Are Accountants Prepared for the Brave New World of Draconian Legislation?

 

 The late Lord Justice Harman once remarked ‘accountants are the witch doctors of the modern world, willing to turn their hands to any kind of magic.’ We should have regaled in this back-handed compliment but it seems that, from reading the recent threads on this Discussion Group, one would have the distinct impression that accountants are now behaving like rabbits caught in the headlamps of the proceeds of crime legislation. Is it not therefore about time that accountants, especially those in practice, moved on from simply debating the perceived iniquities, real and imagined in the legislation and its application, and started taking stock of how as professionals we should act and react in the present environment?  This is not to dismiss the need for vigilance and lobbying of government where we find the legislation unfair and prejudicial both to our clients and to the profession as a whole.    The Financial Action Task Force Guidance for Accountants Guidance for Accountants  issued in June 2008 stated the obvious ‘In many countries, accountants are the first professional body consulted by many small businesses and individuals when seeking general business advice and a wide range of regulatory and compliance advice.’ When accountants feel they are not qualified to give the necessary advice they are directed to ‘advise on an appropriate source of further assistance.’  We are not lawyers but we may well be the first port of call for clients with regulatory and compliance issues.  

One area where we do regard ourselves as having superior knowledge than the local solicitor is taxation and we should be aware that HMRC is rapidly extending its powers under a wide raft of legislation including Proceeds of Crime Act 2002 . On January 1 last year the Revenue and customs Prosecution Office (RCPO) merged with the Crown Prosecution Service (CPS) and became the Revenue and Customs Division (RCD) of CPS. Nine months after this marriage, HM Treasury announced that it intended a fivefold increase in prosecutions through a £900million boost to fight tax evasion. For the year ended 30 September 2009 HMRC had prosecuted 157 individuals for tax evasion.

 

It was little surprise that the main accountancy and taxation bodies in Great Britain issued  Professional Guidance in Relation to Taxation ,a salutary reminder of accountant’s responsibilities. The accompanying press release  to the Guidance issued by the Institute of Chartered Accountants of Scotland made specific reference to two cases that have been detailed in this Discussion Group  Firstly a report in the Sunderland Echo here concerning Mr Doshi.  Although the report was not specific about the offence it appeared that Mr Doshi, an accountant  had been convicted of prejudicing a money laundering investigation contrary to s342 PoCA 2002. The second case alluded to was that of  a taxpayer client had agreed with HM Revenue & Customs that he had failed to notify a tax liability and pay a relatively small amount of tax of around £3,500 for one tax year. His actions were found to have constituted “cheating the public revenue by failing to submit accounts for tax…with the intent to defraud” – a criminal act which meant he was then liable to settle around £700,000 calculated under the Proceeds of Crime Act 2002 as the extent of his unsupported assets deemed to have arisen from criminal activities. The case came to public prominence through the Court of Appeal, Steed v R [2011] EWCA Crim 75

It is patently clear that the legislative powers are going to  be invoked by a wide range of agencies in the coming year. Lord Justice Harman’s nanny has passed into the history books for telling him ‘the world is a very unfair place and the sooner you get to know it the better,’ Now there is a real challenge for the accountancy profession! 

 

Comments

Pages

davidwinch's picture

The cases

davidwinch | | Permalink

Anyone wanting to read more about the two cases to which Gerard refers could do worse that reading the earlier threads in this discussion group - the Doshi case, the Steed Case.

David

cymraeg_draig's picture

Change

cymraeg_draig | | Permalink

"Is it not therefore about time that accountants, especially those in practice, moved on from simply debating the perceived iniquities, real and imagined in the legislation and its application, and started taking stock of how as professionals we should act and react in the present environment? "

 

I don't think it is.

When faced with legislation which is neither just or equitable everyone, including all professonals, should oppose such legislation. Obviously lobbying MPs is one route which should be taken, but, there should also be a refusal to in any way support such a law.

It is not a case of breaking the law, that I could not advise, but there is certainly no reason to do anything more than the absolute minimum to comply with it.  When faced with a situation which potentially might justify a money laundering report, instead of simply making a report, give serious consideration to how you can justify not doing so.

When faced with a demand for information, take the absolute maximum amount of time possible, and supply the absolute minimum. 

We should not simply "react in the present environment" - we should be doing everything possible to change it. 

 

Agree

Stephen Morris | | Permalink

I will not become an unpaid informant for the state even though it may be compulsory. I do my best to persuade my clients to comply with the law when I suspect that there may be a breach. I point out the consequences and the draconian nature of the legislation and that I am required to snitch on them if there is a contravention of the law. If this fails to bring them into line then I ditch them.

 

 

cymraeg_draig's picture

An idle thought - but very tempting when you have a devious mind

cymraeg_draig | | Permalink

I wonder how they would respond if they received a letter stating that we are of the opinion that a money laundering report may be required, that preparing and submitting it will take 2 hours of our time, and that we therefore enclose our invoice, and upon receipt of payment we will file the necessary report.  

After all we are supposed to report matters which "come to our attention in the course of our profession" - and the HRA specifically outlaws slavery (ie being forced to work for nothing).

So, are they actually breaching an article of the HRA which cannot legally be ignored or ammended even by legislation? 

 

This does show the hypocrisy of the current legislation, and if "they" expect us to act to the letter of the law, why dont they ?

 

 

davidwinch's picture

Slavery

davidwinch | | Permalink

C_D

The Human Rights Act 1986 contains an exception for "any work or service which forms part of normal civic obligations".  I rather think that covers anything you might be required to do by laws such as PoCA 2002 and MLR 2007.

David

davidwinch's picture

Stephen

davidwinch | | Permalink

Do you submit your report to SOCA before or after ditching non-compliant clients / ex-clients?

David

@ David

Stephen Morris | | Permalink

Instead of.

davidwinch's picture

Instead of ??

davidwinch | | Permalink

Stephen

If you are ditching clients because you suspect them of dishonesty in tax matters resulting in underpayment of tax (in other words tax evasion from which they have benefited) then you are squarely in a position of being obliged to make a report to your MLRO / SOCA under s330 PoCA 2002 / MLR 2007.

The obligation is not limited to suspicions of wrongdoing by clients.

David

@ David

Stephen Morris | | Permalink

I try to persuade the client to change their ways and may even suggest ways to help them into legality. If these efforts are in vain then I ditch the client so that I don't act for them. As far as I understand it, the benefit/liability must have crystallised for it be have been obtained/evaded for an offence to have been committed. The offence hence depends on the tax return having been made. Since I decline to do this when there is doubt then the client has yet to commit the offence. No crime = no SAR

cymraeg_draig's picture

A "valid" exception David? Thats questionable.

cymraeg_draig | | Permalink

The Human Rights Act 1986 contains an exception for "any work or service which forms part of normal civic obligations".  I rather think that covers anything you might be required to do by laws such as PoCA 2002 and MLR 2007.

David

 

Posted by davidwinch on Sat, 19/03/2011 - 19:57

 

Actually the right to freedom from forced or compulsory labour is an absolute right, Article 4 gives only four specific examples of what does not constitute forced labour. Therefore to some extent this part of the human right is qualified.

 

The following circumstances do not constitute forced labour for the purposes of human rights law:

  • Work which has to be done, following a conviction, as part of a prison sentence or community sentence;
  • Military service, service to be performed as an alternative to military service by conscientious objectors or equivalent services to be performed by civilians. This applies regardless of whether an individual joined the armed forces voluntarily or was drafted;
  • Service which has to be performed because of a public emergency or other situation which puts at risk the life or well-being of the community;
  • Any work or service which constitutes the ordinary duties of members of a civilised society.

 

This raises an interesting legal question.

Does snitching on fellow citizens constitute "the ordinary duty of a member of a civilised society" ?

It does not specify "within the EU" and for every example of a "civilised society" that requires "snitching" I could find 2 that did not place such a legal requirement on its citizens. So, if 66% of the worlds civilised countries dont place such a requirement on citizens, can this reasonably be described as "an ordinary duty of a member of a civilised society" ? 

Also, the requirement came about AFTER the HRA was in force.  At the time the HRA was enacted this requirement certainly did not constitute an ordinary duty in the UK.  The HRA enabling legislation specifically precludes any national legislation which seeks to reduce the rights given by the HRA - therefore there is a valid question as to whether this requirement subsequently placed on British citizens, is in fact legal. 

I believe that if a prosecution for failure to file a report was challenged on these grounds the case could be tied up in the european courts for many years at incredible cost to the government.

 

 

 

davidwinch's picture

Tax returns made

davidwinch | | Permalink

Stephen

Because the obligation is to report suspicions of money laundering (only) and because a money laundering offence involves some connection with the proceeds of an earlier crime (sometimes referred to as 'the predicate offence') then, in relation to tax evasion, money laundering issues only arise after tax has fallen due for payment.

So, to take an example, if I prepare a false tax return, dishonestly understating my taxable income, for the tax year ending 5 April 2011 and submit that in, say, September 2011 I will gain a 'benefit' from a reduced tax payment falling due on 31 January 2012.  So a money laundering issue will arise from 31 January 2012 onwards.

However it is not always necessary to submit a (false) tax return to be guilty of tax evasion.  If I commence to trade (profitably!) in 2010-11 and dishonestly fail to notify the tax authorities of that, then that also is a form of tax evasion.  Assuming there would be a tax liability if the true facts had been disclosed to HMRC, because tax would fall due on 31 January 2012, money laundering issues would arise from 31 January 2012 onwards.

So in each of these examples if you had suspicions of my tax evasion as a result of information which had come to you in the course of your accountancy / tax work you would be obliged to report those suspicions from 31 January 2012.

Of course if my dishonesty also stretched to VAT, either by making false VAT returns or by dishonestly failing to register for VAT, then a tax (i.e. VAT) liability could arise much sooner - resulting in the obligation to report being triggered sooner.

Similarly other requirements could trigger an obligation arising more swiftly - such as CIS returns and payments, PAYE returns & payments, etc.

(And of course the reporting obligation does not arise only in respect of tax evasion - it also arises in respect of all other crime from which a benefit is obtained.)

David

Gaskin v UK 1989 (European Court of Human Rights)

Stephen Morris | | Permalink

In this landmark judgment the ECtHR judged that the system of informants operated by the UK may be compatible with the European Convention on Human Rights. However, the judgment concerned voluntary submissions being made by informants in a completely different context.  This judgment, in passing, confirmed the right of such informants to confidentiality. This judgement is now implicitly reflected in section 7 of the Data Protection Act (protection of third parties).

What conclusions the Court would come to concerning mandatory submissions may be moot. It could well engage Article 8 (Right to Respect for Priivate and Family Life). However, this is a qualified right and so I suspect that a challenge to the surveillance provisions mandated by the MLR would fail, particularly as they are mandated at European level. However, ultimately, laws only work if they have the consent of the governed.Just as juries were sometimes reluctant to convict for murder because of the existence of the death penalty so might ways be found to circumvent legislation which runs counter to the sense of natural justice possessed by many.  

With regards to the advice given by Lord Harman's nanny, the world will continue to be unjust unless people seek to change it. To accept things as they are is defeatism.

 

Gerard Murray's picture

Stephen-Ditching the client

Gerard Murray | | Permalink

 

Surely the cycle of professional responsibilities does not end with the ditching of the client who refuses to mend his ways. Leaving aside the issues of the need to have made a report to SOCA, there is the issue of how to handle the almost inevitable request for professional clearance from a new agent.

 As the main accountancy and taxation bodies in Great Britain have issued  Professional Guidance in Relation to Taxation , it is of considerable benefit for accountants in practice to be aware of paragraphs 5.33 to 5.35, which read as follows:

 

5.33 Having ceased to act the member may be approached by a prospective adviser for information relevant to the decision of whether to accept the appointment or not. The member should not volunteer information to a prospective adviser in the absence of authority from his former client.

 

5.34 Before responding to a request for information from a prospective adviser, a member should ensure that he has authority from the former client to disclose all the information needed and reasonably requested by the prospective adviser to enable him to decide whether to accept the work. To the extent that he is authorised to do so, the member should discuss freely with the prospective adviser all matters of which the prospective adviser should be made aware.
5.35 If the client refuses permission to the member to discuss his affairs, the member should inform the prospective adviser of this fact. It is then up to the prospective adviser to make enquiries from the client as to the reasons for such a refusal.

 

 

cymraeg_draig's picture

Gerard

cymraeg_draig | | Permalink

The problem is there are a lot of cowboys out there who don't ask for professional clearance, probably have no idea that they should, and have no regulatory body.  A certain "franchise" comes to mind.    

 

Regus

JackHarper | | Permalink

I have always said that I will shovel it but I won't eat it. I have always had an attitude problem with authority, beginning with my father. My career would probably be regarded by many as major under-achievement but at least for 20 odd years I have had no business partners annd so none whose current professional specialisation iss drawings, lunch, and adultery.

I hope to think I would have the courage to defy the FATuousF.......s and their guidance at personal cost.

At the beginning of this year I thought I might again use a PO Box, which costs about £120 pa. But I decided instead to go a bit up market and sign up for a business address service with Regus. A week later I had a request from them to go to Liverpool (30 mile round trip) and present the usual passport, gas bill and stool sample. Horrified, I checked and of course it had not occurred to me but they were a trust and company service provider under the ML regulations. Their contract made no mention of it but this seemed to me to be a statutory override. I repudiated the contract and paid up £700 because they would not release me from it. I do not wish to have contractual relations with such people.

I ask prospective clients for this same garbage at present because I do not want to go to gaol and may soon cease to practise. But I won't comply myself. I was forced by my own bank when buying a house last November to ID myself in order to send my own money by CHAPS transfer to my solicitors' client account, so I am not a total hero.

I fear the metric martyrs' cases show that all Governments are authoritarian and conformist and their vicious enforcement against our neighbour will stir very few of us to action as opposed to disapproval. The coarse de-humanising of a cultured nation was achieved during the Third Reich by reducing the decent vast majority population to a state of de-sensitising terror, so as to countenance if not participate in acts that would have been regarded as unspeakable throughout previous German history. Of course it could never happen here.

 

Jack Harper

Publicus's picture

Getting Back to Basics

Publicus | | Permalink

Gerard Murray wrote 'from reading the recent threads on this Discussion Group, one would have the distinct impression that accountants are now behaving like rabbits caught in the headlamps of the proceeds of crime legislation.'

As I see it, he is completely right and the postings on this thread have simply confirmed his suspicions. As I recall, one of the first postings by the FATF in 2004 identified accountants as  major players in assisting money laundering and some of the postings on this thread have confirmed that bent accountants haven't gone away you know! Don't get all uptight and morally challenged but it seems that there is a moral fog and legal ignorance amongst some of our brethern when it comes to facing the realities presented by the proceeds of crime legislation.

Comply with the legislation or pick your own cell! As an alternative seek specialist advice from professionals such as David Winch and Gerard Murray but don't hide behind your delusions of jurisprudential righteousness. One of the best pieces of advice given in the recent guidelines of the UK accountancy and taxation bodies is , for what has been previously termed in this discussions group as the 'average accountant', to seek sound professional advice in the context of the isues raised by the new legislation. It is pretty simple in spite of all the obfuscation and ranting of the zealots. 

In spite of the denunciations of this legisaltion by the Lib Dems, when in opposition, this wide ranging nature of legislation is set to grow in the term of this parliament. It will not be limited to taxation isues although I note that HMRC have already indicated thier eagernes to extend the legislation in their enquiries, which may well include errant accountants.

I note that sofar we have been concentrating on HMRC but the reality is that the powers under the proceeds of crime legisaltion have been extended to a vast range of governmental agencies tht have a direct contact point with our clients, and as it is we their acountants who are the first point of professional contact for these  businesses.  Wake up and smell the coffee of both the threats, about which many of the postings have been whinging, and the opportunities that the legislation opens up for the profession in offering sound advice. 

cymraeg_draig's picture

Publicus

cymraeg_draig | | Permalink

How sad that someones ethics are such that they simply roll over and blindly accept pseudo-communist legislation, and see it instead as an "opportunity" to fleece clients.

Incidently as someone with both accountancy and legal qualifications I find some of your comments rather offensive.  Perhaps if you had some knowledge of the injustices caused on a daily basis by poorly drafted, ill conceived legislation in many areas, you would have a better grasp of the realities. For your information, the realities are not merely injustices (which is bad enough) but also victims of this legislation committing suicide, and having heart attacks caused by the stress of unjust legislation. 

My duty is to justice - not to the whims of politicians, and "laws" are not always just. When they are not, than any right thinking person has the duty to force their repeal, and defeat them by all means possible.

Your blind acceptance is exactly why governments get away with oppressive and unjust laws. You seem to believe that this unjust law will be extended by this government - that is not what I was personally assured by Mr Cameron at the last party conference. It is in fact due to be heavily ammended to reflect parliaments original intention, that it apply only to terrorism and serious organised crime - not subcontractors fiddling their tax by doing the odd cash in hand job.

It will be interesting as the public becomes more informed and as the courts have ruled that defendants have the right to see as part of disclosure any "report" filed.  Immagine an accountant reporting a client - the client gets hold of the report and word gets out that an accountant has shopped a client. That accountant can wave goodbye to his practice because clients will melt away faster than snowflakes in a desert.

 

 

cymraeg_draig's picture

A serious and libelous statement -

cymraeg_draig | | Permalink

"........some of the postings on this thread have confirmed that bent accountants haven't gone away you know!"

Posted by Publicus on Sun, 20/03/2011 - 21:56

 

Clearly you are accusing someone who has posted in this thread of being "bent". 

That is an extremely serious and libelous statement and I suggest that you immediately state to whom you are referring because I for one would instantly take action if that statement was made about me.

There is judicial precedent of a succesful action for libel in a forum even though pseudonims are used.

 

 

Independence v criminality

Stephen Morris | | Permalink

@ Publicus

It does not follow that a person whose views are contrary to the consensus, or to the legislature's, that he or she is "bent".

Legal action threatened for stating opinion

tonyarm | | Permalink

Lighten up CD, you take yourself too seriously - life's too short, and I didn't take Publicus's comment to refer to you or SM. Clearly as cases show, there are bent accountants as there are bent coppers, laywers, taxmen, politicians and probably judges. But what's new - there have always been and there always will be some bad apples. However, they are few out of the many which is why this country, despite what you seem to imply, is still to all intents and purposes free and the poiticians answerable to the public and opinion formers. The public and opinion formers do not agree with you that these measures go too far, indeed mostly they probably think criminals get away with too much. I wouldn't bank on your libertartian opinions holding sway amonst most of the victims of crime that we are all likely to become at some time in our lives.

billgilcom's picture

C_D re Bent accountants

billgilcom | | Permalink

and if there are any bent accountants  in Scotland they'll soon be under the cosh for trivial amounts of £1,000 whereas the rest of the EU continue doing it for bigger amounts. It seems its cheaper to qualify for a criminal lifestyle in Scotland than elsehwere - even Wales

Has the world gone mad?

There is in fact no evidence that anyone on here is bent - or in fact an accountant - it is just like the MLR etc someone has a suspicion that an accountant has done somethign wrong just cos they do not agree with the legal viewpoint. They could just be testing out the water like all good devil's advocates.

Mind you I gather that HMRC are now preparing for the accountants disclosure opportunity by trawling all these forums for people who are at risk of not having done MLR's etc correctly.........  Maybe we should be putting somebody elses photo up on our profiles - any volunteers?

Let's hope that accounting web are prepared to refuse to divulge our personal details when the application for members details flows in shortly

 

Scaremongering

The Black Knight | | Permalink

Whilst these rules are very serious, there are no resources to implement them as we have seen.

most of the tax cases have related to carousel fraud and then only the large cases as I understood anything less than £1M would not be investigated. And then only 200 cases hopefully rising to 800 cases in future years.

Is that less than 1 in a million chance I wonder ? I do not think dodgy accountants have anything to worry about just yet ! And the honest just need to take simple precautions, and fill in the forms to pass a monitoring visit.

You just need to be sensible, do as you are told, do not leave a smoking gun if you have not, and do not admit to it.

You have already lied to your client in making a report ! therefore you are now a Liar , live with it. lol

 

@ David ? are you saying that a suspicion of a crime is not reportable until after the due date for payment.

In that you have knowledge of an incorrect return, lets say on the 30th april but it is not reportable until the 31 January following ? Is the crime the completion of the return or not correcting it ? which would make the window even longer.and in that case how long should you give the client to correct before reporting him, or do you need to given that your relationship probably ended shortly after the discussion.

 

Publicus's picture

Bent Accountnts and Others

Publicus | | Permalink

 

C_D

Sorry that you take umbrage at my comments, which I assure you were not directed at any of those who have made comments on this thread. If, however, you had gone back to the first postings you would have noted that both made direct reference to the Doshi case, in which an accountant was convicted in Sunderland very recently. Further research on Mr Doshi’s former associates would have unearthed a case in which the ICAEW struck off a member for ‘unethical conduct.’ We live in interesting times and I suspect that more professionals are going to fall foul of the proceeds of crime legislation simply because they believe they are immune from it on conscientious grounds.

cymraeg_draig's picture

.

cymraeg_draig | | Permalink

We live in interesting times and I suspect that more professionals are going to fall foul of the proceeds of crime legislation simply because they believe they are immune from it on conscientious grounds.

 

Posted by Publicus on Mon, 21/03/2011 - 10:39

 

Actually you can use conscientious grounds, providing they are genuine, and form part of a religious belief or other recognised right. Most of these rights are detailed in the HRA, however, some are not.

For example. I have been an active campaigner against capital punishment all of my professional life. I am still active in trying to achieve the aboltion of this barbaric practice in the USA. Were I to be ordered by a court to prosecute a capital case (should the death penalty be reinstated) I would refuse regardless of the contempt that would imply. The court would not be allowed to impose any sanction whatsoever as I would be refusing on conscientious grounds which are protected by the HRA.  

The current money laundering regulations are indefensible and draconian, and, in my view, place an unlawful requirement on professionals.

Regardless of claims to the contrary, any report you file is not "confidential". Any defendant has an absolute right to access all prosecution evidence and the courts have repeatedly ruled that ML Reports do not attract public interest immunity and that the defendant's absolute right (per HRA) to face and cross examine his accusers overrides any other consideration.

Regardless of disclosure, it is often qute obvious who "shopped" someine anyway as the accountant is quite probably the only person who would have known about the clients activities.

Therefore, by filing a report you are doing so in the full knowledge that you may, indeed probably will, be called to appear in and subsequent court case. A vigorous cross examination is not something to be taken lightly. Certainly I make it my business to unearth and "skeletons" in a witnesses past which may prove useful, and have no problem in reducing witnesses to tears and destrying their reputation if that is necessary to defend my client.

You are also filing a report in the knowledge that witness intimidation or just plain revenge is far from unusual, and you could therefore, find yourself targetted by a defendant and/or his "friends".  In my experience it is not just hardened criminals who intimidate witnesses, so your life could well be turned upside down for months or even tears.

So, this legislation is actually forcing professional, under threat of prosecution, to place themselves and their families in potential danger. And amazingly, it is forcing them to do so for free.

Such legislation is totally unacceptable and any professional would be well advised to find any reason possible not to file a report.

 

 

 

 

Gerard Murray's picture

Stephen- Potential problems of tipping-off the client

Gerard Murray | | Permalink

 

 ‘I point out the consequences and the draconian nature of the legislation and that I am required to snitch on them if there is a contravention of the law’   

 

Have you considered that taking this course of action could leave you liable under tipping-of offences of the Proceeds of Crime Act 2002?  The Act, as amended by Statutory Instrument 2007 No. 3398, sets out the ways in which this offence can be committed, and the exceptions that provide a defence against allegations of tipping off. Section 333A of the Act relates to the Regulated sector. Tipping off is committed when a person reveals information gained through work in the Regulated sector that a disclosure has been considered or made to an official, and where that information is likely to prejudice an investigation resulting from that disclosure. Sanctions against those who commit this offence include fines and imprisonment for up to two years.By telling the client that you will have to make such a report could surely constitute a tipping-off offence!

Gerard Murray's picture

When is Legislation Unlawful?

Gerard Murray | | Permalink

 

The current money laundering regulations are indefensible and draconian, and, in my view, place an unlawful requirement on professionals.’ C-D

 

 

Every judge has admitted that the proceeds of crime legislation is draconian and opinions differ as to whether it is indefensible. However, I would take issue with you in your comment that it places ‘an unlawful requirement on professionals.’ I think that it is dangerous for any professional to state that legislation, duly passed in parliament not repealed and not challenged in the courts, is unlawful. Are we setting ourselves above parliament and the judiciary?   

In similar vein, is this not refusing to abide by the regulations of ones own acountancy body and abrogating to onself the ability to determine which parts of the regulations we will obey and implement and which we will determine to be 'unlawful?'

davidwinch's picture

Tipping off

davidwinch | | Permalink

Gerard

My copy of the legislation, s333A(2) says:

"the person or another person has made a disclosure".

I think you are not correct in suggesting a tipping off offence can occur where a report has been considered but not yet made.

However it is the case that a report made internally to the firm's MLRO does count as a disclosure which has been "made" for the purposes of s333A.

It is also the case that an offence under s333A or s342 can be committed where an investigation by the authorities is being contemplated or is proposed.  But if no report has yet been made the authorities presumably will not yet be at the stage of contemplating or proposing an investigation.

David

davidwinch's picture

@kalden

davidwinch | | Permalink

In England & Wales it is only suspicion of money laundering (or terrorism related offences) which is reportable (in Scotland suspicion of "serious organised crime" is also reportable).

There can be no money laundering until there has been some benefit arising as a consequence of a crime.

So the dishonest submission of a false tax return does not itself trigger an obligation to report (although it is a crime) - but the tax 'saving' which results from that crime necessarily brings in its wake a money laundering offence (which is reportable).

So the report is required once that tax 'saving' has materialised (which is once the due date for payment has arrived).

Does that clarify the position for you?

Also, ceasing to act for a client does not of itself remove the need to report (since the obligation is to report suspicions based on information which has come to you in the course of your work - it is NOT limited to suspicions of wrongdoing by clients).

David

Tipping Off

Stephen Morris | | Permalink

@ Gerard

The statutory requirement to report suspicious activity is made clear to clients in the letter of engagement. This is not deemed to be tipping off. If I remind a client of the relevant clause in the L of E at a later point in our relationship then I don't see how this can be tipping off. Surely tipping off only occurs when a SAR has been submitted, or is about to be submitted, and thereafter the client told?  Since I will have terminated the relationship before an offence has been committed there is no need to submit a SAR. There can be no offence of tipping off therefore.

Clarification, please.

jpcc1 | | Permalink

CD,

The reasons you give for deeming the legislation “an unlawful requirement on professionals” seem to be that the work involved in reporting is unpaid and because a report may not be kept confidential. Desiring remuneration and fear of intimidation may be pragmatic considerations but don’t seem to be compatible with your stated stance of always acting in line with justice?

I also think that your statement “you may, indeed probably will, be called to appear in and subsequent court case” (my emphasis) is incorrect. I have submitted reports and have never been called as a witness. I don't know of any colleagues who have been called as witness in such situation. I find it difficult to believe that the majority of the thousands of such reports submitted each year end with those reporting being called as witnesses. Have you any evidence to support this assertion?

called as a witness

perry23 | | Permalink

I can help CDs case in relation to being called as a witness. In 100% of cases where I have made a report I have been to called to court as a witness and been reported as the person who reported the client in the press (admittedly I have only made 1 report)

 

Publicus's picture

Calledas a Witness

Publicus | | Permalink

 

The likelihood of having to appear in court having made as Suspicious Activity Report has to be seen the context of overall numbers. In November of last year the Serious Organised Crime Agency (SOCA) published its annual report of Suspicious Activity Reports (SARS) received in the year ended September 2010. Overall, there were 240,582 SARS received and as expected the vast majority were from the banking sector, which contributed 78.31% of all SARS received by SOCA.  

Accountants made  6,390 or 2.97% of the total reports. I would be surprised if more than a handful of these reports culminated in the reporting accountants having to give evidence in court.

cymraeg_draig's picture

jpcc1

cymraeg_draig | | Permalink

 also think that your statement “you may, indeed probably will, be called to appear in and subsequent court case” (my emphasis) is incorrect. I have submitted reports and have never been called as a witness. I don't know of any colleagues who have been called as witness in such situation. I find it difficult to believe that the majority of the thousands of such reports submitted each year end with those reporting being called as witnesses. Have you any evidence to support this assertion?

 

Posted by jpcc1 on Mon, 21/03/2011 - 15:22

 

Defences were initially told they could not have access to "confidential" reports, however, since this has now increasingly been ruled incompatible with Article 6 reports are now being sought in disclosure as a matter of routine, and quite rightly so. Justice cannot ever be served when people are allowed to sneak around making alllegations without being held to account for them.

Once your report has been disclosed you are open to several possible consequences -

  • The defendant may decide to embark on a little witness intimidation.
  • In the unlikely case that you have stumbled upon terrorists or drug dealers, their intimidation may well be rather "final". 
  • Once released the defendant may decide to embark on a little revenge (and if he's had a few years to stew in prison this is extremely likely, plus, you wont know when he's released).
  • During the trial you will probably be cross examined about the rgounds for your suspicion, any other motives you may have, and if defence counsel is really doing his job, anything in your past which could be used to damage your reputation and therefore your value as a witness, will be used against you. (I make it my business to know everything I can about all witnesses).
  • Should the defendant be acquitted, and if he can show that your report was in any way unwarranted, you may find yourself being sued.

As for "justice" - since when was justice served by innocent people being subjected to invasive and lengthy investigations with all the distress that can cause, simply because someone has formed a totally unsupported "suspicion" ?

Since when has justice been served by forcing people to place themselves and their families at risk ?

This is something I happen to know a lot about having myself been stalked and threatened including death threats and three attempts made on my life when I myself was a witness some time ago. Over 1,000 incidents of harassment & threatening behaviour were recorded including silent calls, razor blades in my post, an arson attack on my parents home, and several attempts to force my car off the road.  The police of course were useless, because the defendant WAS a police officer.  I can assure you that is not a situation I will ever allow myself to be involved in again even if it means developing sudden sight problems should I again be unfortunate enough to witness a serious crime.

Threats of violence

davidlchapman | | Permalink

I thought anyone believing he would be attacked physically had an excuse not to file a report?. Given that terrorists and drug dealers have no compunction about killing people, doesn't that mean we only have to report mortgage cheats and tax evaders etc ie the better class of criminal. Given that your report and personal details WILL be given to the miscreant, can't we claim fear.?

 

davidwinch's picture

Reasonable excuse

davidwinch | | Permalink

It is indeed the case that if you have a 'reasonable excuse' you are not obliged to file a report.

I have been advising accountants about reports for years and can only recall one occasion on which I advised an accountant to carefully consider his option not to file a report because of a credible threat of violence to himself or a colleague.

There have been occasions in the past in which accountants have suffered serious physical violence (including death) which would appear to be work-related but it is extremely rare - much more rare than someone winning multi-millions on the lottery!  If we worried about the risk of death and injury all the time we would never drive a car or cross a street (and the stress would kill us).

David

Gerard Murray's picture

Reasonable Excuse

Gerard Murray | | Permalink

 

Section 330(6) of POCA 2002 states that a person does not commit an offence of failure to report if he has a reasonable excuse for not making a SAR. In deciding whether a person committed this offence a court must consider approved guidance. In the case of accountants this is set out in the CCAB Anti-Money Laundering Guidance

 

 Paragraph 2,15 reads :-

‘ There are defences to and exemptions from the failing to disclose offences as follows:• there is reasonable excuse for not making a report (note that there is no money laundering case law on this issue and it is anticipated that only relatively extreme circumstances, such as duress and threats to safety, might be accepted);’

 

The important matter is surely to document the reasons for believing that it was reasonable not to make a disclosure

cymraeg_draig's picture

Threats

cymraeg_draig | | Permalink

 have been advising accountants about reports for years and can only recall one occasion on which I advised an accountant to carefully consider his option not to file a report because of a credible threat of violence to himself or a colleague.

 

Posted by davidwinch on Mon, 21/03/2011 - 19:51

 

I don't think I could be described as a coward, I've fought in two conflicts, I raced motorcycles wel into my 50's (it took a heart attack to stop me). and I've routinely dealt with some fairly violent people. However, it is not simply yourself you must think of.

I could not have forseen what happened to me. The case in which I was a witness was initially not particularly serious, the defendant faced loss of his job and pension, and maybe 12 months inside, but more likely a suspended sentence.  After being followed whenever I went out - after months of silent 'phone calls, - after razor blades arriving in my post, - after several attempts being made to run me off the road - after an attempt to stab me - and after an arson attack on my elderly parents home - it was very obvious that there was a credible threat of violence.  Now, tell me, if you were a judge, and I had told you at the outset that I believed a serving police officer would go to those length, would you have believed me? 

But, the facts speak for themselves - he did. 

So, you tell me how you assess a "credible threat of violence" ?  Particularly as, until you file the report and the suspect knows you have filed the report, he has no reason to make any threats, and once he has it's too late to do anything about it as the report has already been filed. 

The bottom line is that this Act is placing innocent lives potentially at risk - who is going to compensate wives, children, etc when someone is killed for filing a report ?

 

 

whose decision?

davidlchapman | | Permalink

David, whose decision is it that any threat was credible? Is it a judge or a jury, or does it not get that far?. I'd feel confident that any jury would realise how dangerous some people are, unless ordered otherwise by a judge. I wonder would a jury also be advised that details of any report are given to a criminal which enables him to identify the reporter?

Scottish accountant

The Black Knight | | Permalink

I read about a Scottish accountant who made a report, gave his evidence in a VAT money laundering case, and his decapitated head was found in a fishing net, after having been taken away by two people disgused as police officers.

Apparently the police did not think he was in danger because he had already given his evidence.

Reported in the Scotsman in 2006,  www.news.scotsman.com

Andrew Ramsay

Jeremiah

JackHarper | | Permalink

My favourite Private Eye cartoon is of 2 old Testament prophets. One is saying to the other: "Cheer up Jeremiah! It may never happen". As regards AML he could have replied: " It already has".

The problem never seems too real when they come for others, only when they come for you.

 

Jack Harper

davidwinch's picture

Murder of Scottish accountant

davidwinch | | Permalink

My understanding is that two men have been charged with the murder of the accountant (who was said to have been involved in a very large VAT fraud).

I have no information as to the currect status of the case but if it is still due to come to court at a later date then it would be inappropriate (and possibly illegal) to comment further on it now.

David

lindaluvdup's picture

Witnesses, threats and violence

lindaluvdup | | Permalink

I understand the defence are given all the information, including full details of witnesses. That's what happened to a friend of mine around 15 years ago, and I feel the stress of having her entire family under constant threat for months contributed to the death of her mother. The police were powerless to help.

I was born in a dodgy area and lived in various dodgy areas during my younger life. I know threat and violence can come from almost anywhere, almost anytime - it frequently occurs over something seemingly small in insignificant and from a person in any walk of life, so it could be your client and he's not necessarily a drug dealer or big time crook!

I always comply with the law but would do virtually anything else to avoid any kind of confrontation.

-- Lin

cymraeg_draig's picture

.

cymraeg_draig | | Permalink

I have no information as to the currect status of the case but if it is still due to come to court at a later date then it would be inappropriate (and possibly illegal) to comment further on it now.

David

 

Posted by davidwinch on Tue, 22/03/2011 - 13:09

 

There is no offence committed in discussing a forthcoming criminal prosecution, unless of course you are a witness in those proceedings, or, seek to influence the outcome of the case (which is where adverse publicity in the press can be held unlawful if it villifies the accused therefore tainting any future jury's independance).  Of course witnesses similarly should not reveal their evidence prior to the trial, so it would be unwise for anyone to discuss a case they are personally involved in.

The point about this case is that it would appear that an accountant has been murdered as a result of "snitching" to the authorities. Simply, it seems to indicate that making money laundering reports etc can prove extremely dangerous, and no one can predict how people will react when accused, even of fairly trivial offences let alone serious crimes.

 

davidwinch's picture

Contempt of Court

davidwinch | | Permalink

C_D

You say

"There is no offence committed in discussing a forthcoming criminal prosecution, unless of course you . . .  seek to influence the outcome of the case".

That is not correct.

The position is that, where proceedings are active (as they may well be in this case), a publication which creates a substantial risk that the course of justice in the proceedings in question will be seriously impeded or prejudiced will very likely be a contempt of court (which is an offence).

Whether the writer seeks that outcome is not the issue - it is an offence of strict liability.

Earlier this month two newspaper companies were convicted of contempt notwithstanding that the publication arose from negligence or mistake.

David

cymraeg_draig's picture

David

cymraeg_draig | | Permalink

 

Perhaps my use of the word "seek" was not completely accurate, but that is the test most judges would use when assessing such a matter.  Nevertheless clearly speculation about a case cannot "create a substantial risk ......".  Our judicial system is open and public, and only in the most exceptional circumstances can comment or speculation be construed as impeding or prejudicing proceedings. 

Were that not the case then newspaper coverage of every murder and serious offence would be construed to "create a substantial risk ......".  Headlines about the Bolger case, Myra Hindley, the Yorkshire Ripper etc could all have been considered to "create a substantial risk ......of prejudicing subsequent proceedings", but, they were not because we have a small thing called free speech, which is also an absolute right (so long as it does not encourage hatred etc).

Speculation as to why a victim may have been murdered cannot constitute contempt. 

 

Gerard Murray's picture

Scottish Accountant

Gerard Murray | | Permalink

 Kalden- 'read about a Scottish accountant who made a report, gave his evidence in a VAT money laundering case, and his decapitated head was found in a fishing net, after having been taken away by two people disgused as police officers.'

 

From limited research on this case it is not clear as to whether the unfortunate Mr Ramsey made a SAR , that triggered events that led to his murder. One report was that he had 'an alleged involvement in a vast £500 million VAT fraud' and that he had been interviewed by Curtoms officers on several occasions prior to being abducted.

The defence to and exemption from failing to  disclose offences is very narrow and the words 'reasonable excuse' contained in section 330 (6) a of POCA 2002 have not been tested in the courts. One interpretation that i have read courtesy of solicitors Slaughter & May was as follows-

       'the prudent view must be that the term will be construed narrowly and should not be relied upon  in practice except in very special circumstances to determine whether a disclosure should be made.'  

It does  not therefore seem to be defence simply to record the view that there is a possibility of being attacked should a disclosure be made. Something more tangible appears to be required. The difficulty is that, as numerous other posts have made clear, almost anyone who is reported can turn very nasty and it is really incumbent upon SOCA and the agencies which feed into its intelligence to ensure the confidentiality of those who make SARS.

There is a considerable difference between the making of a SAR and being  witness in criminal proceedings and virtually any prosecution witness, including forensic accountants, are potentially at risk.

cymraeg_draig's picture

Total opposites -

cymraeg_draig | | Permalink

it is really incumbent upon SOCA and the agencies which feed into its intelligence to ensure the confidentiality of those who make SARS.

Posted by Gerard Murray on Tue, 22/03/2011 - 17:39

 

 

HRA - Article 6  .Right to a fair trial

.... everyone is entitled to .............

 

(d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him;

 

 

Once charges are brought you can forget any promise of confidentiality (quite rightly) and of course disclosure must be made long before the matter actually reaches trial. If SOCA promised confidentiality, it would be in breach of european law, and would face accusations of perverting the course of justice.  Justice must be seen and cannot be dispensed in secret.

 

 

davidwinch's picture

An example

davidwinch | | Permalink

Suppose in the course of his work an accountant in general practice receives evidence causing him to suspect that 'X' is living off immoral earnings (i.e. he is, in common parlance, a pimp).

The accountant makes a suspicious activity report.  The information is picked up by the local police force who commence an investigation.  Following the investigation they arrest 'X' who is charged and the matter is committed for trial in the Crown Court.

'X' is entitled to see the evidence against him - which is the evidence obtained by the police investigation.  Typically the SAR is not of evidential value (and so the accountant will not be required as a witness) nor does it contain anything which would assist the defence or undermine the prosecution.  Therefore it is not disclosable to the defendant.  The disclosure officer will simply mark it "CND" (clearly not disclosable).

The defence are not entitled to see everything the police have or to rummage around in police files on a fishing trip!

David

billgilcom's picture

Scottish Accountant

billgilcom | | Permalink

I suppose at the last minute if he had time he would have been cursing that he carried out his public duty for no remuneration - or is that too flippant on my part

Pages

Add comment
Log in or register to post comments
Group: Money laundering and crime
A group for discussing issues relating to suspected money laundering and other crime