Members of AccountingWEB.co.uk's Money laundering and crime discussion group provide expert analysis on the Prudential decision on whether legal professional privilege should apply for accountants.
In the wake of the Court of Appeal decision last week in the Prudential v HMRC case that legal professional privilege does not apply to accountants, AccountingWEB.co.uk member Clint Westwood posed two key questions for David Winch, the leader of our discussion group on Money laundering and crime:
- Whether there are any remaining circumstances under which an accountant can claim to have received information under "privileged circumstances"? and
- Whether this test is different as regards the accountant’s obligations to file a report to SOCA under the Money Laundering Regulations as contrasted with the accountant's defence to a request for information by HMRC.
In a nutshell, it’s “no change” on MLR, replied Winch. “We need to be careful not to confuse two completely different things which have similar names and, in some respects, operate in slightly similar ways. The first is common-law legal professional privilege and the second is the statutory exemption from the obligation to report to SOCA information which has been received in privileged circumstances.”
The Prudential case was about whether an accountant giving legal advice could be covered by the ancient common-law rule of “legal professional privilege” that information provided by a client to a lawyer in connection with obtaining legal advice or dealing with legal proceedings is “privileged” and therefore exempt from disclosure.
The only exemptions from the lawyer’s duty not to disclose are if the client waives the privilege or is abusing it for a criminal purpose.
As Winch succinctly summarised it, “The moral of the story being that it is safer to bare your soul to your lawyer than to your accountant.”
The exemption from reporting to SOCA is set out by statute law. It is an exemption of limited application (for example, it applies only to 'suspicious activity reports' to SOCA - in other words the reports made under Money Laundering Regulations 2007, s330 Proceeds of Crime Act 2002 and the parallel legislation relating to terrorist financing). The statute law sets out quite clearly that it applies to information received in 'privileged circumstances' (as defined in the statute) by lawyers and 'relevant professional advisers' (as defined - to include most qualified accountants).
The statutory exemption says that where information is received by a lawyer or 'relevant professional adviser' in 'privileged circumstances' there is no obligation to report it to SOCA. The Prudential case covers a separate point of law and has no impact on this statutory exemption.
Visit the Money laundering and crime discussion group to see the full version of this debate.