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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I am not sure I follow what is in it for your client if they have been paying these invoices.
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?
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.
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.
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.
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.
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
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.
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?
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.
Yes of course as you have been told repeatedly the conduct of C is clearly fraudulent and that is where your reporting obligation arises.
What makes you say that John?
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.
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
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.
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.
No investigation but....
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. 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.
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.
What about a duty?
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.
Making work for yourself
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. 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.
Your professional duty is to your clients. You have neither a professional nor legal duty to investigate other people's financial dealings.
@ 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?