Practitioner's Diary: The engagement letter challenge

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They may be essential, but they're still not much fun to produce, says our West Country general practitioner in his thoughts on letters of engagement.

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29 February - No more new

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Comments

planet rock

nickpaulley | | Permalink

I have to say that the comments on this article have drifted from the main issue - saving planet rock. Mornings will not be the same unless they are shared with Alice Cooper.

I agree that a consortium of accountants should buy it - singlehandedly it will improve our social standing in the world. However, sadly I suspect the economics are iffy - the owners put money in and get rock music out.

davidwinch's picture

ML Regs and engagement letter updates

davidwinch | | Permalink

The MLR 2007 now require that customer due diligence (which has sort of replaced KYC and includes confirming the identity of the client and any beneficial owners - i.e. those with a more than 25% interest in the client) is applied to existing clients.

If you have not yet confirmed the ID of an existing client (or if his / her address, name. etc have changed since you undertook your last confirmation) then when you update your engagement letter would be a good time to obtain / update the client ID documentation.

It may also be a good time to tell the client about all your wonderful range of added value services - but I claim no expertise in marketing!

David
www.MLROsupport.co.uk

carnmores's picture

agree re P35

carnmores | | Permalink

they send you out a penalty for 4 mnths at a time without previously letting you know that they havent got their return, so presumably this is a cash rasing exercise.

Daftest fraud

neileg | | Permalink

I was involved in a case where an employee used Tippex to blank out the payee name on cheques and then wrote in her own name and banked them! The bank seemed to think it had acted reasonably in accepting these cheques...

davidwinch's picture

Re 15 February diary

davidwinch | | Permalink

The available evidence suggests that only a minority of frauds detected are brought to light by audit (whether internal or external). Often fraud is discovered by chance.

Sometimes fraud comes to light only because it has grown so large that it has a significant impact upon the victim which cannot go un-noticed.

The practitioner does not say what actually brought either of the frauds he mentions to light. It might be interesting to know!

I can think of examples where fraud has come to light as a result of: (i) a tax enquiry resulting in an examination of the (fraudulent) director's personal bank statements (which showed deposits of cheques which should have gone to the company); (ii) the bank 'bouncing' a company's VAT Return cheque when there was "always plenty of money in the account" (the MD rang the bank to complain only to find that the finance director had withdrawn all the money from the account months earlier); (iii) in a large company the expenditure under a particular head being very much in excess of the budget (due, it turned out, to the submission and payment of bogus 'invoices from suppliers' generated by the budget-holder with the aid of a photocopier and a bottle of correcting fluid).

As it happens only one of these three cases was reported to the police - and that did result in the fraudster going to prison.

David

davidwinch's picture

Response to David Honneyman

davidwinch | | Permalink

David

I don't think any statistics are reported as to how many SARs are looked at.

The 2007 Annual Review of the SARs Regime (published last November) commented that "use of SARs by end users [i.e. the police, tax authorities, etc.] remains patchy with significant areas of weakness".

It is also the case that "SARs usage is not as regular and widespread as it should be" and "end users do not yet have the management information systems in place to enable them to accurately gather information on the use made of SARs".

However the issue I was referring to in the case mentioned by AWEB's Practitioner was not that his SAR would not result in an investigation, but that the client's report to the police concerning the theft by his employee might not result in a police investigation.

David
www.MLROsupport.co.uk

Money Laundering statistics

David160 | | Permalink

You say that the police may not take up this case. I began to wonder how many SAR's are actually looked at.

Approximately, how many money laundering reports are actually investigated by the appropriate authorities? In absolute numbers and by percentage of reports made? By accountants and other reporting organisations?

If you do not have the information to hand could you point me in the right direction on the internet?

I suspect that the numbers will be disappointing low.

Horid clients

refs8 | | Permalink

I have gone one better and even torn the cheque in front of a client and sacked him - felt great !!

davidwinch's picture

Theft by client's employee

davidwinch | | Permalink

Immediately report the theft to your MLRO (and he must to report it to SOCA) under s 330 PoCA 2002 and MLR 2007.

The next point is what has the employee done with the money? Does he have any assets which would be recoverable if the employer launches a civil claim against him? Ought the employer to be attempting to get an interim order from the High Court to stop him dissipating any assets he has? (There may be a need for urgent action here! This needs a solicitor, preferably one with experience of obtaining such orders.)

Has the matter been reported to the police? They may or may not take action depending upon the amounts involved and the strength of the evidence. If you can persuade the police to take action that may eventually (i.e. in a year or two) help in getting some money back. But don't expect the police to be keen to act (such cases are, from their point of view, fraught with difficulty, expensive to pursue and generally low priority). Get in touch with a police officer who deals with financial fraud (not a beat bobby) and offer him every assistance - don't expect him to do all the work! (He will have a dozen other cases already piled up on his floor and he needs another like a hole in the head. Try to persuade him that he should take up this case because it involves a significant sum and will be relatively straightforward because the evidence will be available in terms of paid cheques from the employer and their deposit into the employee's bank account.)

Can you be sure this employee alone is responsible?

Do you need to do any work to check whether anything else is going wrong?

Be careful about interviewing the employee. Unless this is done by the police (or someone with a very good understanding of the appropriate procedures) you will make prosecution of the employee more difficult! In other words - leave the employee alone - let the police interview him on tape and under caution with his solicitor present.

Presumably you will be instructed to assist your client to identify bogus 'transactions' and quantify the loss. Think carefully about how you handle the client in this connection (bearing in mind he may be minded to blame anyone but himself for the loss and you look like a handy scapegoat!).

Does your client have insurance against theft by an employee?

Can you advise the client about tax relief in relation to the monies stolen?

Endeavour to get the client to see you as a useful ally at a difficult time - rather than as someone to blame. Remember all sorts of emotional stresses will be happening now in the client's workplace. People may be feeling betrayed, under suspicion themselves, guilty / stupid themselves for failing to spot what was going on, etc. You are walking on eggshells when dealing with them!

Finally, do you need to have a quiet word with your PI insurers?

David
www.AccountingEvidence.com

davidwinch's picture

And another thing . . .

davidwinch | | Permalink

When trying to persuade the police to act you should also point out that the employee was in a position of trust and his betrayal of that trust will be an aggravating factor.

Another factor may be the relative impact on your client's business - a £20,000 loss to a small business is more likely to merit investigation than a £20,000 loss to a big company.

Please don't take the line of, "I pay my council tax so you have to act where there has been a crime" (because the police do not, and cannot, investigate every crime reported to them - which is why they set priorities and fraud is not a priority when compared to violent crime, drug crime, domestic burglary, disorder on the streets, etc., etc.).

The employee may be guilty of theft (s 1 Theft Act 1968), false accounting (s 17 TA 68), obtaining a money transfer by deception (s 15A TA 1968), and /or fraud (ss 1 & 4 Fraud Act 2006, if committed after 15 January 2007).

The police will sometimes investigate employee fraud / theft cases involving only a few thousand pounds, however the larger the amount (other things being equal) the more likely they are to act.

Remember it is no part of their duty to investigate an offence in order to assist your client's claim against the alleged offender!

Remember also that if the police do investigate then what they will do will be a POLICE investigation. Neither you nor the client will be in a position to influence what they decide to do (or not to do) or when and how they do it (except by sweetly offering to assist them in various ways and so gently nudging them in your preferred direction!).

You say "a pretty significant sum", do you mean over £100,000?

If you cannot get the police to act, suggest the client writes to the Chief Constable of the local force (i.e. normally the force for the County in which the crime was committed) at Force HQ briefly outlining the crime and requesting a police investigation of it. Include brief mention of the factors which ought to make it higher than normal priority to the police. That will get the matter officially logged and the police will either act or have to formally explain why they are not.

Only if that fails consider writing to your MP.

I presume the employee is not himself a member or student of a professional body. If he is, you (or the client) should also report the matter to that body.

David
www.AccountingEvidence.com

P.S. As always, do get the client's consent before disclosing any information to third parties (including the police and the client's solicitors). The only exception to this is for reports to SOCA under PoCA 2002 and MLR 2007.

Sacking a client

Martin Tingle | | Permalink

...so if you did work for me and I complain about the fee you then give me a credit note for the full charge? So I get the work for free? I am amazed. Why not sack the client but insist the work is paid for?

listerramjet's picture

re the planet rock thing

listerramjet | | Permalink

perhaps you could come up with a consortium of general practioners who could come up with a workable business model for a digital music station. I wonder how rock and roll interspersed with adverts for accountants and sporadic random accounting and tax tips would work? Who is the chris evans of the accounting world who could engage the interest of the general public? Perhaos you could work out a subscription model for suitable feeds into office buildings.

On the other hand I gathered that not many are listening to digital radio - preferring instead podcasts, sky radio, and good old fashioned radio stations.