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Are we obliged to file a Money Laundering Report?

Our client wishes to let his company go without paying any liabilities

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Hi All,

Our client who is a limited company has finished his first year of trading, the company year-end accounts are yet to be filed:

  • The company turnover is £90,000 approx and the income was not taxed at source.
  • The company had registered for VAT but no returns have been submitted (3 VAT Returns are overdue).
  • The director has drawn all the monies out of the company account leaving the Director’s account overdrawn.
  • The client will still be largely overdrawn after paying Salary and dividends from the company. The amount of dividend will also lead to a Self Assessment liability which he has no intention of paying.
  • He has also been paying subcontractors without any CIS payroll set up. He has made no CIS deductions before paying his subcontractors.

The director has now approached us advising that he has ceased to trade and is unable to pay any of his liabilities (VAT, CIS tax, Corporation Tax, Section 455). He would like to just allow the company to be struck off. To date he has not attempted to contact any statutory bodies including Official Receivers.

We believe the client has intentionally allowed the company to be run down. As the Client’s accountants what are our obligations? Should we file a Money Laundering Report and report him to SOCA?

Would appreciate your input

Replies (21)

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By Duggimon
02nd Aug 2017 16:32

Are you already engaged as this numpty's accountant? Or has he just approached you to assist now in getting him off the radar?

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By RaccW
02nd Aug 2017 16:51

We are his accountants. He has only just advised us that he wishes to let the company go however.

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By johngroganjga
02nd Aug 2017 17:21

He hasn't got away with anything yet, so there is nothing for you to report. What do you think are his chances of not having to put money back into the company to enable it to meet its obligations?

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By Malcolm McFarlin
02nd Aug 2017 17:23

Yes, I think you need to protect yourself. It is possible that HMRC may object to the company being struck off which will enable them to issue penalties against the company which are recoverable against the Directors personally.

It's not so easy for Directors to walk away from a HMRC debt these days and he cannot disperse any personal assets.

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David Winch
By David Winch
02nd Aug 2017 17:58

The issue is whether any 'person' (which includes a company) has obtained any benefit (in the form of an asset of any description or the side-stepping of a liability) as a consequence of a crime. Most (but not all) relevant crimes involve dishonesty.
The plan to let the company be dissolved has not yet been put into effect - so for this purpose we can disregard that (because no benefit has yet been obtained from it).
Where there may currently be a reporting issue is in the failure to submit the VAT returns. If that failure has been dishonest it could amount to a crime (such as 'cheat') and, if the correct amount of VAT has not been paid to HMRC, a benefit could have arisen (for the company) from that crime.
Alternatively, it could be argued that in taking all the money out of the company for himself whilst leaving no money to pay inevitable tax liabilities (and perhaps other creditors?) the director has acted dishonestly and defrauded creditors of the company (including HMRC). That could be a crime under s993 Companies Act 2006 from which the director has obtained a benefit.
In either case, a Suspicious Activity Report should be submitted to the National Crime Agency (which has replaced SOCA).
Of course, quite apart from that, you will want to ensure that you have given appropriate advice to the client (preferably in writing) to cover yourself.
David

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RLI
By lionofludesch
02nd Aug 2017 18:15

File a report and don't feel guilty about it.

The bloke's a crook. He deserves what he gets.

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Replying to lionofludesch:
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By hiu612
04th Aug 2017 10:05

I agree. Don't worry too much about what you're obliged to do, once you search your conscience you'll feel quite happy flagging his intended tax evasion.

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By Cheshire
03rd Aug 2017 09:06

I like Lion's no nonsense approach but its also great to hear David's full take on such scenarios

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By justsotax
03rd Aug 2017 10:13

and can you tell us again why you are acting for this client...indeed what are you actually doing for him.

You appear to have lots of info about what he has done or is not intending to do...at what point did you consider that you may not get paid ?

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By bernard michael
03rd Aug 2017 15:24

What are HMRC doing about the unfiled VAT returns?

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By maurice
04th Aug 2017 10:33

What have you got to lose by reporting if you do report?

What have you got to lose if you dont report? (Everything)

Time to do the right thing.

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By RaccW
04th Aug 2017 10:49

Thanks for all the replies.

We have now advised the client in writing. There appears to be a fair amount of work involved in filing the SAR with the NCA which you can appreciate will not be chargeable to the client.
Could we not simply resign as his accountants?

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Replying to RaccW:
RLI
By lionofludesch
04th Aug 2017 11:00

Quote:

Could we not simply resign as his accountants?

Resign ? He doesn't seem to need one.

The NCA is just another Government job you have to do for nowt. Saying you're not doing it because you don't get paid is, frankly, asking for trouble.

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Replying to RaccW:
By SteLacca
04th Aug 2017 11:41

Quote:

We have now advised the client in writing.


Advised them what, exactly? Hopefully not a tip off!
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By bernard michael
04th Aug 2017 10:55

I don't think resigning get's you out of filing a report as the reportable event has already happened

David am I right or talking crap??

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Replying to bernard michael:
David Winch
By David Winch
04th Aug 2017 12:44

Bernard, you get a gold star!
Resigning or continuing to act makes no difference to the obligation to file a SAR.
The obligation is to report any suspicion of money laundering which you have as a result of information which has come to you in the course of your work in the 'regulated sector'. It is not limited to reporting suspicions OF A CLIENT. So, for example, where a client's employee has stolen money from the client that is reportable even though the client is not the person whom you suspect.
David

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By Mature Student
04th Aug 2017 11:05

Bernard, I'm with you. As the accountants you have legal and professional obligations to report such activity.

Although it's a bit concerning that your post doesn't ask if there are grounds for reporting, but asks what your obligations as the accountant are. Surely that was covered in your accountancy exams? Or if QBE, you have surely come across this in the past?

Also, when you say you have advised the client, you are referring to telling them of their legal obligation to comply with relevant legislation (Companies Act, tax, etc)? And not that you intend to report them if they don't take the appropriate action?

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By Ruddles
04th Aug 2017 12:59

A short letter to HMRC:

"We have ceased to act for the taxpayer - we'll let you work out why".

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By ShayaG
04th Aug 2017 13:22

Seems this director is trading while insolvent. That's a criminal act, so ML report seems needed.

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By gwilkinson
04th Aug 2017 14:45

Just out of interest, what was the agreed scope of your work when you engaged? Year end accounts only?

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By justsotax
04th Aug 2017 14:12

yes that question has been avoided....you are the agent and are aware of all of what hasn't been done....presumably you were engaged to do something - if so what haven't you done!?

It just seems really odd that someone who clearly wanted to avoid doing anything would engage an accountant....what details are we not being told....

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