A former chartered accountant who “stubbornly refused” to upkeep Money Laundering Regulation (MLR) due diligence has received a £3,094 penalty.
A recent first tier tribunal [TC/2015/04408] heard how Neil Bevan, owner of N Bevan Ltd (NBL), was unable to provide HMRC with a record of the checks he'd undertaken on his clients during a routine compliance visit, and afterwards, ignored HMRC warnings to enforce a more robust system
Bevan, who has been practising for 40 years, is not a member of a professional body so he registered with HMRC and followed their regulations. But when his MLR due dilligence was scrutinised, he argued that their CCAB guidance was not the law.
During the meeting, Bevan clutched at a number of excuses including a broken printer as the reason why he couldn’t provide HMRC officer Andrew Glew with a list of the firm’s clients.
Bevan told Glew that he relied on HMRC’s online tax system as, effectively, an electronic record of information on his clients. So, he didn’t keep any records, since paperwork was returned to the client. In fact, Bevan claimed that all of his clients’ relevant information was “in his head” as he had known them for many years.
Yearly meetings were enough
Due to these longstanding relationships, he believed his yearly client meetings and checking that their online information through the tax agent self assessment system remained unchanged was enough to fulfil the identity verification and risk assessment required.
But when pressed by Glew, he was unable to provide evidence of identity of the firm’s three main clients other than outdated correspondence from 2004.
But in his oral evidence, Bevan asserted that information demonstrating he had established his clients’ identities was in his house. At this point, the judge pointed out that they “prefer officer Glew’s evidence”.
Later, Bevan argued in a letter to the Revenue that he did assess the risk of businesses being used by criminals but didn’t expand on how - but he did include the client’s records he was unable to print in his meeting.
HMRC followed this with a warning letter, giving Bevan the opportunity to correct the weaknesses they identified. But when HMRC returned Bevan informed the officers that he had not changed any of his customer due diligence processes, believing those he already had in place were sufficient enough.
The judge said that although Bevan was correct to say CCAB guidance was not the law he still “stubbornly refused” to provide an alternative method of complying with the regulations “without justification”.
Could have been avoided
In conclusion, the judged said: “This is a sorry outcome for NBL and one that could easily have been avoided had it not, for no good reason, ignored HMRC’s warnings about the inadequacy of its policies and procedures and what it might do to address them.
“NBL would be well advised now to read the CCAB guidance and develop policies and procedures the take account of that guidance.”
Because the actual threat of money laundering was limited, the judge mitigated HMRC’s originally enforced penalty of £3,750 by 20%, resulting in the “appropriate penalty” to be £3,094.