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ML + False Accounting RISK - Help Needed

How and when to report Suspicious Activities!?

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I've been appointed a Director of a small (practically dormant) Scottish company, which has conducted a handful of land transactions in the last 25 years. Despite the lack of transactions, the new Board has inherited a diabolical accounting mess. 

An internal audit has revealed multiple statutory frauds: false declarations on accounts, false names on accounts, false claims of PSCs, false statements on 3rd party balance sheets relating to PSCs for this company. False claims of auditing have been made in writing by a conflicted Director (misleading non-conflicted Directors). These seem to be straightforward criminal offenses and breaches of fiduciary duties.​

The company is technically insolvent, with 2 major creditors sustaining the business as a going concern for decades. 2005 and 2019 land sales have resulted in substantial re-payments to 'creditors'. However, 1 of the original 2 creditors was struck off 16 years ago (no notice given; a fact concealed by the Directors and never mentioned by the ex-CA;  who made a point of naming this (dissolved) company expressly as the legitimate creditor in 2019. The discrepancy wasn't picked up until after payment and accounts were filed (the two companies have practically identical names, and a common trading name is used). A third company (with a remarkably similar name) has benefitted from two substantial payments, with a high risk of fraud and false accounting attached to this. The accounts have practically no notes; other than a subtle substitution of creditor name (2005), recently picked up.

The CA’s advice on 2019 distributions and advice on the preparation of accounts are... problematic. They were conflicted. There are unexplainable discrepancies. Questions raised about creditor balances prior to filing of accounts were flatly ignored. Their behaviour suggests that they have knowingly filed false accounts, knowingly omitted material information (that would have alerted non-conflicted Directors to fraud risks) and misled non-conflicted Directors to conceal this. Accounts and timelines don't square. Advisory statements and facts don't square. We cannot trust the accounts.

Common law frauds are suspected and need to be taken forward by police for investigation. There is a substantial risk of Money Laundering, False Accounting, 3rd party Tax Fraud, and 3rd parties receiving credit by deceit, under the guidance of this CA.

2 conflicted Directors and the conflicted CA (appointed by conflicted Directors) have been fired for their conflicts of interest. The CA has been representing all 3 companies. Efforts to resolve these problems now by writing to the ex-CA have turned hostile. Even professional handovers are being stonewalled (2nd attempt with new firm).

After expressly being warned in 2019 that Directors were being systematically excluded by colleagues, and that selective communication with Directors and the CA was unacceptable, the malpractice continued. The CA excluded two Directors even after promising in writing how they would communicate. 

Prima facie evidence suggests bad faith on the part of the CA. Many examples of reportable Suspicious Activity have not been reported. Even when specific fraud examples have been put in writing to the CA, they have been brushed aside and excused. The CA even confirmed false PSC statements on Companies House. Their role is not clean. The conflicts of interest are snowballing.

There is reason to believe AML regulations have been deliberately ignored, and a web of conflicts of interest have been ignored by the CA and by former Directors, and that each has benefitted from this.

Alarmingly, when concerns about the conduct of this specific CA were raised as an unambiguous written complaint to the senior partner at their firm, the response was (paraphrased): ‘How dare you?! Don't ever contact us again!’ The firm seems determined to not report Suspicious Activity. They shared the serious complaints with the conflicted colleague, giving them an opportunity and motive to manipulate/destroy records.

In Scotland, it appears to be a fraud offense for a CA to not report known or suspected fraud. Is this correct?

ICAS has been informed. Now seems an appropriate time for Directors to contact the NCA and/or Police Scotland. Perhaps you can help steer us in the right direction. 

Have you any suggestions on specific contacts for such criminal investigations? 


Replies (10)

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Replying to David Ex:
By Raguel
19th Jul 2021 13:27

Thank you, David. Hopefully making a report to NCA/Police Scotland via these links is straight forward.

It would be very useful to hear if any members have a specific financial crimes contacts to communicate with. Or specific experiences of making Suspicious Activity Reports. An ex-police friend has suggested there is a risk of fraud and 'white collar crimes' being lost among the noise of other crimes, and not being investigated to the fullest due to resource constraints.

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Replying to Raguel:
By Raguel
19th Jul 2021 13:32

Note also that HMRC and RBS are potential victims. Any contacts or processes of communication that members can recommend for informing them?

Filling in generic online forms leaves doubt as to how vigorously these problems will be handled.

Thanks (0)
By Roland195
19th Jul 2021 13:42

Do you not think you would be better served taking specific legal advice here? You are talking about a range of issues, some serious & potentially criminal.

I am not completely following what you want to achieve in that you are keen for justice to be served or is you are more practically interested in recovering misappropriated funds?

HMRC/Police Scotland/NCA etc etc will be vaguely interested in the former but probably indifferent to the latter.

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My photo
By Matrix
19th Jul 2021 13:46

I would resign.

Thanks (2)
Replying to Matrix:
By memyself-eye
19th Jul 2021 19:07

me too!

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By paul.benny
19th Jul 2021 14:53

What's your role? Who got you involved? Who are the shareholders?

Agree with Matrix that resignation looks like the best option. Pursuing this will cost you time (a lot), stress (a lot), money (quite likely a lot) for what benefit?

And the longer you remain involved, the greater the risk of damage to you, if only collaterally.

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By Cheshire
19th Jul 2021 14:56

1) why in hell would you be a Director?

2) you need legal advice, not in the gift of this forum

3) how do you know the CA has not done an SAR?

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By ireallyshouldknowthisbut
19th Jul 2021 14:57

I would be very careful about putting these allegations in a public forum.

If I was part of this matter it would be very possible to identify from your post not only the matter, but you personally.

If you ask the mods they can remove your post.

Thanks (1)
David Winch
By David Winch
19th Jul 2021 15:07

You (and your fellow directors) need to decide (1) what you aim to achieve (compensation for the company & others wronged or prosecution/punishment of the wrongdoers or both), and (2) how much you are prepared to spend (money & time) in pursuing this.
Then you need to take (paid for) legal advice.

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