Insolvency Technical Update - August 2017
Insolvency technical update – Your round-up of recent developments in insolvency
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Anti Money Laundering
Revised Anti Money Laundering Guidance for the Accountancy Sector has been issued by the Consultative Committee of Accountancy Bodies (CCAB). The guidance has been prepared to help accountants (including tax advisers and insolvency practitioners) comply with their obligations under UK legislation to prevent, recognise and report money laundering. Compliance with it will ensure compliance with the relevant legislation (including that related to counter terrorist financing) and professional requirements. The guidance is based on the law and regulations as of 26 June 2017. The guidance is issued in draft while awaiting approval by HM Treasury. Although appendices for tax advisors and insolvency practitioners have not been included, these are at an advanced stage of drafting and are expected to be issued shortly. The main guidance however provides a solid foundation from which to work from.
Politically Exposed Persons (PEPs) Guidance
The FCA have issued guidance on the treatment of Politically Exposed Persons (PEPs) for AML purposes. The guidance can be obtained on the publication section of the FCA website.
- There is useful guidance on who should be treated as PEPs.
- The requirements of the Money Laundering Regulations 2017 are highlighted, especially the requirement that each PEP must be risk-assessed on case-by-case basis.
- UK PEPs (family members and associates) should be treated as low risk, unless there are other risk factors not linked to their position as a PEP meaning they pose a higher risk.
The Financial Ombudsman Service will consider complaints from PEPs, their family members or close associates – and will take the guidance into account.
The Accountant in Bankruptcy (AiB) will stop accepting paper based applications for sequestration from 30 September 2017. The last day for receipt of paper based by the AiB is 29 September. Further details available here.
The Accountant in Bankruptcy has published a new PTD Bulletin. The Bulletin covers the latest statistics on PTDs, ASTRA enhancements, Handy hints, PTD audits and reviews, Notifying AIB when trust deeds fail, and more.
Concerns have been raised with the AiB about some of the content contained within the Bulletin.
In particular, concern has been raised in connection with the article on notifying the AiB when a trust deed fails and the advice within the Bulletin in situations where the debtor is deceased. The article highlights that there is a legislative requirement to notify the debtor and provides guidance on notification where the debtor is deceased. This includes suggesting that a letter be drawn up and addressed to the debtor but not issued. The inference in the article is that the letter would be placed on file and exhibited to the AiB as having been ‘issued’ to the debtor in order to meet the legislative requirements.
IPs and their staff are reminded that the fundamental principles contained within the Code of Ethics include integrity and professional behaviour. IPs and their staff are likely to breach those fundamental principles where letters are used in the way suggested in the article. It is considered that the correct approach in such a situation would be to write to the Executor(s) of the deceased estate.
We have also queried whether the approach to joint and several debts and the assessment of contributions set out in the article ‘Attributing joint debt in linked trust deed proposals’ complies with legislation. IPs encountering such a situation may wish to seek legal advice.
The AiB have issued the summer edition of their DAS Digest. The edition includes articles on Stakeholder events feedback, Latest DAS statistics, DAS review responses, DASH case conversation function, and DAS case reviews and decisions.
Insolvency Service Guidance
The Insolvency Service have issued new guidance in relation to reporting misconduct by companies, directors and bankrupts to the Insolvency Service. The guidance provides detailed information about how to complain about misconduct to the Insolvency Service and what they will do about it.
Subject Access requests
Following a series of court decisions, the Information Commissioner’s Office (ICO) has issued an updated version of its code of practice on Subject Access Requests (SARs). The revised code addresses a number of difficult issues in relation to SARs, including how the rules on disproportionate effort should be interpreted. A useful commentary can be found on the website of Brodies LLP.
SIP 11 consultation
The Joint Insolvency Committee has issued a consultation on the handling of funds by insolvency practitioners. The main change in the draft SIP 11 issued for consultation is to provide greater clarity around the need for proportionate safeguards and financial controls so that creditors, and other stakeholders, can be confident that funds are held appropriately and securely and that their interests are adequately protected. The consultation closes on 12 September 2017.
Common Financial Tool consultation
The Accountant in Bankruptcy has issued a consultation on whether the CFT should be changed in Scotland from the Common Financial Statement to the Standard Financial Statement. Further information on the consultation which closes on 27 October 2017 is available here.
Joint Insolvency Exam
The Joint Insolvency Exam Board have published transitional provisions that shall apply to candidates and papers as the exam moves towards a revised structure in 2018.
Candidates for the November 2017 diet of exams are reminded that applications must be received by their RPB no later than 6 September 2017.
Application under section 63(1) of the Bankruptcy (Scotland) Act 1985 by Kenneth W Pattullo, former trustee in the sequestration of Mary Elizabeth Johnstone. Sheriff Deutsch in Glasgow Sheriff Court has issued a note in connection with the above application. The Note provides guidance on the circumstances in which it is considered appropriate for a former trustee in receipt of a PPI refund to apply to be re-appointed to a sequestrated estate. While the Note raises some highly valid points, some of the approaches discussed as being alternatives by the Sheriff may not sit entirely comfortably with regulatory or professional expectations.
Redman v Zurich Insurance plc and another. The High Court has provided useful clarification on the transitional arrangements of the Third Parties (Rights against Insurers) Act 2010 and whether the claimant was entitled to rely on this Act, avoiding more stringent requirements of the Third Parties (Rights against Insurers) Act 1930 (TP Act 1930) as a result. (via Lexology)
BHL -v- Leumi ABL Limited.The High Court has found that the lender of an invoice discounting facility may not always be entitled to charge collection fees under its contractual rights. (via Lexology)