Benefit fraud

Benefit fraud

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I am a member of ACCA.Recently I have joined a charity group that offers financial advice for people in need.

During a visit to a lady I discovered a major benefit fraud. She owns a house and rents this out. She is also claiming housing benefit

on her social housing property. She does not declare the rent to either HMRC or the benefit agency.

She is also involved with others in a tax credit fraud.

The rules of the charity are that we have to offer client complete confidentiality.

But were does this leave me as an accountant.?

Do I make a money laundering report ?

Any advice gratefully received.

Replies (50)

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David Winch
By David Winch
05th Aug 2014 19:00

Interesting

A couple of questions arise to my mind (and I am assuming that you are in England or Wales).

Firstly were you within the 'regulated sector' when you obtained this information?  The relevant definition is: " A business is in the regulated sector to the extent that it consists of . . . the provision to other persons of accountancy services by a firm or sole practitioner who by way of business provides such services to other persons".

Does the charity by way of business provide accountancy services?  (There is broadly similar wording in relation to tax, audit & insolvency work.)

If you were not in the 'regulated sector' at the time and are not proposing yourself to engage in 'money laundering' then you have no obligation to report this.

By the way I consider that a person can be in & out & back in the regulated sector numerous times in the course of a day.  You are not permanently in the regulated sector because you hold a qualification.

If you consider that you were within the 'regulated sector' when you obtained the information, did you obtain it from a person seeking legal advice (i.e. concerning their rights, duties, responsibilities & possibly punishments under law) from you (as distinct from asking you to fill in a form or calculate some figures)?

If that is the case the information may be subject to PoCA privilege & therefore not reportable.

 

If in doubt consult the charity management in the first instance.

David

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Replying to Tax Dragon:
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By User deleted
08th Aug 2014 12:37

Is this actually

tonyh wrote:

The rules of the charity are that we have to offer client complete confidentiality.

 

Is this actually any different from a normal Accountant-Client engagement?

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By johngroganjga
05th Aug 2014 19:06

As you are presumably offering your services as an accountant, albeit voluntarily and unpaid, then your knowledge comes to you in the course of your exercise of your profession. So you have a reporting obligation. Confidentiality is not an issue. All our work as accountants is covered by confidentiality of one kind or another. That is how it appears to me, but others may have a different take.

Are you by the way a practising ACCA or an employed one? That might make a difference.

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By duncanedwards
05th Aug 2014 19:23

I'd happily report
anonymously if necessary. Fraud is fraud.

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By johngroganjga
05th Aug 2014 20:11

I agree. Regardless of the technicalities these people need to be stopped, and punished for their crimes. If she has been foolish enough to confess her wrongdoing to a stranger she deserves everything that is coming her way.

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Replying to jcace:
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By nickja
08th Aug 2014 15:27

But if.....
...she'd kept quite she doesn't deserve it? Not what I believe you meant but that's how it comes across.

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By tonyh
05th Aug 2014 21:34

Thanks for advice

Thank you all for your help.I am semi retired and doing voluntary work . I was not acting as an accountant but a "filler in of forms".Needless to say I did not fill in any forms and advised her that she must cease all claims and declare the rental income.

The charity does not provide accountancy services the people it deals with are all benefit claimants of one sort or another.

So based on your advice it would appear that I do not have any reporting requirements under MLA.

Thank you.Great help.

 

 

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Stepurhan
By stepurhan
06th Aug 2014 09:04

Report to charity

Whilst you may not be obligated to make an ML report, you should probably report back to the charity. If their intention is to provide assistance to those in financial need, then it is presumably of interest to them that someone using their services is not actually in such need. If nothing else, their reaction to such news may make it worth considering your future volunteering with them.

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By User deleted
06th Aug 2014 09:36

I'd report it on moral grounds.

And they wonder why the country is in £1T of debt

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By User deleted
06th Aug 2014 10:35

Try this

https://www.gov.uk/report-benefit-fraud

Report the thieving little sods.

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By User deleted
06th Aug 2014 10:43

I must admit

I see these things regularly around where I live and for a split half-second I say to myself "I wish I had the audacity to do that".

 

I then swiftly realise that I am not a scoundrel and my dreams of 'hitting it big' come crashing down around me.

 

I then go home and report them - rubbing my hands together with a 'Bond villain-esque' grin on my face

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None
By FCExtraordinaire
06th Aug 2014 11:39

Morally, ethically , etc

I would say that it is morally, ethically and if you have a PC,  your duty to report such a fraud.

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Stepurhan
By stepurhan
06th Aug 2014 11:48

Legal conundrum

Whilst I agree in principle to a report being made, I suspect the legal position is a tricky one. The OP is acting as agent of a charity, and the charity has strict confidentiality policies. Potentially a breach of that confidentiality is leaving the charity open if the services they offer amount to legal privilege (as mentioned by David in his first response). Remember that this is not someone acting as a private individual coming across the information in that capacity.

This is why I would suggest reporting back to the charity first, as they are the ones who have promised confidentiality. If they are happy breaking that confidentiality in the circumstances, then they accept the consequences and all is well. If not, and the reasoning is anything other than concerns about legal action, I would resign the position.

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By User deleted
06th Aug 2014 12:10

I had compliance check from the HMRC Money Laundering as im an independent HMRC agent and not part of any association. So they check occasionally accountants regard to MLR. 

 

I think even though you have the confidentiality agreement legally you have to report them.

I have a full manual from HMRC MLR compliance team they sent me to help my work.

Also when you report the person I don't think you will get involved as they wont disclose her who actually made the report.

I would report it as if you ever get into trouble because of this that I not good for you.

im happy to send you the what I got from HMRC maybe it helps

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Replying to stepurhan:
Stepurhan
By stepurhan
06th Aug 2014 12:58

Some clarity

kazamoto wrote:
I had compliance check from the HMRC Money Laundering as im an independent HMRC agent and not part of any association. So they check occasionally accountants regard to MLR. 

I think even though you have the confidentiality agreement legally you have to report them.

I have a full manual from HMRC MLR compliance team they sent me to help my work.

Also when you report the person I don't think you will get involved as they wont disclose her who actually made the report.

I would report it as if you ever get into trouble because of this that I not good for you.

im happy to send you the what I got from HMRC maybe it helps

HMRC may have some powers if you are registered for Money Laundering with them. Those powers are only to ensure you are complying with your Money Laundering responsibilities in the same way as any other supervisory body. ML reports should still be made to SOCA, not HMRC. If HMRC are telling you otherwise, then I suspect they are getting a little carried away. They are correct in saying that a person who fails to make a report when obligated to do so can get in trouble. Again, that would not be with HMRC. I would be surprised if HMRC could do any more than remove someone from their ML supervision, though that would prevent an agent operating if they did not have an alternative available.

As David said in his opening response, the fact that the OP is working voluntarily may mean it is outside the scope of work in the regulated sector. Accordingly, as already discussed, there is likely to be no obligation to report under ML Regs. Even if it is considered work within the regulated sector, there is still the legal privilege position. Ordinary client confidentiality does not apply to ML reports, but this situation may go beyond that to a point where confidentiality does still apply. I would never advise someone to simply ignore a confidentiality agreement with a third party without legal advice.

Tax evasion is actually a criminal offence, it is just often dealt with as a civil matter. Tax avoidance is not necessarily an offence at all (unless it includes an illegal element) and it is important not to confuse the two. Enough of that happens in the press and parliament.

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None
By FCExtraordinaire
06th Aug 2014 12:20

Confidentiality

I always believed that the confidentiality factor was over-ridden when you 'know'  a fraud is being committed.   Not suspected,  thought there might,  etc   be but 'know'...    In this instance you have been outrightly told there is..

Maybe I am wrong on this but I would be inclined to at least report it to the charity. 

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By User deleted
06th Aug 2014 12:28


When I got the compliance check believe me, that overrides everything.

If I don't report something suspicious re my clients you an be taken to court.

I think the best thing I to call HMRC Money laundering and as them

or ACCA an advice?, or asking the charity?

I would cover my [***] to max if I can.

 

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By User deleted
06th Aug 2014 12:33

Forgive me for my ignorance, but do we actually have a statutory obligation to report to HMRC? Is it not SOCA?

Is this just another case of HMRC mistakenly working on the basis that they create and pass Acts of Law

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By User deleted
06th Aug 2014 12:37

HMRC tax avoidance, benefit fraud

both are HMRC, you have to report to SOCA in case of crime

tax avoidance is not a crime

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Replying to The Innkeeper:
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By User deleted
06th Aug 2014 12:41

Ok

kazamoto wrote:

HMRC tax avoidance, benefit fraud

both are HMRC, you have to report to SOCA in case of crime

tax avoidance is not a crime

 

So benefit fraud is reportable to HMRC because it's not a crime

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Replying to Glennzy:
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By snigglesnaggle
08th Aug 2014 15:23

Tax avoidance is not a crime

Tax evasion IS a crime

This is not avoidance, it is evasion.

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By Roland195
06th Aug 2014 12:45

Never volunteer for anything...

I sympathise with your position in your attempts to volunteer your time have landed you with a potential problem. Such issues are why voluntary organisations are facing a shortage.

I would have to echo Stepurphan's  advice here to report this matter to the management committee first. Much depends on the objectives of the charity in that this person may have thought their disclosures were under privileged circumstances and what exactly your position with the charity is.  

 

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David Winch
By David Winch
06th Aug 2014 14:11

Nit picking, I know

For the record, SOCA has ceased to exist.  Reports should now be made to the NCA.

Benefit fraud & tax evasion (as distinct from avoidance) are crimes.  Strictly speaking such crimes are not reportable to anybody.  But these crimes will lead on to money laundering offences.  

A person operating within the 'regulated sector' is under a statutory obligation to report where, on the basis of information which has come to him in the course of his activity within the 'regulated sector', he knows or suspects, or has reasonable grounds to suspect, that a person (not necessarily a client) is engaged in money laundering (unless one of the statutory exemptions applies).  The report should be made to the NCA.

I hope that is clear.

David

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By User deleted
06th Aug 2014 14:21

Thanks David

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By AWebbie
08th Aug 2014 11:20

BENEFIT FRAUD

If you are an ACCA member, always ask the ACCA Technical Helpline.  They are very good on what is reportable and what isn't

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By colinsimo
08th Aug 2014 11:40

Fraud

In simple terms the lady in question is committing benefit fraud and claiming money for which she is clearly not entitled to. Benefits are there for people who actually need the money, it is as simple as that.

 

Ask yourself if one day you need to claim benefits how would you feel if someone was making a fraudulent benefit claim.

I feel that as a crime is being committed and someone is cheating the system they should be reported.... Its as black and white as that

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Replying to accountright:
Stepurhan
By stepurhan
08th Aug 2014 11:54

Not black and white

colinsimo wrote:
I feel that as a crime is being committed and someone is cheating the system they should be reported.... Its as black and white as that
But we have not established that whether the confidentiality agreement by the charity is legally binding. It is easy to act morally superior and say to someone else "You should just report this. No exceptions". They are the ones that will suffer the consequences if doing that meant they breached a legally binding confidentiality agreement.
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By David Gordon FCCA
08th Aug 2014 11:48

be careful

 

 Fact: Even though you offer your services for free, you may be liable.

 An ACA friend/of mine who offered some advice free to an elderly lady, no fraud involved, was hauled over the coals by the ICAEW.

 Your PI provider must be advised of the work you are doing.

 Second, there has been case law which suggests extreme caution.

 This is it has been deemed that accountants working in or offering services for charities (Paid or unpaid) are working for a concept called the "Public good". I might put it this way:

Your ultimate responsibility is to "Mr Public Good", not to the trustees or beneficiaries. To the extent that it has been ruled that an accountant finding something wrong within a charity is required to report it either to the Charity Commission, or to Law officers.

My understanding of money laundering rules is, You may not advise the alleged miscreant that you are making a report.

Practically, I would advise you make a written report to your immediate superiors, the trustees, and also to the charity's accountants, and let them deal with it. Both should have designated money laundering officers.

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By pat27
08th Aug 2014 12:22

I think you possibly do volunteer work for the same charity as me. I would certainly report it to the charity and seek their guidance as they have protocol to deal with this.

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By Denman
08th Aug 2014 12:36

Confidentiality

Something needs to be done about such confidentiality clauses. If someone tells you they are breaking the law and its obvious then you should be left in no doubt that it needs reporting and that in that case its not worth the paper is written on. 

If I told you in such a confidential environment that I'd murdered someone would you just let it lie? I hope not!

 

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By JMillgate
08th Aug 2014 12:46

Who is responsible for investigating benefit fraud

Just a quick response to the previous comments:

- All benefit fraud (regardless of the type of benefits involved) is a criminal offence.

- HMRC only deal with tax credits and those investigators are a very small team.

- Local Authorities cover Housing Benefits, and their fraud teams can and do deal with all associated benefits as part of their investigations and also generally jointly investigate with the DWP where other benefits are involved.

- Given that HMRC does not have blanket jurisdiction of all benefits then I would suggest any confidentialy agreement about tax issues does not prevent reporting potential benefits fraud.

- Agree that engaging with the charity on the issue would be a good idea, but does not necessarily prevent reporting if you then are satisfied that there is no legal prvilege (which is a narrow definition as to what is legally protected not the same as a confidentiality agreement).

- Also agree can be done via online and/or phone reproting both of which are confidential and can be anonymous. Virtually all local authorities will have these contact details on their websites. In addition they will usually be happy to discuss any concerns you may have before you provide any detals.

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By caffeineaddict
08th Aug 2014 14:44

Should she be a client of this charity?

Question the management on the reason for the confidentiality agreement.  Is it to keep information, which is potentially embarrassing, private? ie the fact that someone has actually relied on the charity could be considered as being embarrassing if it were known to their friends and associates.  Or is it to hide (potential) criminal behaviour?

It would seem that this lady is not only defrauding the benefits system but she is defrauding the charity too by claiming their aid when she shouldn't have to and/or probably wouldn't qualify for the charity's help.  Basically, she shouldn't be a client of the charity so this, to me, puts her outside the scope of any confidentiality agreement.

In your position I would tell the charity management that they must report it and let them know that if they don't then I'd have to see legal advice regarding my own position.  I'd also get written confirmation of what actions they plan to take and what actions they do actually take.

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By Chris08
08th Aug 2014 15:28

As said by others, speak to the charity.

I have a similar issue with work I do for a tax charity. In my case the charity has taken a great deal of time to consider the legal position of such situations, and I assume yours has too.

My understanding in brief is that if the charity is providing all its services free, it is not in business and therefore not caught by MRL (except for the gun running and drug smuggling provisions).

So employees and volunteers of the charity are not caught by the MRL - even if volunteers have their own practice.

However, any self employed person who is paid by the charity to provide a service for its clients is caught by MRL as they are in the business of providing services to the charity.

In our case,the charity has set measures in place to ensure self employed advisers are not in situations where MRL may be an issue, for example they do not deal with non disclosure cases.

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By JMillgate
08th Aug 2014 15:57

In relation to the comment on tax avoidance/evasion.

- Failure to declare income when claiming tax credits is benefit fraud, tax credits (despite their name) are a form of benefits not taxation, these are adminstared and regulated by specific tax credit legislation which covers the fraud offence (as does the Fraud Act).

- Failure to declare any income and assets to the local authority and the DWP when claiming housing benefits, or any other kind of benefits, is benefeit fraud.

- Failure to declare the income for tax assessment purposes is the only part of the issue covered by tax regs.

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By jiatbanus
08th Aug 2014 17:28

Benefits fraud.

Do you really have to ask?

Deal with it!!

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By tonyh
10th Aug 2014 14:48

thank you all for advice,

I had in fact reported it to the local senior member of the charity and it was he who told me that I could not report it to authorities.The reason for the confidentiality is to protect the clients and give them the confidence to use the charity.

We have told the claimant that we cannot offer her any help.I know she has moved to another mug.(charity)

Thanks for advice I am going to send a written report to the trustees of the charity.

I appreciate your help as they say it is "good to talk."

Wished I had stuck to golf.

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Replying to Vaughan Blake1:
David Winch
By David Winch
28th Aug 2014 13:23

The OP has already responded

tonyh wrote:

I had in fact reported it to the local senior member of the charity and it was he who told me that I could not report it to authorities.The reason for the confidentiality is to protect the clients and give them the confidence to use the charity.

We have told the claimant that we cannot offer her any help.I know she has moved to another mug.(charity)

Thanks for advice I am going to send a written report to the trustees of the charity.

I appreciate your help as they say it is "good to talk."

Wished I had stuck to golf.

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By David Gordon FCCA
11th Aug 2014 16:27

Charities in particular

 

 Your "Senior member of the charity" does not appear to be fully aware of the standards applied to charities by the charity commission.  I act for a number of small charities, I can tell you, crooks soon get to know where the easy pickings are. Benefit claim fraud is as much a problem for private charities as for HMG.

. A trustee of a charity is in a more onerous position than a director of a company. A director may avoid responsibility by proof that it was reasonable for him to delegate what was in question.  A trustee has no such get out. He/She is deemed to have full knowledge of the affairs of the charity, with consequent responsibility.

The ability to rely on a confidentiality clause is limited in law to only a few special cases. For example solicitors, doctors, and priests. Accountants in practice cannot rely on it.

As an aside, it is questionable given contemporary unsavoury goings-on published in the media, whether according to circumstances anyone may absolutely rely on confidentiality clauses.

Trustees of a charity, who stand as ordinary members of Joe Public, certainly cannot rely on it in law. 

Although most small charities work on the principle that their funds are "Unrestricted funds" it is certainly arguable that a donor might claim in these circumstances that a trustee is liable for misuse of the donation. Since we may safely assume that the donor did not intend his gift to be used to assist or reward wrongdoing. Especially if the charity is in receipt of government funding. The tax recovered from Gift Aid may well come under this heading.

Just as an employer will be prosecuted for knowingly aiding and abetting an employee who the employee knows is improperly claiming benefits. 

With my clients we have covered this in our agreement signed by "Clients".

 

 

 

 

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By User deleted
11th Aug 2014 17:22

Report and be damned

Just report them. In my books confidentiality shouldn't be in question when they're up to no good. That only applies when confessing your sins (and benefit fraud) in church. If you do wrong then you run the risk of getting caught, whether that's speeding and getting caught out by a speed camera that wasn't there yesterday or claiming benefits dishonestly and letting someone else find out. 

If you don't want to report them feel free to PM me with the details and I'll report instead. 

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By jiatbanus
12th Aug 2014 18:35

Benefits fraud.

The more that get away with these "thefts" the more will be encouraged to steal.

Shape up and shop them.

Then publicise it.  

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By ecmcelhi
28th Aug 2014 10:56

Benefits fraud

I find this unbelievable. We are debating whether confidentiality overrides any obligation to report a criminal offence. In your own words, you discovered "a major benefit fraud". Benefit fraud is ILLEGAL. You need to report this to whoever is paying the benefits, be it the local authority or the local Jobs & Benefit Office. They may well have a confidential telephone line for this very purpose. Is this not covered by the Social Security Administration (Fraud) Act 1997?

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Replying to Glennzy:
Stepurhan
By stepurhan
28th Aug 2014 11:15

Did you read the opening response

ecmcelhi wrote:
I find this unbelievable. We are debating whether confidentiality overrides any obligation to report a criminal offence.
If you had, you would know that legal privilege actually does override that obligation. Whether it applies in this case was a central part of the discussion.
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By jiatbanus
28th Aug 2014 11:07

Have you shaped up?

Three weeks have passed since you asked the opinion of this community.

I would be really interested to know if you have accepted the majority advice. And if you did - how you dealt with it and "what was the response of the agency you reported to"

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By David Gordon FCCA
28th Aug 2014 12:44

Stop this shilly shallying

 

 The subject has committed benefit fraud

 Additionally she has defrauded the charity

 In the nature of these things, based on my experience, she will go on unless she is stopped.

 Do not behave as I have known banks to behave. Often they do not take legal action against thieving employees because they are worried it will damage their reputations. So they quietly dispense with their services. I have had this on three occasions.

So it is with these charity fraudsters. Charities, particularly small charities, are most reluctant to take "Official" action

a) because it may cost them. (Money in legal fees, reputation)

b) Because mostly volunteer-trustees do not want the probable ensuing aggravation.

 You are in an unwanted situation, accountants are often the meat in this particular type of rancid sandwich.

 It is similar to visiting the dentist. Eventually you do have fix the toothache, or you may endure sleepless nights.

 

 

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By ShirleyM
28th Aug 2014 12:54

Criminal actions

They should be reported.

If people did what was right, rather than what is convenient, then maybe we wouldn't have crimes coming to light after years of being allowed to continue unchallenged, eg. abuse of children caused by people turning a blind eye, or not bothering to take action.

In other words, unless fraudsters are reported they will continue for year after year, until someone makes the effort to get them stopped.

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By Roland195
28th Aug 2014 14:35

Health Warnings

Anyone advising the OP or anyone in a similar position to report the action and damn the consequences should bear in mind that while reporting the fraud act may be the right thing to do, it will be no defence if the disclosure was made under privileged circumstances.

The professional sanctions alone could be dire not to mention the potential legal action from the client.

 

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By justsotax
28th Aug 2014 16:17

you couldn't make it up....

you have a suspicion that someone has been involved in ML but without evidence and the cry is report them....you have evidence that someone is actually involved in corrupt goings on and you cannot report them.  Makes a mockery of the whole ML 'system'....

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By ShirleyM
28th Aug 2014 16:24

Do you think legal privilege is ok?

I always feel sorry for lawyers who have to defend self-confessed criminals (even if it is only a confession under legal privilege). The job satisfaction (win or lose) must be non-existent, and if the criminal gets off it must be soul-destroying knowing the person is guilty and justice hasn't been done.

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David Winch
By David Winch
28th Aug 2014 19:13

A different world

Shirley

The criminal justice system operates on different principles from accountancy.

In the courts the advocates (typically barristers) are engaged in an adversarial operation in which they are required to act in the interests of their clients (but without breaking court 'rules').  Justice is intended to be the outcome from the battle of the opposing sides.

So it would defeat the system if one barrister were to, in effect, throw in the towel before the contest in the perception that to do so would be in the interest of justice.

The prosecution have to satisfy the jury - so that they are sure - that the defendant is guilty.  The defence have to frustrate the prosecution in their objective.

Neither advocate should be guided by his own preference for what the outcome 'ought' to be.

If the defendant tells his barrister that he is guilty but insists on pleading not guilty then the defence barrister's role will be to challenge the prosecution evidence with a view to leaving the jury insufficiently sure of the defendant's guilt.  If he succeeds in difficult circumstances that is a testament to his knowledge, skill & luck!

David

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By David Gordon FCCA
29th Aug 2014 14:26

Another outrageous example

 One word:

 Rotherham

 it does not matter what the "Legal" position is. Those officials involved probably had (at the time) seemingly excellent reasons for their actions, or lack thereof, but Sh*t is still Sh*t. .

 

 Accept you cannot win either way, because if the Benefits officers were to discover you knew and did 'owt, you would suffer. This is because as an ACCA you are expected to behave in a certain way.

 Report to your PI insurer, and then report the matter.

 you need to sleep at night.

 DG

 

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