Will trust transferring funds

Will trust and money laundering.

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First let me apologies for this question, I know it is more a legal question, but I was hoping someone might at least point me in the right direction.

I am one of the trustees of a will trust. The majority of the beneficiaries have been paid, but the is one beneficiary who does not want to cash the cheque that we issued a year ago. The beneficiary is trying to buy her council house under the 'right to buy' scheme, and wants us to transfer the money to the solicitor to be held in a client account.

It pretty obvious that she wants to hide the money. I think this is money laundering and we won't just do it. But is it even legal to do this if it is properly documented? Any ideas anyone?

 

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Replies (24)

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By FactChecker
15th Jun 2024 16:21

First the standard caveat ... IANAL.

Second I'm not convinced, even if your suspicions (as to her reasons) are well founded, that it would constitute money laundering (as the source of the funds isn't hidden or unclear and there's nothing you've mentioned that indicates tax evasion is sought).
However David, or any other AML expert, may have different views?

But, you say she's asked you "to transfer the money to the solicitor to be held in a client account" ... which doesn't in itself pose any obvious problem that I can see - any more than any other account nominated by the beneficiary to you for the receipt of funds being disbursed.
In your shoes (after potentially legal advice just to be safe), I'd be inclined to tell her that her request can only be implemented if she signs a form (constructed by you or your lawyer) that authorises the specific payment to be made into an account specified by her.
That of course gives you the opportunity to pick wording that makes clear whatever it is that you want to be safeguarded from - and might include something to the effect that payment is deemed (via her authorisation on signing the form) to be a payment to *her* (not whoever's name appears on the receiving account).

I'm also not an expert in Trusts, but don't see how your suspicions (however correct they may turn out to be) of fraud (in her attempt to purchase her council house under the 'right to buy' scheme) are relevant to your role as Trustee of a Will Trust?
[There may be other things you can do as a 'concerned citizen', but if tempted to do this then check first whether they conflict with your duties as a Trustee.]

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Replying to FactChecker:
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By FactChecker
15th Jun 2024 16:29

BTW, you refer to her as "one beneficiary who does not want to cash the cheque that we issued a year ago".

Do the terms of the Trust not include an option to distribute that share elsewhere in the case that a beneficiary cannot be traced or refuses receipt or ...?

Many wills now contain something akin to the standard 'predeceasing' terms, but for situations where distribution cannot be effected within a fixed timescale, for precisely this kind of reason - in order to protect the Executors.
So I would have expected some similar protection for the Trustees.

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David Winch
By David Winch
15th Jun 2024 17:11

I am assuming you are an accountant and that you are not only acting as a trustee but have dealt with some tax or accountancy implications for the estate or completed a tax return of some sort. I am also going to make an assumption that you are doing this "by way of business". The purpose of all these assumptions being that (per Reg 11 MLR 2017) you are subject to the anti-money laundering regime in connection with your acting as a trustee in this estate.
You have a concern - I could use the word suspicion - that this beneficiary (who has been entitled to what I understand to be a share in the residuary estate for a year or so, from looking at your query last year) is engaged in some sort of financial dishonesty by obtaining some financial advantage to which he/she would not be entitled if the full facts were known. (Sorry for the clumsy wording.)
So you think he/she has perhaps been receiving state benefits whilst having assets (including this £30,000 odd) which would make him/her ineligible to receive them.
So after that lengthy preamble my view is
(1) if you get the appropriate authority from the beneficiary I do not see any problem with you paying the money to the beneficiary's solicitor to hold on their behalf (the solicitor may have a problem with that though, depending on the circumstances), and
(2) you need to file a Suspicious Activity Report with your firm's MLRO or the NCA regarding your suspicion of money laundering derived from benefit fraud.
David
P.S. Factchecker - I am puzzled by your reference to tax evasion. I don't see any suggestion of tax evasion here.

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Replying to davidwinch:
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By FactChecker
15th Jun 2024 17:45

"P.S. Factchecker - I am puzzled by your reference to tax evasion. I don't see any suggestion of tax evasion here."
... and nor did I!
What I said was: "I'm not convinced ... that it would constitute money laundering (as the source of the funds isn't hidden or unclear and there's nothing you've mentioned that indicates tax evasion is sought)."

So we're in agreement on that?

We also appear to be in agreement with regard to not seeing "any problem with you paying the money to the beneficiary's solicitor ...."

BUT, OP's 'suspicion' was apparently related to "trying to buy her council house under the 'right to buy' scheme" - and so nothing to do with "receiving state benefits whilst having assets".
FWIW I don't know how OP has arrived at that suspicion, since the right-to-buy scheme isn't means tested according to https://assets.publishing.service.gov.uk/media/660d76cb97e60600112b2261/...

Does that impact on your recommendation to file a SAR (if it's not benefit fraud)?

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Replying to FactChecker:
David Winch
By David Winch
15th Jun 2024 18:24

Hi Factchecker, in an earlier thread the same poster raised a concern about the beneficiary claiming state benefits. Like you I don't see any issue with the 'right to buy' and having capital. So I assume the OP has a suspicion about benefit fraud (and hence money laundering). On that basis, since the entitlement has existed for a while and benefits will already have been obtained fraudulently, there is an obligation to report the suspicion. Agreed?
David
Earlier thread https://www.accountingweb.co.uk/any-answers/beneficiary-refuses-to-cash-...

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Replying to davidwinch:
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By FactChecker
15th Jun 2024 19:38

First ... congratulations for remembering a year-old thread which, now that I've read it, must indeed be the very same case/scenario.

BUT, in that thread, what OP actually said was:
"I think it is benefit based. They gave us an excuse that they didn't want to 'fritter it away'. So I said well put it into a savings account, but they don't want to do that. The beneficiary is a relative so we know them well, but I am not 100% certain that they are on benefits. However I don't know what they are living on if they are not. They've been out of work all there adult lives, so I think the **** has hit the fan with this."
... not quite the same as "raised a concern about the beneficiary claiming state benefits."

I'm happy to bow to your undoubted expertise in this area, which is why I was raising the question regarding a SAR.
[On the admittedly limited info presented to us, OP's suspicion doesn't appear to be related to anything with which he has been dealing ... more just a 'gut' sense of "I don't know what they are living on if they are not (on benefits)".]

I guess my question would have been better phrased as ... 'what degree/threshold of suspicion has to be reached to trigger reporting of it via a SAR?'

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Replying to FactChecker:
David Winch
By David Winch
15th Jun 2024 21:37

There is longstanding case law in money laundering cases around the meaning of suspicion - "a defendant who thought that there was a possibility, which was more than fanciful, that the other person was or had been engaged in or had benefited from criminal conduct. We consider that, if a judge feels it appropriate to assist the jury with the word "suspecting", a direction along these lines will be adequate and accurate".
So here the OP has a suspicion that the beneficiary may have been engaged in criminal conduct from which he/she has obtained a financial benefit (a benefit in money or money's worth). So that triggers an obligation to report.
The suspicion does not need to be related to tax evasion or to anything the OP has been dealing with. (But it does need to be based on information which has come to him in the course of his work in the 'regulated sector' - hence my earlier ramblings to determine whether he has been acting in the 'regulated sector' when acting as trustee in the estate.)
David

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Replying to davidwinch:
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By FactChecker
15th Jun 2024 22:08

"But it does need to be based on information which has come to him in the course of his work in the 'regulated sector' - hence my earlier ramblings to determine whether he has been acting in the 'regulated sector' when acting as trustee in the estate."

That's what I thought (although better expressed by you) ... which, setting aside OP's unknown role, is why I was questioning the 'suspicion' criteria.
If OP's statement in earlier thread is to be taken at face value, then the suspicion is based solely on being unable to "know what they are living on if they are not (on benefits)" - this thought being based on the beneficiary being a relative of OP, not on any information gleaned as a Trustee.
If OP doesn't even know whether X is claiming or receiving Benefits, then it seems a gigantic leap to have a suspicion that that they are making fraudulent statements in support of these potentially non-existent claims.

Just to be clear .. I'm not defending OP's beneficiary/relative (and certainly not the idea of hiding assets in order to fraudulently claim a means-tested benefit).
But I'm still not clear as to when a vague dislike of a person's apparent lifestyle becomes a good enough basis to support a suspicion that, with no additional information, warrants a SAR?

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Replying to FactChecker:
David Winch
By David Winch
16th Jun 2024 13:17

Hi Factchecker, see my response to Taxdigital below, which I hope addresses your point as well.
David

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By Tax Dragon
16th Jun 2024 06:43

@OP, how has money that you held on bare trust as executor for a beneficiary now become the subject of a distribution from a will trust? If that's not what's happened can you explain please.

@anyone tempted to guess an answer rather that let OP speak for himself - it's OK, I've already made some guesses.

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By taxdigital
16th Jun 2024 08:49

@OP- are you professional trustee(s) or a private individual? You say you’re one of the trustees: do other trustees share your view?

As for the MLR part, with a caveat that I only have some basic understanding of the legislation, I would comment as follows:

OP has a suspicion. Whilst I agree that the threshold for suspicion is very low for MLR reporting purposes, this case ( https://www.bailii.org/ew/cases/EWCA/Crim/2006/1654.html ) notes that:

“ Suspicion is a word that can be used to describe a state-of-mind that may, at one extreme, be no more than a vague feeling of unease and, at the other extreme, reflect a firm belief in the existence of the relevant facts”

To me OP’s concerns appear to be more of a ‘vague feeling of unease’ than a suspicion based on actual wrongdoing.

Then there is this question, if the OP is a private individual, do they have an obligation to make a SAR?

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Replying to taxdigital:
David Winch
By David Winch
16th Jun 2024 13:13

Hi Taxdigital
"Vague feeling of unease" - it is for the OP to decide whether he has merely a vague feeling of unease (which therefore is not sufficient to be a reportable suspicion) or a suspicion. But the OP has said (1) the beneficiary did not want to bank the cheque for the last 12 months or so, (2) when asked why, the beneficiary came up with an explanation which did not satisfy the OP, (3) the OP apparently has some awareness of the beneficiary's financial affairs, which ordinarily would make the receipt of £30,000 or so, significant and welcome, and (4) the OP has now been asked to pay the money not to the beneficiary but to a solicitor. Putting all this together I would not be surprised if the OP decides he has a suspicion.
We can quote case law at length. Lawyers may feel differently from accountants on this one. In the case to which you refer the court said, A vague feeling of unease would not suffice. But the statute does not require the suspicion to be "clear" or "firmly grounded and targeted on specific facts", or based upon "reasonable grounds".
In the OP's case there are "specific facts" related to the suspicion.
Turning to the point about whether the OP is a private individual - there are obligations on everyone (in the UK) under ss327 - 329 PoCA 2002. In a nutshell, one is obliged to report one's own money laundering. Let us assume that the deceased was not Al Capone and that the monies in the estate are not proceeds of crime.
It follows that the OP is not at risk of an offence under s329 (possessing/ using etc proceeds of crime) or under s327 (converting/ transferring etc proceeds of crime).
The only conceivable risk of a mainstream money laundering offence by the OP is that he may be entering into or becoming concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person, contrary to s328. If the OP is worried that he may be doing this he should make a DAML (defence against money laundering) disclosure to the NCA - effectively a form of SAR. The NCA will then (almost certainly) give him consent to proceed.
If (but only if) the OP is acting "by way of business" in relation to this estate and in so doing is acting within the accountant/tax adviser definition in Reg 11 MLR 2017, then he has an obligation to report suspicions of money laundering by others (i.e. not his own money laundering) where that suspicion is based on information which has come to him in the course of a business in the regulated sector.
To be clear, the point is not whether the OP is a private individual - it is whether in relation to this estate the OP is dealing with it "by way of business". So the OP may be senior partner of KPMG but may be dealing with this as a favour for a friend and entirely outside of his job - and in that case would not be obliged to report a suspicion of money laundering by anyone other than himself.
David

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Replying to davidwinch:
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By FactChecker
16th Jun 2024 13:28

Thanks ... at last a complete route through all the aspects, which manages both to be easy to follow - and an excellent illustration of why most people get lost en route!

So ultimately, in OP's case and I suspect many others, there comes a point where the individual has to make a decision based on their view rather than unequivocal facts.
But at least my "vague dislike of a person's apparent lifestyle" now sort of slots in alongside the "vague feeling of unease" concept.

The only remaining missing 'guidance' is what OP should do if the decision is to not file a SAR? Presumably document the reasoning, and keep it as confidential papers against any potential later problems?

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Replying to FactChecker:
David Winch
By David Winch
16th Jun 2024 13:31

FactChecker wrote:

The only remaining missing 'guidance' is what OP should do if the decision is to not file a SAR? Presumably document the reasoning, and keep it as confidential papers against any potential later problems?


Yep!
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By robwillett
16th Jun 2024 14:47

First let me say how grateful I am for the replies. I am an individual - not acting in any professional capacity. But I am one of the Executors and Trustees in the will. The trust comes about from the will which had five beneficiaries and specifies the residuary funds as 'The Trust Fund'. Four of the beneficiaries have had their share as soon as I sent the cheques out, but one - a relative - does not want to cash the cheque, and indeed it is most likely invalid now.

This does relate to the post some of you have spotted from a year ago. To be honest it has been an awful experience; we had someone try to contest the will, and now this. When people ask about being an executor I tell then not to do it, or at least get a professional to do it. We would never do this again.

However we are stuck with this situation, so as I see it we have three options:

1. Send a replacement cheque, which will probably never get cashed, although my wife (who is the other trustee) points out that when the money is needed to pay for the house they will have to cash it.

2. Get then to sign a document authorising and requesting us to transfer the money to the solicitors making it clear that this is ditributing their inheritance and we will cease to be trustees.

3. Tell them we resign as trustees and appoint new trustees whose fees will come out of the inheritance.

Either way we are just fed up with the whole thing and want an end to it.

Once again, thank you all for your input.

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Replying to robwillett:
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By Tax Dragon
16th Jun 2024 14:58

Do you have any discretion or was the residual fund due absolutely (and immediately) to the beneficiaries (including this one) under the will?

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Replying to Tax Dragon:
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By robwillett
16th Jun 2024 15:01

She is specifically named as one taking a fifth or the residuary estate.

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Replying to robwillett:
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By FactChecker
16th Jun 2024 15:21

Shame ... but are there no 'break' clauses or something that gives the Trustees ANY discretion to bring things to a head?

As per my earlier post:
"Many wills now contain something akin to the standard 'predeceasing' terms, but for situations where distribution cannot be effected within a fixed timescale, for precisely this kind of reason - in order to protect the Executors.
So I would have expected some similar protection for the Trustees."

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Replying to robwillett:
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By FactChecker
16th Jun 2024 15:18

With the same caveat with which I opened, IANAL, I lean towards your option 2 .. well I would, having suggested it!

Option 1 seems pointless as it just perpetuates the current situation until or unless the beneficiary chooses to cash one of the cheques ... but that's doesn't bring you definitive closure. [BTW I too presume the original cheque is now invalid, but I'd still tell the bank to formally cancel it before any re-issue.]

Option 3, aside of all the complexities (which may take some time), is unfair on all the beneficiaries as those fees won't be paid out solely from the portion for the recalcitrant beneficiary. [Given the apparently litigious nature of at least one of those beneficiaries, this doesn't sound an attractive route.]

As you are "not acting in a professional capacity", I'd suggest it would be wise to seek professional advice on any route chosen - particularly with regard to the document wording if choosing option 2.

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By kim.shaw-and-co.com
17th Jun 2024 01:05

...

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By kim.shaw-and-co.com
17th Jun 2024 01:05

Is there a time limit on their Right to Buy and could they complete it with the funds earmarked for distribution ? I am guessing if the inheritance can pass straight into an asset that is a main home it would not disturb any claims that are means-tested. Early distribution would invariably dissipate the beneficiaries' means with which a Right to Buy might otherwise be completed.

Deferral of distribution of the inheritance to Completion of their purchase would surely be in the best interests of the beneficiary ?

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Replying to kim.shaw-and-co.com:
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By FactChecker
17th Jun 2024 01:24

To the best of my knowledge there is NO aspect of eligibility for Right to Buy that is means-tested ... which is why all the 'discussion' above has been pure guesswork as to why the beneficiary is being so awkward (from Trustee's perspective).
Or have I missed your point?

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Replying to FactChecker:
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By kim.shaw-and-co.com
17th Jun 2024 01:34

FactChecker wrote:

To the best of my knowledge there is NO aspect of eligibility for Right to Buy that is means-tested ... which is why all the 'discussion' above has been pure guesswork as to why the beneficiary is being so awkward (from Trustee's perspective).
Or have I missed your point?

That was my understanding too - the beneficiary likely wants to defer receipt of the inheritance so it can be sheltered in the RTB property. If it is, it won't disqualify other entitlements. If the executors insist on foisting it prematurely on the beneficiary then it likely will end up getting dissipated in lost benefits. Meaning the recipient might not be able to afford to purchase their home.

So ... whilst I have some sympathy for the executor(s), I can't say I agree that they are having regard to the beneficiary's best interests by winding up the Estate before that beneficiary has a chance to shelter the inheritance from the clutches of the DSS.

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Replying to kim.shaw-and-co.com:
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By Tax Dragon
17th Jun 2024 06:06

It's not foisting. The money is already the beneficiary's (the trust is bare).

Have a read of last year's thread.

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