Imprudent Accountant: Do you report criminal activity?
As the supervisors are pulled up over their slack AML enforcement, The Imprudent Accountant deliberates how serious accountants take these matters.
In my last column, I highlighted a recent story about tax evasion, involving an individual trading in legitimate invoices. The idea was that purchasers could use these to reduce their VAT and corporation tax/income tax liabilities.
As expected, there was a wide variety of responses from accountants up and down the land, most sceptical and a couple suggesting that this was an April Fools’ Day joke. It wasn’t. At least, if it was then the BBC had chosen to broadcast their April Fools’ Day piece a couple of days ahead of everyone else.
What worries me is that nobody picked up on some serious points beneath the relative frivolity. If any of us has a suspicion that a client or any other associate with whom we come into contact has committed a crime, is laundering money or may be doing so then we have an obligation to notify the authorities.
Coincidentally, just after that article was published, AccountingWEB highlighted a report from the newly instituted Office of Professional Body Anti Money Laundering Supervision (OPBAS).
Predictably, at least in my eyes, this body with a mouthful of a title slammed the profession on the basis that nobody is taking their pet subject seriously.
That fits in with my own experience. I would love to know whether any reader has ever reported a client, or for that matter anybody else, to the authorities because they suspected them of benefiting from the proceeds of crime under the Proceeds of Crime Act 2002, the Serious Crime Act 2015 or of laundering money, which is now largely governed by The Money Laundering Regulations 2007 and the fearsomely entitled The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
My experience covers time at a couple of top 10 firms since the rules were introduced but I have not been aware of a single case in which a report was made.
There could be a number of reasons for this. First, very justifiably, there is supposed to be confidentiality surrounding any such reports. Secondly, MLROs tend to be good at weeding out situations that look dodgy but do not justify a report. Thirdly, it’s always possible that every single one of our clients were compliant, though beggar’s belief.
I certainly raised queries about two or three situations but, in each case, was comforted by someone in authority. They either confirmed that my suspicions were not strong enough to make a report, proposed keeping a watching brief without taking any further action or, as far as I recall in one case, suggested that it was actually down to the firm of solicitors who had commissioned my services to make the report.
Personally, I doubt that more than a handful of smaller firms have ever reported in such situations, preferring to keep their clients happy or just being too dilatory to actually take the necessary action.
Until the ICAEW and its peers start taking these matters seriously, carrying out audits on professional practices and issuing penalties together with naming and shaming publication details or perhaps even expelling those that commit offences repeatedly, I fear that this is legislation that will be ignored wherever possible.
I would love even one reader to come back with a strong refutation of these assumptions, at the very least confirming that they have made multiple reports of their own clients or those of others. Rightly, I have very low expectations. Surprise me!