And I always believed ML Reports were confidential...................

I recently attended a training course where a fairly recent First Tier Tribunal case was mentioned in the notes - TC00007 Chemists (a firm) v R & C Commrs February 2009.

The issue of the case was whether the taxpayers had disclosed all their income and came about due to information disclosed in Suspicious Activity Reports filed by a bank clerk which were then passed from SOCA to HMRC.

I was always under the impression that if I had to file a SAR with my MLRO in order to comply with the law (and thereby protect myself from possible prosecution) that the SAR was confidential. If the MLRO then believed that the matter was to be reported to SOCA, again, confidentiality would protect my identity.

The worrying aspects of this case are that:-

(1) during discussions between HMRC and the taxpayers, to quote the course notes "it became apparent to all concerned" that the original information on which the case had been based had come from the taxpayers bank.

AND

(2) S20 notices were served on the bank which resulted in the ORIGINAL Suspicious Activity Reports being handed over to the taxpayers - where only the reference numbers were redacted. (Apparently the bank had initially refused to hand over the SAR as they believed that it was "outside the scope of the ... s20 notice(s) and HMRC did not dispute this". But the Tribunal ordered the disclosure of the SAR.

Presumably it would have not been too difficult for the taxpayers to identify the actual bank clerk in question once the original source of HMRC's information had been revealed to them. But even if it had, they would later have had the clerk's name and signature on the SAR!

David - your comments/opinion on this would be greatly appreciated together with any advice on how to go forward. Do those of us working in the regulated sector now have to balance the probability of going to prison (if we fail to report something) against the possibility of being "done over" (if we do report and our identity is revealed)?

Comments
davidwinch's picture

Confidential - but not secret

davidwinch | | Permalink

Jazzy

When I make my money laundering training presentations I use a couple of slides entitled 'Protecting your kneecaps'.

Being confidential, Suspicious Activity Reports (SARs) are not routinely disclosed to the person whom they concern, even in legal proceedings.  However (i) they MAY (as in the case you describe) be disclosed in the course of proceedings, (ii) there are (rare) breaches of security in which information is disclosed which should not have been (typically a couple of cases each year, compared to approximately 200,000 reports made each year), and (iii) even where there is no disclosure the subject may 'guess' that a report has been made and who has made it.

An example of (iii) occurred in a case I am dealing with.  Police arrived at a lady's house with a search warrant.  In the house they found over £50,000 in cash.  The lady was charged with money laundering and benefit fraud.  The prosecution case summary (made available to the defendant) notes, "Mrs X visited ABC Bank on (date) and attempted to deposit £50,000 in cash.  The bank refused to accept it."  Now it doesn't take a criminal genius to work out that this might be connected to the police search a few days later!

I am surprised that the Tribunal ordered the disclosure of the SAR in the case you describe, and that it was not more fully redacted.  The identity of the individual at the bank is hardly relevant if sufficient evidence of the bank transactions can be produced.

In relation to 'Protecting your kneecaps' some key points are:

1.  Try to avoid taking on dangerous clients in the first place.

2.  If you face a credible threat of violence consider using the 'reasonable excuse' exemption from reporting in s330(6) PoCA 2002.

3.  If you do make a report do not unnecessarily name staff in your SAR (for example in the 'white space').

4.  If appropriate you can contact SOCA (by phone or fax) when you submit your SAR to alert them to your fears of violent retribution - they will then note that for the information of users of the information in your SAR.

5. Good luck!

 

David

Anonymous reporting

Anonymous | | Permalink

If you make an anonymous report, and keep a copy presumably you have complied with your responsibilities and the powers that be cannot disclose where the information came from.

Unfortunately people who operate the system have no respect for you, your business, or anyone else, you are as if nothing to them.

Read the report on Andrew Ramsey a Glasgow accountant that was murdered, police could not work out why because they already had all the information from him. I despair. We seem to be dealing with IQ's equivalent to lower pond life.

Would it not be preferable to publicly torture accountants once a year so we could retain some dignity in this process.

 

What's it all about

Anonymous | | Permalink

Didn't all these rules, and those on the need for ID, all arise due to the Government needing to introduce some high publicity anti-terrorist legislation?

This has caused the position whereby large numbers of the population are assumed to be either potentional terrorists or criminals purely they appear to some individual, who often do not know them or their circumstances, to have assets which seem to be above their means.   Why should the lady in the case quoted be treated in that manner purely because she had a large amount of cash.   If I had a building society account with £100,000 in but because of new regulations I realised that in the event of the financial collapse only half would be guaranted, I might well reasonably decide to transfer £50000 elsewhere.   Why should I be restricted in the way I do so and be required to do this by cheque?   If I did not want the receiving institution to know where the money came from, why should I not be able to withdraw cash from one and pay it to another without being branded a potential criminal?

I am all for extracting illegally obtained assets from criminals, but surely it is reasonable to prove the criminal aspect before doing so.

 

davidwinch's picture

Cash seizure

davidwinch | | Permalink

For some years now police officers, customs officers and accredited financial investigators have had power to seize cash above a 'minimum amount' (currently £1,000) where they have reasonable grounds to suspect that cash is proceeds of crime or intended for use in crime, s294 PoCA 2002 (as amended).

In this context 'cash' includes cheques, s289.

In the case I mentioned I imagine that the decision by the police to seach the lady's home was influenced by the fact that another member of her family was 'known' to them.  The seized cash was tested for contamination with drugs but no significant contamination was found.  However a financial investigation by the police turned up the fact that the lady was claiming benefits and that was inconsistent with her ownership of cash in that amount.

She was subsequently convicted of benefit fraud and money laundering (in relation to the proceeds of her benefit fraud).

David

secrecy vs number of reports made

Anonymous | | Permalink

David

I think your comment about there being 200,000 disclosures each year and very few leaks of discloser's identity is a bit disingenuous. Probably 99% of these disclosures at least are simply ignored, so the possibility of accidental disclosure is much higher than your original post suggests.

200,000 reports

Anonymous | | Permalink

Why is this number so low ? Presumably there are many firms that are not reporting their suspicions or are not aware that they are in fact assisting in tax evasion. You can forget terrorism and drugs and money laundering as these cases will be dealt with by specialist firms of accountants and lawyers who will never report themselves, or will they now ? Could be good planning for them if they report then carry on anyway.

But every firm in the land must have seen at least a couple of cases of tax evasion, let alone a whole host of criminal companies act defaults !!  200,000 looks very low indeed. !

When are we going to see some examples made !! We were promised some public hangings !!

Is it actually possible

Anonymous | | Permalink

to bank a large amount of cash then as a private individual? What information would you need as to its provenance?

I have in mind the scenario where an elderly relative dies or goes into care and not uncommonly a large amount of cash is found in the house. It's been said to me that it is actually a symptom of dementia that the person starts to withdraw and hoard cash, so this cannot be uncommon. Similarly if one had withdrawn cash in view of the banking panic last year?

davidwinch's picture

Mostly from banks

davidwinch | | Permalink

Most of the 200,000 reports annually come from banks and similar institutions.

In the latest year for which I have figures (year to 30 September 2008) there were approximately 7,500 reports from accountants.

Do bear in mind a report is only required where there is knowledge or suspicion of a criminal offence from which a benefit has been derived.  So, for example, an innocent error on a tax return would not trigger an obligation to report (even if underpayment of tax or VAT had resulted) if the error were corrected upon discovery.

Similarly a late filing of a set of accounts or an Annual Return at Companies House would not be reportable (since no benefit is derived from that).  For the same reason a merely late filing of a tax return would not trigger a report.

On the other hand if, say, you found out in the course of your accountancy work that a trader had been selling 'pirate' DVDs then a report would be necessary (it's a criminal offence from which the trader has derived a benefit).  You might however consider that you had a reasonable excuse for not reporting this if all the information in your possession was already known to the authorities (such as where Trading Standards or the police have already prosecuted the offender).

David

davidwinch's picture

Taking cash to the bank

davidwinch | | Permalink

Of course you can take cash to the bank and deposit it.  Depending upon how regularly you do this, you may be asked to explain where the cash comes from.  (I don't suppose Tesco get asked this every time they bank the day's takings!)

If you are behaving 'out of character' (for you) then it might be sense to explain to the bank the circumstances.

I don't know why the bank refused to accept this lady's cash on this occasion.  Possibly she gave an explanation that was not credible, or gave no explanation at all.

In any event the bank may make a Suspicious Activity Report to SOCA without informing you!

David

JazzySasha's picture

To give some context for the case cited.....

JazzySasha | | Permalink

........in my original post, the SAR reports by the bank were in relation to:-

(i) 26 cash credits made at the branch to the credit of an account of a bank in India, and

(ii) around £250,000 of "old" £20 bank notes which were exchanged at the branch for "new" £20 notes.

Obviously the repeated transactions at (i) and the amount of the transaction at (ii) were enough to arouse suspicion. 

late annual returns

Anonymous | | Permalink

Late annual returns were originally given as an example of when it would be appropriate to make a limited intelligence report. (guidance notes for the completion of limited intelligence value report -version 4 - january 2007 - section 5)

Now the guidance is silent on this matter! But it is still a criminal offence with a financial benefit. Interest on late payment or non payment of annual return fee !!

Surely a set of accounts that are filed that do not comply with the companies act, must lead to a suspicion that these accounts may not be compliant for tax purposes, not to mention the financial benefit of lower accountancy fees obtained from not complying with the law.

In fact we find that companies act non compliance is a very good indicator that tax defaults also exist !!

 

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