Tipping off - a serious risk?

Accountants worry about 'tipping off'. But do they worry unnecessarily?

Tipping off is a criminal offence, punishable by a fine or imprisonment. When the Proceeds of Crime Act 2002 first became law s333 of the Act dealt with tipping off. It was brief and to the point. If you knew or suspected that a report had been made (either internally to an MLRO or externally to NCIS, as it was then) and you made a disclosure likely to prejudice any consequent investigation by the authorities, you faced a maximum of 5 years in jail and a fine.

But s333 has since been repealed and replaced by new sections 333A to 333E. So what is the position now?

The major changes have been that:

  • the maximum penalty has been reduced to 2 years imprisonment and a fine;
  • the law now makes clear that the tipping off offence is only committed where a person discloses either that a report has been made (either to the MLRO or to the authorities), or that an investigation by the authorities is underway or in contemplation;
  • the offence can now only be committed by a person in the 'regulated sector' (which includes accountants in practising firms) who received the information, which they improperly disclose, in the course of their work; and
  • there are a host of permitted disclosures which will no longer amount to tipping off.

The reality is that an accountant should not be at risk of committing a tipping off offence unless he does something unethical and stupid (like gossiping outside the office about confidential client matters) or is deliberately trying to assist a suspected wrongdoer.

As a 'rule of thumb' I advise accountancy firms NOT to disclose to anyone outside the firm that a report has been made (either to the firm's MLRO or to SOCA). This advice is arguably over-cautious since, under the new law, this information can be passed on (for example to a successor firm of accountants) under certain circumstances. But I am cautious as I think there is no need to pass that information on, and you would not want to discover, having told your successor firm, that actually the particular circumstances of the case did not permit you to do that!

There is certainly no objection to passing on to a successor firm full information about the circumstances which have given rise to your suspicion - I just would not add "and I have reported it".

In addition the new law provides that a tipping off offence is NOT committed by:

  • disclosure of any information to a colleague in the same firm;
  • disclosure to the firm's supervisory authority;
  • any disclosure made for the purpose of the detection, investigation or prosecution of a criminal offence; or
  • disclosure to the firm's client if that disclosure is made for the purpose of dissuading the client from engaging in criminal conduct.

Finally, it has always been the case that a tipping off offence is not committed by a person who neither knows nor suspects that his disclosure is likely to prejudice an investigation by the authorities.

So my advice on tipping off would be - act sensibly and stop worrying!

(But don't overlook the risk of a s342 offence of prejudicing an investigation. I shall write a piece about that on here before too long.)

David Winch

Comments

Regulated sector?

jpwattam | | Permalink

David, where can we find a clear definition of 'regulated sector'?

davidwinch's picture

A definition, maybe

davidwinch | | Permalink

A clear definition of the 'regulated sector' ? Wow!

The 'regulated sector' is defined in the Money Laundering Regulations 2007 and Schedule 9 of the Proceeds of Crime Act 2002 (as amended).

You can find the current version of Schedule 9 at http://www.hm-treasury.gov.uk/d/proceedsofcrimeact211107.pdf

But there is some jargon in the definition, and some cross-referencing to other legislation!

The bit you are most likely to be interested in is:
"the provision to other persons of accountancy services by a firm or sole practitioner who by way of business provides such services to other persons".

David

An example of Tipping Off?

Mark R Outhwaite | | Permalink

Hi

In support of DW, a note from my blog in July 2009.

"One Saturday last year I was dropping the offspring off at school on what turned out to be a chilly bright English September morning. Having safely achieved the designated task I started back toward the horseless carriage when my flappy ear’s pick the following statement broadcast in clear across the rapidly emptying playground “What exactly made you report this suspicious transaction report (STR) to the authorities?” .......
So discussing your SAR activity in a public playground does appear, at least to me, something of a high risk activity. But it did get me too thinking about what it is people take away from their AML training? Is it always the message that we think it is? Or do people just go through the motions?"

The full article can be found at:
http://anabscenceofbalance.blogspot.com/2009/07/tipping-point.html

All the best

Mark

Thank you David

pauljohnston | | Permalink

Bavid what would ordinary accountants like myself do without you and Steve O'Neil and others clarifying what I consider to be a difficult subject. What I mean by difficult is breaking down the complexity of the legislation and how to apply it. Thank you again

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