What to do when the police come knockingby
What do you do if there’s a police officer in reception asking for you? David Winch explains what an accountant should do if they’re faced with a production order from the authorities.
Accountants are not used to dealing with the police or the criminal justice system. So when the authorities come knocking on your practice door about a criminal investigation involving a client, it’s not surprising that the first thing an accountant does is to panic and wonder what they’ve done wrong. They then start thinking that they better talk to their client and ask them what on earth is going on.
Before they know it, they’re like putty in the hands of authorities. David Winch (pictured below), the director of MLRO Support Ltd, said that is the wrong reaction.
His overarching message is simple: “We don’t need to panic.” He said that accountants have confidential financial information about their clients, and the authorities – whether that’s the police or HMRC – are not routinely permitted to just come and say “hand it over” because it’s covered by client confidentiality. So they need to go through a process to obtain this “special procedure material”.
He explained that special procedure material means documents and information that is held by somebody in a business on the basis that they should keep it confidential. So in order for the authorities to access that information, they have to go through a process that involves getting a Crown Court judge to sign off that there is proper legal basis to allow them to require this information. As soon as the judge is satisfied of this, the production order is signed and served to the accountant.
If you find yourself in this situation, Winch laid out a step-by-step process of how accountants should react if they get a knock on the door from the thin blue line.
Step one: Don’t panic.
“It’s not about you. It is about investigating the client, it’s not about investigating the accountant,” said Winch. “It’s not like somebody’s going to comment on how well you’ve done your work, or whether you should have checked more things or that sort of thing. That’s not the purpose, nor is it anything to do with anti-money laundering (AML) supervision. Please don’t start improving your working papers and initialling all the empty boxes and fudging things.
“It is to do with your client being suspected of having committed some sort of criminal offence, and you having information that will help the authorities to investigate.”
Step two: Don’t tell the client
“The whole point is that the authorities are investigating your client,” said Winch.
“Your client may know that, or they may not know, but you can’t ask. So don’t contact the client and say, ‘I’ve had this production order request.’ You just deal with it.
“You don’t want to be volunteering information to the client about the police or HMRC criminal investigation. The client may mention it to you or may not. But because of issues around tipping off, you don’t really want to mention it if you don’t have to. You just continue as normal – and don’t do anything extra.”
Step three: Narrow the information
“Very often the authorities will contact you and say, ‘We are going to ask for a production order and we’re going to ask for this, this and this…’ At that stage, it is open for you to go back and ask them to be absolutely clear what you’re required to produce and what you’re not.
“You may have had this client on your books for 20 years, and if they ask simply for everything relating to them, you’re going to have to root through 20 years’ worth of documents, whereas they probably only want the last year or two.
“You could ask: ‘Are you only interested in its income tax returns? Are you interested in the limited company they have?’ You can actually make life a lot easier for yourself and for them by having a discussion about what it is exactly they need.
“So if you can sort out with the authorities exactly what they want and focus the wording on that, then it will help you produce that information without too much time wasting, and they don’t have a truckload of information that they are not interested in. So you can actually cooperate with the authorities.
“They will not want to tell you what they’ve got on the client, although they might say what offences they’re investigating – for example, child benefit fraud or drug trafficking. But they’re not going to give you all the details because they don’t know if they can trust you.”
Step four: No obligation to give a witness statement
“The police or HMRC will probably ask if you would like to make a witness statement to confirm that you’ve handed over the documents. My advice is don’t do that. It’s an invitation – it’s not a requirement.
“It’s better not to make a witness statement. HMRC or the police can make their own witness statements saying, ‘We attended the offices of XYZ Accountants and we obtained these documents,’ and list them. If you make the witness statement, it brings you into being a party in the proceedings and it makes you, in my view, more likely to be asked to be a witness in the Crown Court.
“You just don’t need that hassle and stress. There’s absolutely no obligation on you to do it. So just don’t. The police or HMRC are not going to take offence if you say no. Certainly comply with the court order, but there is no obligation to make a witness statement.”
Step five: Don’t volunteer additional information
“Don’t feel that you should volunteer additional information, either. A production order is about what they call material, which means documents or recordings. It’s not about giving a commentary, offering advice or an explanation of what’s in the files. You just hand over the documents. You don’t need to comment on them or explain them. It’s down to them to sort out if they can understand them or not.”
Step six: Don’t be fooled by a data protection notice
“The police sometimes will give you a Data Protection Act notice. A Data Protection Act notice will say you won’t be in breach of the Data Protection Act if you give us information.
“Remember that’s not actually a court order, requiring you to produce something. So the fact that you won’t breach the Data Protection Act really is neither here nor there. So don’t be fooled into thinking that the data protection notice forces your hand to turn over everything. At that stage, you would still be breaching client confidentiality if you turned over information. So you won’t breach data protection. What you have to say is, ‘I need a court order from you before I can hand you anything.’”
Step seven: Do you have money laundering suspicion?
“Now you know HMRC or the police are conducting a criminal investigation into your client, do you need to report a suspicion of money laundering under the normal anti-money laundering rules?
“The answer in all probability is yes. If you make that report, say that a criminal investigation is ongoing and include the reference number if you have it. But as ever with suspicious activity reports, you don’t want to do tipping off.
“You are now in a bit of a dilemma. If you’re aware the police are suspecting your client of drug trafficking, for example, then will you want to continue acting for this client?
“There’s a tension between not wanting to tip off and certainly not wanting to give information about having a production order vs if this client is possibly involved in criminal activity that they’re not telling you about. Do you want to carry on with them?
“There isn’t a standard textbook answer to that. It depends on the particular circumstances.”