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Customer overpaid possible money laundering?

Customer overpaid possible money laundering?

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During the preparation of the accounts for one of our limited company clients we have been advised that they received a considerable amount of money up front for delivery of a particular project to a local PCT. The project never materialised and our client was advised verbally that repayment of the money was not required and any future contracts should be delivered at a slightly cheaper rate than would usually be charged in recognisition of this fact. This issue is that there have been several changes since then and PCT's no longer exist and in effect the original project is unlikely ever to be required. The money will be included in the accounts, our issue is do we have some money laundering problem?

Thanks

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David Winch
By David Winch
13th Jun 2014 17:58

Dishonesty?

At risk of stating the obvious, money laundering can only occur if there has first been some (other) crime from which a benefit has been obtained.

Broadly speaking, a crime from which a benefit has been obtained will be a crime (such as fraud, theft or tax evasion) which necessarily involves dishonesty on the part of the offender.

In this case you do not seem to suspect there has been any dishonesty.

If you do not suspect dishonesty, you do not suspect a crime has been committed.  If there has been no crime there can be no money laundering.  If there is no suspicion of money laundering (or terrorist related crime) then there is no obligation to report.

David

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By mrme89
13th Jun 2014 20:21

Not a money laundering issue, but If your client is vat registered, they may have overpaid vat?

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By johngroganjga
13th Jun 2014 20:49

David I think the point is that the OP is probably wondering if the retention of the money is itself a crime.

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David Winch
By David Winch
13th Jun 2014 22:17

@john

John, yes - but he does not suggest that the retention of the money was dishonest.  On the contrary he says "our client was advised verbally that repayment of the money was not required".  Hence my response focussing on dishonesty (& if no dishonesty, no crime).

David

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By bernard michael
14th Jun 2014 11:30

How will you treat this in the accounts?

1. Creditor due to the customer to be diminished by future sales

    What happens if there aren't any

OR

2. W/O to P & L a/c

It also makes me wonder how it's been treated in the customer's accounts

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By raybackler
17th Jun 2014 12:25

Customer intentions

I was wondering what the customer was trying to achieve?  I have come across public sector bodies wanting work billed near the end of the year to ensure the budget is spent and also to ensure it is maintained in the following year.  Your client could inadvertently be colluding in this dishonesty by not seeking to repay the money in some way.

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Replying to Wanderer:
David Winch
By David Winch
17th Jun 2014 12:33

Inadvertently colluding

raybackler wrote:

I was wondering what the customer was trying to achieve?  I have come across public sector bodies wanting work billed near the end of the year to ensure the budget is spent and also to ensure it is maintained in the following year.  Your client could inadvertently be colluding in this dishonesty by not seeking to repay the money in some way.

The issue raised was whether the OP was under any obligation to make a money laundering report.

On the basis of the INFORMATION WHICH HAS COME TO HIM in the course of his work he has no suspicion of dishonesty by anyone (and no reasonable grounds for such a suspicion) IMHO.

The ML Regs / PoCA 2002 do NOT require him to seek out further information which (if he obtained it) might then give grounds for a suspicion!

So he has nothing to report, in my view.

David

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By raybackler
17th Jun 2014 12:58

MLR Report

Sorry for the confusion David.  I was not referring to the OP's original request about whether to make a MLR Report.  I was widening the response as other contributors have done by questioning the motive of the OP's customer in the transaction and what the likely accounting treatment should be.

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By BKD
17th Jun 2014 17:02

I wonder ...

... just how many NHS Primary Care Trusts are involved in drugs (the illegal kind, of course) and human trafficking?

It is likely that they would want the money repaid back

What is so difficult to understand in the phrase "our client was advised that repayment of the money was not required"?

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Replying to Elizabeth-bonner:
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By La BoIS Saint
18th Jun 2014 04:09

Seems fishy

BKD wrote:

... just how many NHS Primary Care Trusts are involved in drugs (the illegal kind, of course) and human trafficking?

It is likely that they would want the money repaid back

What is so difficult to understand in the phrase "our client was advised that repayment of the money was not required"?

 

At what level of authority can someone advise a company to keep money paid for services which were never delivered? I would want something in writing at the very least. The PCT (Primary Care Trust - a hospital?) is there to provide services to its patients. I'd be pretty hacked off if in my area a PCT (or whatever has replaced them, there must have been a transfer of funds) simply gave money away.

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Stepurhan
By stepurhan
18th Jun 2014 09:03

Proof is the issue

The money has been paid to the company. That is provable.

The service has not been provided by the company. That is also provable, though not the company's fault. The project they were given the money for simply didn't happen.

This is where proof becomes an issue, because they have apparently only been told verbally to keep the money. No actual record that they have been told this and, as La BoIS Saint has pointed out, no proof the person doing the telling had authority anyway. If someone from the PCT or its successor comes looking for the money, what is the company going to do? Even on the facts given, keeping the money relies on a future obligation (doing later work at a lower rate) though it is unclear if a successor to the original client would inherit that right. Might be time to run this past a lawyer.

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By bernard michael
18th Jun 2014 09:12

It sounds more like a dodge to hide a budget underspend, which your client should not get involved with if they want to carry on working with PCT's. It could be discovered during a Government audit and looks like collusion 

It's a simple answer.tell the client to pay the money back ASAP with a a covering letter. It then becomes a problem for the PCT

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