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You decide to charge for your intial consultation...any AML issues?

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A number of people have queried whether they should charge for initial consultations - if you do what AML checks if any do you need to do.

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By Roland195
19th Dec 2011 10:02

Stand to be corrected

I had not understood the fact that you make a charge for the meeting to have any bearing on your AML procedures. In fact, I have the idea that most of the overseerers (or whatever you call the regulators) would probably think that you should be using the procedures for everyone.

I have a fairly high conversion rate from potential clients to actual but if you operate the shotgun marketing approach then it could be interesting finding out you have to perform AML procedures on people you will most likely never hear from again.

 

 

 

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By ShirleyM
19th Dec 2011 10:18

Can I expand upon this question, please?

People will often give quite a lot of information at a first meeting, ie. not informing HMRC that they are trading, whether as self-employed or a limited company, and we are not necessarily going to learn whether they will 'come clean', unless they engage us.

If they are clients, and refuse to put things right, then the situation is clear, but what if they are not complying, but we are not sure whether they intend to comply in the future, or not?

What if we suspect they are 'dodgy' and therefore don't want to engage them? A report may be required, and I don't think we have to do any AML checks before we can submit the report, but should we?

I give basic advice during a first meeting, although a fee is not incurred. Should I withhold this advice until checks have been completed?

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David Winch
By David Winch
19th Dec 2011 13:37

What the Regulations say . . .

I think we need to look at what the MLR 2007 actually require - but I think we also need to use some common sense about what is practical and workable.  A good many firms operating in the types of activities falling within the regulated sector (accountants, tax advisers, lawyers, etc) actually operate customer ID procedures in circumstances in which - strictly speaking - the MLR 2007 do not require them.  The reason is that they find it more convenient to have a very straightforward in-house procedure (e.g. "we apply customer ID at the earliest opportunity to anyone who contacts us for help") rather than a more complex set of "ifs & whens".  There is nothing wrong in that, in my view.

Reg 7(1) MLR 2007 says:
"Subject to regulations 9, 10, 12, 13, 14, 16(4) and 17, a relevant person must apply customer due diligence measures when he —

(a) establishes a business relationship;
(b) carries out an occasional transaction;
(c) suspects money laundering or terrorist financing;
(d) doubts the veracity or adequacy of documents, data or information previously obtained for the purposes of identification or verification."

But some of these expressions are defined for MLR purposes by Reg 2 which includes:

“business relationship” means a business, professional or commercial relationship between a relevant person and a customer, which is expected by the relevant person, at the time when contact is established, to have an element of duration

“occasional transaction” means a transaction (carried out other than as part of a business relationship) amounting to 15,000 euro or more, whether the transaction is carried out in a single operation or several operations which appear to be linked

So one could argue that at the time of an initial meeting a 'business relationship' has not yet been established since the accountant does not, at that stage, expect the relationship to have an element of duration.

One could also argue that a fee charged for that one-off meeting is not an 'occasional transaction' if the fee does not amount to 15,000 euro or more.

So, one could say, if there is no suspicion of money laundering or terrorist financing then there is no need (at that stage) to carry out customer due diligence (which would include an ID check).

So that, in effect, is an answer to the OP's question.

As ShirleyM correctly infers, reporting is not limited to reporting suspicions of clients - one may have an obligation to report someone who is not (and never was) a client.

But one is hardly in a position to go to a non-client and say, 'Please can I see your passport because I want to report a suspicion that you are dodgy?'.

In any event 'customer due diligence' - as defined by Reg 5 - does not impinge upon a non-client (except someone who is a 'beneficial owner' of a client).

I think a bit of common sense does need to be applied at that stage!

David

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By ShirleyM
19th Dec 2011 13:40

Thank you, David ... you have made it all much clearer for me now.

I think there will always be cases where we are unsure whether to report, or not, but I feel that I am on safer ground now regarding initial meetings.

Sorry, justsotax, for hijacking your thread!

 

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By justsotax
20th Dec 2011 09:42

No worries Shirley....

thanks David - very clear and concise.....

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By cfield
20th Dec 2011 11:08

MLR suspicions

Yes thank you David. I was never quite sure if I should request ID for people wanting one-off tax advice (although I do anyway if I meet them in person in case they become regular clients later).

One thing that still isn't clear in my mind is what to do if a one-off client or an enquirer confides that they failed to pay tax or not filed a tax return but it was just an honest mistake. I always thought that you should only file a MLR report straight away if you suspect actual dishonesty (ie if that person did it on purpose).

If someone makes an honest mistake and you tell them to make a full disclosure but they do not, only then do you report them. But if it was someone you are never likely to hear from again, clearly you will never know whether they complied or not. Does that not mean we can forget about them? Surely we are not compelled by law to follow these cases up.

In practice there are many shades of grey. For example, someone might say they've been charging VAT without having registered yet. We might think that's so daft it's bona fide suspicion of dishonesty, but it's surprising how many people make that mistake. Where do we stand on something like that?

And if someone phones and admits they've been cheating the taxman for years but you don't even have a name or phone number for them, what can you do then? Ignore it I suppose, but what if there is some obscure rule requiring you to file a report anyway? And what if that person later gets arrested for tax evasion and the police discover from his mobile phone records that he called you? Would that get you into trouble?

Chris

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By Mrtaxation
28th Dec 2011 01:23

defence

best practice......diary and a filenote for the odd or spurious phone calls....I've had many and I rarely catch any details that I could use to identify the caller. As noted, its not as onerous once you read the legislation. Good questions and answers.

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David Winch
By David Winch
29th Dec 2011 12:04

ML suspicions & PoCA privilege

Don't forget to consider whether information you have received (and on which your suspicion of money laundering is based) is 'PoCA privileged' and therefore NOT reportable.

The first question to ask yourself is 'Am I the firm's MLRO?'.  If not then you can report to the MLRO and let him decide whether 'PoCA privilege' applies.  If you ARE the MLRO then you need to think about this a bit more!

If the information has come to you because your client has volunteered it (as opposed to you discovering it) and he is seeking advice from you as to what to do about past irregularities then 'PoCA privilege' may apply.

Ask yourself if you and / or the firm are 'relevant professional advisers' as defined by s330(14) PoCA 2002.  If neither you nor the firm are 'relevant professional advisers' then 'PoCA privilege' does NOT apply.

If you pass that hurdle then consider if the client is asking you for legal advice (or advice in connection with legal proceedings).  Legal advice is likely to involve words (orally or in writing) rather than numbers or the completion of a form or return.  It is advice about the client's legal responsibilities and / or the consequences of failing to comply with his responsibilities (e.g. penalties).

For example if a client says to you 'I have underdeclared my income in the past, what must I do now to sort it out and can you help me with that?' then (in my view at least) he is asking for legal advice.  In contrast a client who says 'I am in business and need someone to deal with my accounts and tax returns' is not (again in my view) asking for legal advice - he is asking for accountancy and tax services.

If the client has volunteered the information to you, and you are a 'relevant professional adviser' and the client is asking for legal advice then any suspicion based on that information is not reportable (unless the crime exception applies).

The crime exception applies where the client is abusing your services to commit or further a crime.  So, for example, if a client says 'I have hidden the money from my undeclared profits in a bank in Lichtenstein, but the taxman is getting information from Lichtenstein now - so where should I put the money to keep it hidden from the taxman?' then that information IS reportable because the client is attempting to further a crime with your advice.

If information is 'PoCA privileged' then it is not reportable even if the client goes away and you never hear of him again (so you don't know whether he took your advice or not).

The same rules apply to a client or a potential client.  So the out-of-the-blue phone call from a potential client who 'fesses up may also be 'PoCA privileged'.

If someone says they have been charging VAT without being registered again that may be 'PoCA privileged'.  You might also consider this to be an honest mistake.  Of course an honest mistake is not reportable. 

In a case in which 'PoCA privilege' does not apply it's down to you to form your own opinion as to whether the client made an honest mistake or dishonestly charged VAT when he realised he should not have done.  If you suspect dishonesty then a report is required.

Where the client has made an honest mistake and becomes aware of his mistake and then chooses not to correct it that choice is dishonest and the matter becomes reportable (unless the original information is covered by PoCA privilege).

If you simply don't know whether or not the client corrected his mistake (because he ceases to be a client) then my view would be that the matter is not reportable unless you have reasonable grounds to suspect, or do suspect, dishonesty.  I do not regard a total lack of information as providing reasonable grounds for suspicion.

Chris, I hope that answers your questions.

David

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