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liability to client by subcontractor accountant

liability to client by subcontractor accountant

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where accountant subcontractor with sole practitioner and is asked to deal directly with client on client queries,
what is legal position of subcontractor 1- to practitioners client
2- to practitioner
3- under MLR on discovery
John Rabbitte

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David Winch
By David Winch
10th Aug 2005 19:12

MLR aspects

John

As far as the Money Laundering Regulations 2003 (MLR) and Proceeds of Crime Act 2002 (PoCA) are concerned the subcontractor is providing accountancy services by way of business, so his work falls within the 'regulated sector'.

When working in the regulated sector one is required to report knowledge or suspicion of money laundering by anyone. The reporting requirement is not restricted to suspicions about clients.

So, if the subcontractor has a suspicion he is obliged to report it to NCIS.

Of course the subcontractor is likely to mention the problem to the main contractor. He too will then have an obligation to report the matter to NCIS if he then becomes suspicious.

In practice, NCIS will accept a single report filed jointly by the contractor and the subcontractor as satisfying the reporting obligations of them both.

I hope that clarifies the position.

If you are an MLRO you can get confidential one-to-one email support, information and NewsAlerts from my website www.mlrosupport.co.uk.

David
[email protected]

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David Winch
By David Winch
10th Aug 2005 19:21

Legal liabilities

John

I presume by legal position you are referring to a legal liability for work done badly which results in a loss.

As far as contract law is concerned the client's contract is with the main contractor. It is the main contractor who has a contractual responsibility to the client to have the work performed competently.

So the client will sue the main contractor for his losses resulting from bad work by the subcontractor.

The main contractor can then sue the subcontractor under the terms of whatever contract exists between them.

There is also the law of tort to consider. Under this the subcontractor may have a liability to the client, even though there is no contract between them.

However, my guess is that the client would be more likely simply to sue the main contractor as the legalities of suing in tort are more complex than those of suing for breach of contract. (The client could go for the subcontractor though if the main contractor were bankrupt, dead or not worth suing for some other reason.)

The safest option is for both accountants to carry professional indemnity insurance and let the insurers battle it out when trouble strikes!

David

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