Anti-Money Laundering Queries
A number of queries have been published in the ICAS CA Practitioner Service's bi-monthly Technical Bulletin, and are categorised below. Click the titles below to view sample queries and answers from each category as well as links to each list of queries.
Customer Due Diligence
Query: If we were to take on a new client who has at one time been in prison, would there be anything extra, money laundering-wise, that we would need to do?
Answer:This comes down to the firm's assessment of risk and its policy of due diligence across the risk categories.
You would have to consider the reason why the potential client had been in prison. If, for example, he simply got into a fight leaving a nightclub or whatever, it is unlikely this would cause any additional risk. However, if he were jailed for fraud, extortion, drug running, living off immoral earnings or similar that would certainly put him in a high risk category.
In the latter situation, the firm's procedures for high-risk category clients should be utilised. Of course, again dependent on the nature of the crime, the firm may wish to consider whether it wants such a person as a client at all, regardless of any money-laundering obligation.
More details on applying customer due diligence procedures can be found in our downloadable List of Customer Due Diligence Queries.
Query: We have recently prepared accounts to 31 March 2012 for a new client and submitted these and the returns to HMRC. Since then, we have become aware of undisclosed payments made to the client (as a result of accounts work performed for another of our clients). The VAT due on these payments has not been paid to HMRC. Obviously these payments did not come to light when we were preparing the accounts and the client made no mention of them. In addition, we have subsequently discovered that the client has arrears of tax from previous years, suggesting that this omission is not just an oversight. Given that we believe that the accounts and tax returns deliberately understate the profits and tax liability, what action should we take?
Answer: The action taken is really dependent on whether you believe that the client has deliberately concealed the transactions or whether you believe that it is an innocent error. If you consider that it is an error, you should speak to the client and discuss what can be done to address the matter. If the client is happy to go ahead with this process, and you feel that the reason for the mistake is reasonable, then there is no need to report to Serious Organised Crime Agency (SOCA).
If, as you suggest, you believe that the client has deliberately concealed transactions, then you must report this matter to SOCA. Despite this, you do not necessarily need to resign and you may wish to bring the issue up with the client. The client may then agree to correct the error (this will not invalidate your previous report to SOCA). If the client does not agree to correct the error, however, then you must resign and write to HMRC, informing them that previous returns submitted by you for this client cannot be relied upon (to say any more would be a breach of confidentiality).
If the client agrees to adjust, but you still feel that they are not being 100% honest with you, again you must resign. Finally, if the client adjusts and you are satisfied that these accounts are correct, you can continue to act. Unless the client has a good explanation for the omissions, you should be considering your risk assessment for this client and looking carefully at the accuracy of returns in subsequent years and the completeness of information being provided by the client.
More FAQs can be found in our downloadable List of Reporting Queries.
Query: I run a small practice and sometimes use staff from agencies or subcontractors to assist me in busy periods. Do I have to make sure that they are suitably trained in money laundering issues?
Answer: The simple answer is yes. Not only will you have to ensure that they are trained in and aware of your firm's own procedures but you should ensure that they understand what money laundering is and how to identify it. You should be ascertaining what training they have had and whether there is adequate proof that this has been undertaken. In particular you should be ensuring that the individual's training has been recent. Always ask individuals who are new to the firm of their experience in this area and if necessary arrange training for them, whether it be by external or internal courses or online training. Whatever the training, remember to retain evidence of this.
It is important to note, that subcontractors who provide these sorts of services (i.e. accountancy service providers), should now be registered with HMRC (unless already registered with a professional body). However, if the subcontractor is working for a firm who is monitored by a recognized supervisory body and he or she does not contract with the end client, is included within their client's anti-money laundering procedures, and there is a contract between the two businesses expressing these facts then there is no need to register with HMRC. Of course, if the subcontractor has any clients not regulated by a recognised supervisory body, then he or she should register with HMRC. These businesses must therefore ensure that they comply with the Money Laundering Regulations 2007 and also have risk based anti money laundering controls in place.
More FAQs can be found in our downloadable List of Training queries.
Query: I have heard that where the police have been unable to prosecute a criminal case successfully, it can refer this to the Serious Organised Crime Agency (SOCA) who can take further action. Is this true?
Answer: Yes. Where a law enforcement agency or prosecution authority has a criminal case which it has been unable to prosecute successfully, it can refer the case to SOCA for consideration for civil recovery or tax action if it meets the following criteria:
- recoverable property has been identified and has an estimated value of at least £10,000;
- recoverable property has been acquired in the last 12 years (20 years for tax);
- recoverable property includes property other than cash, cheques and the like (although cash can be recovered in addition to other property);
- there is evidence proven to civil standards of criminal conduct;
- for tax cases there must be reasonable suspicion that untaxed income has resulted from criminality.
More FAQs can be found in our downloadable List of Other Queries.