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should we file a money laundering report

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we've had a potential client come in, they have admitted that they have a large amount of cash sales off the books

we've politley declined the business as its just not the type of client we want, but we're not sure if we should be making a MLR report?

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David Winch
By David Winch
06th Apr 2018 11:31

Three questions for you:
1. Did they admit that they knew they should not have done this? If 'Yes' go on to 2. If 'No' consider whether you suspect they knew this. If 'Yes' go on to 2. If 'No' END.
2. Were they asking for your assistance in regularising their tax affairs with HMRC? If 'No' then submit SAR (Suspicious Activity Report). If 'Yes' go on to 3.
3. Are you a member of an accountancy body meeting the criteria of s330(14) PoCA 2002? If 'No' then submit SAR. If 'Yes' END.
(I assume that they have submitted at least one incorrect VAT or tax return & made a 'saving' as a result.)
David
P.S. It is irrelevant that you declined to act for them.

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Replying to davidwinch:
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By stuart carpenter
10th Apr 2018 10:39

Well summarised, David - but can I just ask you to explain your point 3?

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By Wanderer
10th Apr 2018 11:30

See David's summary here:-
http://www.accountingevidence.com/blog/2015/11/section-330-proceeds-of-c...
AIUI it's all about whether legal privilege applies.

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Replying to Wanderer:
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By stuart carpenter
10th Apr 2018 11:40

Thanks, Wanderer. I hadn't picked that up - if I understand it correctly, we have a defence of privilege because we are trained and regulated; others who are acting in our sector - possibly with just as sound an ethical basis, but without the regulation - are required to make a report, even if they are engaged to regularise the client's affairs. That seems harsh on the client.

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By andy.partridge
10th Apr 2018 12:09

That's not it, is it?
Isn't the determining factor one of the client coming to you for legal advice, not the in connection with standard compliance work. David Winch said this:

" . . . privileged circumstances if it is communicated or given to him –
(a) by (or by a representative of) a client of his in connection with the giving by the adviser of legal advice to the client,
(b) by (or by a representative of) a person seeking legal advice from the adviser, or
(c) by a person in connection with legal proceedings or contemplated legal proceedings."

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By Wanderer
10th Apr 2018 12:27

Quote:

That's not it, is it?
Isn't the determining factor one of the client coming to you for legal advice, not the in connection with standard compliance work.


Surely it's both, i.e. someone coming to you to sort out their past tax omissions AND you are regulated, at least that's the way I am interpreting David's (effective) 1.2.3. flowchart above.
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By stuart carpenter
10th Apr 2018 13:14

That's how I'm reading it as well. Privilege is only relevant if the client says that he/she intends to sort things out - that may develop from our finding something during compliance work, but the test comes when we talk to the client about it. If the client will not take our advice, we will end up reporting. The bit I had not previously picked up, if I am reading it correctly, is that an unregulated accountant would be required to report the client, whether or not the client heeded the advice and started to sort things out.

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By Wanderer
10th Apr 2018 13:39

Mmm not exactly.
From reading past postings by David IF someone comes to you to sort past omissions out AND you are regulated then no report.
If however you discover something during compliance work and client admits that they were aware of past omission then you WOULD report anyway.
If they weren't aware of past omission and they now agree to put it right then no report.
If they weren't aware of past omission and they refuse to put it right then report.

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By stuart carpenter
10th Apr 2018 14:01

Re something coming up in compliance work: if my judgement was that a client knew what they had been doing and had hoped to get away with it (the "pull the other one" test), then yes, I agree that a report would be indicated. Many real world cases are less clear, and I would tend to give the client the benefit of the doubt, providing they act promptly to repair things.
Anyway, that's not my point - my point is about the apparent requirement for an unregulated accountant to submit a report on a client who actively wants to put things right.

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By pauljohnston
24th Apr 2018 11:37

Just shows how clear this MOney Laundering regulations are.

I thought you made a SAR if you suspected that someone had carried out an activity determined as money laundering in the normal course of doing business.
Thus I would feel that a SAR would be made by us but it would say "this client has indicated to us that they intend to bring his or her tax affairs upto date".

We had taken on a client with tax affairs to bring up to date but he stopped paying us and then closed down the company without sorting out the tax arrears.

I was glad that the SAR was made.

That apart the client had already committed a money laundering offence.

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