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Anti-money Laundering Reports : Latest Updates

1st Jul 2015
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Richard Simms looks at Reporting to the NCA and gives some examples.

In the last edition of Accounting Practice (March 2015) we highlighted that the total number of reports made by accountants to the National Crime Agency (NCA) last year was just 4,930, down 9% from the previous year. This contrasts with the total number of reports made by all sectors, which rose by 10% to 354,186. We also noted the NCA had concluded there was no clear reason why the number of reports from accountants continued to fall. Consequently, in this issue, we revisit what is actually reportable – it seems that not everything that should be reported actually is.

The Proceeds of Crime Act 2002 states that someone is engaged in money laundering if they:

• conceal, disguise, convert, transfer or remove (from the United Kingdom) criminal property.

• enter into or become concerned in an arrangement which they know or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.

• acquire, use or have procession of criminal property.

They must also know or suspect that the property in question constitutes or represents a benefit from criminal conduct. Generally, ‘innocent mistakes’ do not represent a crime and therefore are not money laundering.

In terms of reporting, all individuals working for the firm have a personal legal responsibility to report any knowledge or suspicion of money laundering as soon as practical.

An employees’ duty ends when the report has been made to the money laundering reporting officer (MLRO) and a receipt has been received. The MLRO must assess the information received and if necessary make a report to NCA.

It is, of course, possible that you will identify a major crime constituting hundreds of thousands of pounds of criminal proceeds. However, you should remember that many more ‘minor’ offences also constitute money laundering and must be reported. Below we highlight three examples of crime you may come across.

Mortgage fraud

It is quite common for banks and other lenders to require accountants to ‘certify’ someone’s income when they apply for a mortgage. Clearly care should always be taken that sufficient evidence is obtained regarding the client’s financial position before any such assurance is provided. One simple example of mortgage fraud would be your client providing false information that overstates their income. You incorrectly certify this and a fraud will have occurred as the bank will have lent the client more money than the client was legitimately entitled to.

Where the individual concerned is an existing client of your firm, the risk is reduced as you may have a good understanding of their actual level of income and be able to identify unexpected discrepancies. However, risk still exists. If the individual is a new client, great care is required.

Mortgage fraud may also occur on a much more significant scale. Criminal gangs are known to inappropriately inflate property prices to gain mortgages larger than the actual value of the property. Alternatively, mortgages may be obtained against properties that the fraudster does not own, or perhaps does not even exist. Generally, such fraudsters rely on a corrupt associate (perhaps solicitor, surveyor or accountant) to assist them. However, you may be an innocent adviser dealing with other professionals who are associated with the criminal and thus be in a position to make a report. To highlight the scale of the problem, Scotland Yard recently disclosed that £180m of British property has been investigated in the past 10 years as the likely proceeds of corruption.

Payment of National Minimum Wage

Employers not paying staff the appropriate National Minimum Wage are committing a criminal offence. The proceeds of this crime are the wages that should be, but are not, paid to staff.

The government has recently made is easier for employees to complain about under-payment and has taken to publishing the names of employers who have underpaid staff. The most recent list (available at bit.ly/1DN8ccM) contains more than 70 employers, mostly small local businesses, including care providers, hotels, a Papa Johns pizza franchise, and even a church. If you identify such non-compliance you must make a report.

Retention of overpayments

It is quite common for credit balances to arise on a client’s trade debtor ledger and this often represents an overpayment from their customer. It may be the customer paid the wrong amount, processed an invoice twice or paid an amount that was subsequently cleared by a credit note.

In the case of credit balances arising where there is nothing to suggest dishonest behaviour no report will be required. For example, where the client attempted to return the overpayments to its customers (or at least has made the position clear by sending out monthly statements showing the true position), or if the overpayments were mistakenly overlooked, it would seem likely that your client is not acting dishonestly.

However, if there is evidence that the client takes action to hide the overpayment, perhaps by transferring these to a different account, suppressing normal monthly statements or transferring such amounts immediately to profit then consideration should be given as to whether theft of these funds has occurred and if so a report is necessary.

Amendment to the Money Laundering Regulations 2007

Finally, the government published the Money Laundering Amendment Regulations 2015 (SI 2015/11) earlier this year. These modify the 2007 Regulations. However, the only practical impact is that CIPFA has asked not to be a supervisory body – hence any firm regulated by CIPFA will now fall into the scope of HMRC and should now register with them.

• Richard Simms is Managing Director of FA Simms and the AMLCC

Richard Simms will be presenting at the 2015 ICPA Conference on 24 September in Daventry. For information and to book your place call us on 0800 074 2896 or email [email protected]

This article is taken from “Accounting Practice” the ICPA quarterly magazine. Dedicated to supporting and promoting the needs of the general practitioner. You can find us at www.icpa.org.uk  or email [email protected]  or by phone on 0800-074-2896

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