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Engagement letters and Anti money laundering

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Hi, 

I have a new potential who is a law firm. I won't be doing their accounts or tax, but that of their clients. What's the general view point of having an engagaemnt letter only with the law firm rather than with each end client of the law firm. 

The engagement letter would be structured so that it confirms that they have already completed all identity checks etc of the end client, so that I don't have to ask them directly.

Thanks in advance

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10th Sep 2018 18:20

That sounds like an "unusual" arrangement! More so with a law firm.

I would check with your PI provider and your professional body to ensure you can operate in that way (with the law firm as client, I mean). It doesn't sound right at all - unless you were an employee/partner of said firm.

EDIT: So you are effectively working as a contractor for the law firm? In that case, I don't think they are "your" clients at all. I'd be intrigued to see what your contract with the law firm looks like.

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10th Sep 2018 18:48

As the above says, are the law firm really your client? Will they be the party ultimately responsible for paying your fees? Or if the client goes bust before putting them in funds will they not have to pay?

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10th Sep 2018 19:21

Thanks, this has given me new lines of thought.

If said law firm is to be my client and I bill them directly I could potentially issue just 1 engagement letter.

If each end client is to be billed by me directly then I will need to issue engagement letters for each client. (Law firm effectively acting as an introducer)

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10th Sep 2018 19:59

And, of course, it's crucial in terms of who the "end clients" belong to. No idea how much work is involved and whether it's recurrent but if the client relationship is with the law firm, you could lose a chunk of business overnight. (That may be dealt with in your agreement with the law firm, of course.)

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to Accountant A
10th Sep 2018 20:05

Thank you, this is also worth considering!

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12th Sep 2018 10:44

It pays to never lose sight of who is your client and what are they instructing you to do what. That is the person/company who you issue your Engagement Letter to and ID etc.

You have to be very careful to not establish a duty of care (and hence potential liability) to someone who is not your client.

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to North East Accountant
12th Sep 2018 12:10

Just to be clear, if you are engaged by the law firm to deal with the tax affairs of its client you will need to confirm the ID of the law firm and of its client and consider the money laundering risk relating to the arrangement (i.e. taking account of both the law firm and its client).
It may be that you can agree with the law firm that you can rely on the ID of the client which they have already obtained.
David

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to davidwinch
12th Sep 2018 19:24

This is what i thought initially. My engagement letter to the law firm would state that they have already done the relevant ID checks and I can rely upon them for it.

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to harpsong
12th Sep 2018 19:50

Do have a read of regs 39 & 28 of the Money Laundering Regulations 2017 and do ask the lawyers whether they actually do check the ID of all clients for whom you will be undertaking work.
By way of illustration, if a solicitor is simply preparing a will for a client then the solicitor may not have obtained ID for that client (as that work falls outside the scope of MLR 2017). But if they then undertake tax work & instruct you, ID is required.
David

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12th Sep 2018 10:44

You should have an engagement letter with everyone who is engaging you. It sounds as though that may only be the law firm though. If the clients engage you on the law firm's recommendation then you need one for each client. If the clients go to the law firm for everything and the law firm engages you for the accounting work, then you only need the engagement letter with them.

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12th Sep 2018 11:02

Worth getting a lawyer to review your engagement letter, so there are no implied duties of care. But useful terms I’ve seen in such cirmumstances (to make it clear who is your client) are:

“If your own client wishes to rely on our advice they should engage us for the work themselves via a
separate engagement letter agreed with us and signed by them.

We will need to see your underlying client identification for work
relating to your clients before we begin the work.

Payment of our fees by you is not linked to how you may recharge these to your clients nor any delay
in your own fees being paid by your client. If our fees remain outstanding in relation to one of your clients, you agree that we may cease work relating to your other clients until those fees are paid.”

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By Matrix
to leeanthonyblackshaw
12th Sep 2018 19:47

I wonder what their mark up would be and who are these clients who choose this arrangement.

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to Matrix
13th Sep 2018 09:41

Matrix,
From recollection, it was about one-third top up on my charge out rate. That was one of the reasons I declined their offer since I didn't want vastly different charge out rates being known to any existing or potential new clients. One of the reasons for solicitors to take this approach is to do with legal privilege and whether or not HMRC would have access to my work. Now there's another topic for debate for another day. In my case, the clients were facing either criminal or civil dishonesty offences, hence the need for a solicitor.

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12th Sep 2018 12:59

I was offered such an arrangement with a law firm with regard to tax dispute issues. The arrangement was that I would only invoice the law firm. The law firm intended to mark up my charge out rate and they would invoice their client. The law firm wanted me to effectively complete a timesheet every week although for many weeks they could be nil returns. I declined their offer when they sent me a 20-page convoluted contract to sign

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to Malcolm McFarlin
12th Sep 2018 19:27

Law firms tend to do that...

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