Making work for yourself

Roland195 wrote:
I would think if I could either confirm or negate my initial suspicion by checking a few facts using publically available information then I would have a professional duty to do this.
So you do a check, and the last accounts submitted are before the period under question. Do you stop there, or does your professional duty require you to keep checking until the relevant period is submitted? How long do you keep checking? What do you do if the accounts are never submitted? Does that confirm or negate your suspicion? Do you perhaps need to do other checks? For that matter, what if active accounts are submitted. They won't negate your suspicion as you will have no way of telling if they include this income or not.

Your professional duty is to your clients. You have neither a professional nor legal duty to investigate other people's financial dealings.

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By Sandnickel
03rd Jun 2015 16:26

@ Roland95

The OP has stated that the consultant was receiving maternity allowance. To be also receiving money for "work" is not allowed (even if it isn't actually for work). This is quite clearly benefit fraud and is surely where the reporting requirement comes in?

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