Between a rock and a hard place?

A colleague has been placed in a ridiculous situation by a bent client and doesn’t know which way to deal with it so I hoped someone on here might know.

The brief facts are as follows  -

  • Client refused to register for VAT despite turnover of £140k per annum
  • Estimate of VAT owed to HMRC to date about £40k
  • Accountant refuses to continue acting for client
  • Accountant then arrested as client has made false accusations that tax refunds not passed on to him by accountant.
  • Accountant bailed while police check his evidence that he has in fact paid these refunds to the client.
  • In the mean time if the accountant doesn’t file a money laundering report he commits an offence, but, when interviewed by police they told him if he did file a report he would be committing an act of witness intimidation.

It seems he is in an impossible situation and commits a criminal offence whichever route he takes.  Has anyone any suggestions or come across this situation before?

 

Comments
billgilcom's picture

witness intimidation    2 thanks

billgilcom | | Permalink

Now I have absolutely no legal training but surely he cannot be intimidating anybody as he is not contacting any witness but merely fulfilling his legal obligations I wouldn't pay any attention to the police as clearly they are biased

My suggestion was -

Seeker | | Permalink

My understand is that the police's logic is that if he informs HMRC, and HMRC then investigate the client, the police consider this to be witness intimidation by using a third party to "harm" the "witness".

My suggestion was that he should make a report - to the police officer - and throw the ball into his court as to what he then does with it. After all, if a police officer is made aware of a crime and fails to pass that information on to the relevent section doesn't the police officer then commit an offence ?

Does reporting it to a police officer fulfill the obligation to report under the money laudering regulations?

How can it be intimidation?    2 thanks

alistair_king | | Permalink

Errr - but shouldn't they then also use this logic against the client who has clearly attempted to intimidate the witness to his failure to register by using the police as a third party to harm the witness (the accountant).

Seek Legal Advice    2 thanks

bobhurn | | Permalink

Where laws conflict one or other is likely to have legal supremacy, I suspect (as the man in the pub) that the POCA will have supremacy in this case.  But bearing in mind that an arrest has already been made the dilemma should be addressed professionally, seriously and quickly.  Paying for an hour with a lawyer experienced in AML may well give your colleague peace of mind and direction to fulfil his responsibilities without committing an offence.

davidwinch's picture

Report to the police officer    4 thanks

davidwinch | | Permalink

You should report your suspicion to the police officer and draw his attention to his duty under s339ZA PoCA 2002 to pass the information on to SOCA.

In my view, it cannot be an act of witness intimidation to fulfil a legal obligation to report a suspicion to the authorities.

David

Thanks

Seeker | | Permalink

Thanks david, that was what I thought, put the onus onto the police officer.

I also agree with alistair, but, until they have done whatever it is they think they are doing, my colleague remains technically on bail.  Quite how hard it is to "investigate" when a bank statement shows the money coming in from HMRC and being transfered direct to the client's bank account 3 days later I really don't understand.

I rather suspect that once the police formally clear him he will be starting a civil action against the client.

 

when all else fails    2 thanks

The Black Knight | | Permalink

The crooked will use the law....and it seems be supported by it.

Surely there is an offence of ...a false accusation, false imprisonment (if the police had no evidence) and wasting police time.

Can he not report/make a complaint about the officer involved ?

I am confused why the police would be interested in the first place.

 

I am confused why the police would be interested in the first pl

Seeker | | Permalink

The standard line seems to be - "if an allegation is made we have a duty to investigate". 

I must say I didn't notice any such duty when a neigbour's house alarm went off, we rang the police as we knew the neighbour was on holiday, and were staggered to be told to go and check ourselves and call back if we found anyone in the premises.

 

 

 

s339ZA PoCA 2002

Seeker | | Permalink

I've googled the above and while there is lots about PoCA I cannot find the actual wording of s339za or any reference to it anywhere.

Does anyone happen to have a link to the legislation containing this particular section as it doesnt appear on the copies of the Act I can find.

 

 

s.339ZA    3 thanks

The Black Knight | | Permalink

"where a disclosure is made under this part to a constable or an officer of revenue and customs, the constable or officer of revenue and customs must disclose it in full to a person authorised for the purposes of this part by the director general of the serious organised crime agency as soon as practicable after it has been made"

It is in your Red book Volume 1B  (PCA 2002)

otherwise you could try  www.legislation.gov.uk

 

 

 

Thanks Black Night .......

Seeker | | Permalink

........... I should have found that, having one of "those" days when I wish I'd stayed in bed.

davidwinch's picture

s339ZA    2 thanks

davidwinch | | Permalink

The wording of s339ZA is HERE.

David

Re Between a rock and a hard place    2 thanks

dougc99 | | Permalink

As already stated the police are just going through the motions - they actually have no clue as to this sort of crime unless you are dealing with the fraud squad/economic crime unit.

The truth will out in the end although that is no compensation.

Irrespective of the allegations you have a duty to report! This includes your statutory duty under AML. You do not have aduty to disclose your actions as that would possibly fall under tipping off and you cannot be induced/ to self incriminate.

 

BigBadWolf's picture

"Accountant then arrested as    2 thanks

BigBadWolf | | Permalink

"Accountant then arrested as client has made false accusations that tax refunds not passed on to him by accountant."

 

A prospective client suing his former accountant once told me that the police are not interested in such cases as in their eyes it is a civil matter - not a criminal matter. The justification was that the client would have signed the authority for accountant to receive refunds in the first place - so can't be classed as theft or fraud. Police weren't interested or wouldn't do anything.

davidwinch's picture

The police and a civil matter    2 thanks

davidwinch | | Permalink

The police are not interested in purely civil commercial disputes.

Frankly they are often slow to get themselves involved in allegations of theft and fraud - and will sometimes recite the mantra "it is a civil matter" to avoid getting involved.

The difference (very often) between a civil matter (such as a dispute over the level of fees charged) and a criminal matter (such as theft or fraud) is 'dishonesty'.

So imagine three different scenarios:

1)  Accountant charges client a fee for work done.  Client thinks it is excessive and refuses to pay.  Clearly a civil matter - of no interest to the police.

2) Accountant receives a tax refund due to client.  Accountant dishonestly retains refund and will not pass it on to the client.  This looks like theft - could be a police matter.

3) Accountant charges client a fee for work done.  Client thinks it is excessive and refuses to pay. Accountant then receives a refund due to the client.  Accountant retains the refund towards the outstanding fees.  This falls somewhere in the middle!  The likelihood is that police will refuse to become involved, saying it is a civil matter.

As, in the OP's question (which is apparently based on none of these three scenarios), the police have become involved and arrested the accountant then the accountant should obtain legal advice from a solicitor (preferably BEFORE being interviewed by the police).

Without wishing to be disrespectful, many ordinary police officers will understand as much about business and accountancy matters as I understand about quantum theory.  I would suggest that the OP's colleague gets his legal advice from a solicitor (and not from a police officer).

You might be interested in s51 Criminal Justice & Public Order Act 1994 concerning witness intimidation.  Note that for the s51(1) offence it is necessary that the offender intends to intimidate another person by an act "intending thereby to cause the investigation or the course of justice to be obstructed, perverted or interfered with".  For the s51(2) offence the act is done or threat made "because" the victim of it is assisting in an investigation (or is a witness or juror).

I would suggest that the accountant here is not making a report of his suspicion with any intention to interfere with any investigation of allegations against him, nor is he doing it because the subject of his report is assisting the investigation against the accountant.  On the contrary the accountant is making his report because he is under a statutory obligation to do so under s330 PoCA 2002 / MLR 2007.  So I don't believe the making of the Suspicious Activity Report by the accountant would amount to witness intimidation.  But the OP's colleague should seek his own legal advice from a solicitor.

David

steveoneill's picture

Lessons to be learnt

steveoneill | | Permalink

A bit devil’s advocate here, based on the original post, which state ‘brief facts’, it all seems to revolve around the actual filing of a SAR

It appears the accountant is trying to file a report to try and create a defence and stop an offence being committed under PoCA S330. Of Course S330(4) states; ‘the third condition is that he does not make the required disclosure as soon as is practicable after the information or other matter comes to him’. I would suggest the potential of the offence under PoCA has already happened. The police knocking on your door is a little bit too late to consider the SAR as a defence. So S339ZA is the only route, relaying you suspicions at this late stage to the investigating officer.

The accountants had suspicions of VAT fraud, no SAR filed, resigned the retainer, still no SAR filed, from further posts, tax rebates are received in the accountants clients account and paid out. Suspicion from the VAT fraud should have arose that the tax rebates are possible criminal property, need permission to proceed from a SAR to pay this out, still no SAR, S328 offence looming.

We do not know how the client came into contact with the police initially, 60% of all tax evaders are already known to the police for one reason or another or perhaps HMRC shadow economy team came a knocking or another SAR had been filed, we may never know. Yet the one thing most clients do when pulled by the appropriate authority is to blame there accountant,’ that’s what I pay him for’ is a common cry at these times.

If a SAR had been filed then a defence would have been in place and probably the accountant would be looking at a production order, assisting the prosecution, instead of a potential personal prosecution under any number of criminal acts.

The lesson to be learnt is if you have reasonable grounds to suspect, file a SAR. The gloves are now off as regards ‘help, support and education’ for compliance, According to Government 4 years is long enough to get your act together regarding the understanding of what you must do to comply. Law enforcement and supervisors are now actively dropping the nice approach and disciplinary, civil or other penalties have already started flying. You only have to look at the ICAEW disciplinary rulings over the past 6 months to see this approach in action. The disciplinary committee I sit on now has a number of cases lined up and ready to go.

Unfortunately these scenarios will become more common

Steve O’Neill

4 years ? must be longer than that ?

The Black Knight | | Permalink

I am sure you are right....seems to be a government policy

lull you into a false sense of security by not applying the law and ignoring MLR's then hit you with a big stick as you get bored with the whole thing and let your Guard down...

just like penalties this year !!

Time scales in above example would make a lot of difference...I suspect there is more to this than meets the eye.

You have to wonder why these types of clients even want an accountant in the first place....the clue may be in the refund ? These type always want their cake and to eat it too.

HMRC only know about these problems because of accountants if is wasn't for us the problem would not even exist in their eyes.

 

billgilcom's picture

don't tell me

billgilcom | | Permalink

The police officer is a friend of the client. Tell him about. the clients misdemeanors and then make your own supplementary SOCA report including giving the name of the officer that you also advised of the client frauds

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