Hope for money laundering reform

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Robert Lovell
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Chancellor George Osborne pledged in his Budget speech this week to reform the UK’s money laundering regime, but stopped short of providing any detail.

As members of the Money Laundering & Crime discussion Group are only too aware, there has been a significant increase in the number of government agencies now using POCA and in particular the confiscation regime.

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28th Mar 2011 11:49

HMRC's own due diligence

I do not believe David's proposals our viable. HMRC's own due diligence procedures are very poor and coud not be relied upon as being correct or up to date. There are many occasions when HMRC have accepted new VAT registrations from persons/companies who subsequently become 'missing traders'. The whole of the MTIC/ carousel fraud was built around HMRC's inability to police their own system.

HMRC's fallback position in respect of these matters is to say the individual business must make the decision as to whether or not to trade/act with a business.  I cannot see HMRC changing their stance.

Malcolm McFarlin


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28th Mar 2011 12:45

Identity theft

Under these proposals, surely someone could simply find a VAT number from somewhere, such as an invoice, and claim to be that business?

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28th Mar 2011 13:44

FATF 4th evaluation states differently

I was mystified when I heard the announcement in the budget, firstly MLR’s are our enactment into UK LAW of European legislation, so it hard to see large scale reform. However, I have had the privilege of giving evidence to HM Treasury personally along with a member of HMRC’s compliance team. Here the perceived perception was an evening out on the approach to supervision and various tweaks to the legislation such as ensuring management policies are in a ‘legible’ format, not just in your head.

There was also a view of widening the scope of the legislation to include ‘High Value Services’ such as school and medical fees when paid in cash. This also fits into FATF 4th evaluation of their recommendations currently being undertaken (Oct 10). In this review it also sets out repairing the anomaly of reporting offences that currently do not mention tax evasion specifically, so in relation to the obligation to report suspicious transactions under Recommendation 13 transactions related to the laundering of the proceeds of tax crimes would have to be reported as suspicious transactions. This does not seem to fit with David’s comments. Even under current UK Legislation tax evasion is defined as financial crime under Financial Services and Markets Act 2000.   The FATF evaluation wants to strengthen the PEP’s regime; we have the Bribery Act to enforce this further.In the current economic and political climate I cannot see it being a popular vote winner by relaxing the requirements for reporting for tax evaders and politically exposed persons. Even the march on Saturday in London had one of its main messages as the correct tax is paid; this has always been the Holy Grail for any Chancellor.Both houses of Parliament have held reviews on Legislation, with more focus on the PoCA, and the risk based approach of both. A case for a de-minimus limit of crime reporting under PoCA was not proved.Members of accountancy bodies have ‘professional ethics’ to contend with any weakening of reporting may be countered by the requirements of these codes of practice. This could actually weaken the sector by a furthering of a two tier divide.I can only see potentials in relaxation for the banking sector whose regime are far stricter than that of the professional. The ability to ‘share and rely on’ information has always been there within the legislation but in reality only benefits larger institutions. Electronic searches are the small firm’s gateway to ‘sharing’ some information held by the major institutions.As for reliance on Government or HMRC, we had our opportunity to rely on a singular piece of Government information for confirming identity, the ID card and the public rejected this out of hand, as for the rest of Government? No, not good enough by a long way, why do you think we have the job of verification?Steve O’Neill

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28th Mar 2011 14:09

All good points

All these are good points worth making (which is not to say that I agree with them all).

The topic has been discussed in more detail in the money laundering and crime discussion group thread at


and I would commend that to you.

Not for the first time we hear a government professing to be keen on turning back a tide of excessive regulation.  The present government has said that it "wants to abolish over two dozen regulatory offences under Money Laundering Regulations and exempt businesses with very low turnovers to reduce compliance burdens".

Some AWEB members would like to see money laundering reporting obligations limited to reports relating to the proceeds of very serious and organised crimes such as drug trafficking, sex[***] trafficking, arms trafficking, etc.

I have suggested that there is scope for some relaxation whilst remaining compliant with the EU Third Directive (and the underlying FATF Recommendations) but the relaxations which I have in mind fall far short of those demanded by some other AWEB members.

We are having an interesting debate!


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28th Mar 2011 16:32

UK PLC open to all (including the criminal)

It is interesting how Governments do come up with this, in the regulations under offences Reg.45 , there are only 26 offences, so he must be planning to scrap them all, so basically the MLR’s have no teeth, therefore no power of enforcement, if unenforceable, no point in having them, except FATF and European Legislation says we must. Voluntary codes, forget it, does not work.

That would put us behind the Regime in Iraq and many other Arab regimes.  Turkey has one of the best, they enforce the obligation to report, however it is an offence for anyone to look at these reports. This just smells of desperation by UK PLC, open to business, no matter who you are, the richer you are the less questions we will ask and the least tax we will remove from you.The problem with just reporting ‘major’ crime is that is putting the burden of detective onto the professional. One stat for you, 60% of SAR’s filed as Tax evasion only is about persons already well known to the police. My first SAR was a £5k capital introduced anomaly, when HMRC investigations team finally got a conviction it was for £5.8m loss of Revenue to the crown from counterfeit cigarettes, this is bigger than all this cases in the new Pay Back times. I had no clue as to this. Under the forums proposals this would not have been reportable.There may be a case for not regulating the smallest of firms, the argument can be set at £15K of regulated activity, when using HMRC penalty calculations. I.e. starting penalty £5k less 70% mitigation = £1.5k, must be no more than 10% of annual GP therefore £15K.  However, once again this must be built on future expectations, however since it would be harder to police the perimeters, since it would be open to abuse and there would be less firms involved to share the overall costs, the average cost of supervision would rise per regulated firm.   Once again those offering services licensed by professional bodies would be penalised by licensing and ethics even more so due to the scale of their smaller businesses.It will be interesting to see how this pans out, I have reviewed the 3rd directive and there is no exemption limit on turnover there, the only point I picked up on is that by the end of 2010 a report was going to be submitted on reducing beneficial owners from 215% to 20%.  Has George just sold everyone a distracting blinder!Steve O’Neill

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28th Mar 2011 17:34

Civil penalties


Don't forget civil penalties under Reg 42 (which would still apply).  How many businesses are actually prosecuted for non-compliance with the Money Laundering Regulations?

Of course a failure to report a suspicion to the firm's MLRO or to SOCA is not a breach of the Money Laundering Regulations, it is an offence under ss330 - s332 Proceeds of Crime Act 2002 (and I don't see any suggestion that such a failure would cease to be a criminal offence).


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30th Mar 2011 16:39

No Real change in reality


I would agree on that point is all that he would actually do is remove the criminality from the firms point of view whilst still allowing civil action to be taken by the Regulatory bodies. The only ones I can see remaining are the ones surrounding registration, which would remain important for the protection of the public especially if this does put a de-minimus level in place, which my little bit of research leaves me to believe £5k would be the limit which matches many licensing requirements of some of the professional bodies including Pii etc.  Of course policing the perimeter in our sectors is HMRC’s job and they are the only supervisor in our sector which has powers of prosecution anyway.  This allows for ‘entry’ to the sector first before registration, one of the Chancellors comments, and removes the burden from the very small bookkeepers, the semi-retired and the staff who do a bit at weekends etc, his other criteria.I could see though with the removal of criminality from the regulations that there would be a widening of the fit and proper test to the accountancy sector, for public confidence reasons, the professional accountancy body supervisors already have this anyway, so it should not be too much of a burden.We always teach that any prosecution of the individual was usually likely under PoCA and its vast range of criminal offences, S330 objective test of negligence, though untested does allow for prosecution for poor compliance to the Regulations if clients criminality warrants that much public interest.So in reality the vast majority of accountants and tax advisors would notice no difference what so ever, the same stick of financial penalty would still be there from the ICAEW or HMRC for example, though with an extra burden of a fit and proper test at regular intervals for HMRC supervised firms.My personal opinion is that there is nothing to much wrong with the MLR’s, it is PoCA that is draconian, wide reaching and intrusive, which is why law enforcement love it.Steve O’Neill

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By SimonP
12th Apr 2011 22:16

MLR = Major Labour Ripoff

Being the cynic that I am, it is my belief that the Money Laundering Regulations have nothing whatsoever to do with combatting crime.

It was just another stealth tax dreamt up by Gordon Brown and his cronies. An easy way to make money off of us professionals. A legal form of Money Laundering, if you will.

Avoidance of VAT is a huge problem and it continually amazes me that despite the fact that non-VAT registered self-employed taxpayers complete Self Assessment Tax Returns to show business turnover well in excess of the annual VAT threshold, HMRC never enquire as to why they are not registered. How hard can it be to program their computers to highlight such returns?

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