The Home Office’s apparent change of heart over giving accountants the same rights as lawyers under the money laundering regulations will have come as welcome news for thousands of accountants.
The professional bodies have long been arguing that the requirement to disclose all suspicious activity to the National Criminal Intelligence Service is a draconian approach.
But in extending to accountants, tax advisers and auditors a privilege exemption which currently only applies to lawyers, the government could be paving the way for a new debate that will see accountants pushing for full professional privilege in all client relationships.
Nigel Morris-Cotteril, a lawyer and director of the Anti-Money Laundering Network, claims that accountants will use the latest apparent concession from the Home Office as a ‘stick to beat the government with’ in its drive to achieve full legal privilege for all client relationships.
He claims that the profession has been trying to establish full privilege for the best part of a decade, an effort driven by a growing trend for accountants to encroach on work traditionally carried out by lawyers.
Whether it is accountants encroaching on lawyer’s work or vice versa is a moot point. The fact remains that accountants regularly get involved in legal advice with their clients and tax consulting and help with company formations can both be put in this bracket.
Should they receive the same privilege as their legal counterparts? Accountants argue that because lawyers have privilege they also have an unfair advantage when tendering for work, and clients are more likely to pay for advice from those that will not shop them to the authorities.
One high-profile accountant who is involved in the debate says that accountants’ are indeed pushing for privilege in all professional dealings with their clients. ‘I see no reason why we shouldn’t benefit from the same legal/professional privilege that lawyers do,’ she says.
‘We don’t see why they (the government) shouldn’t acknowledge that it’s as important to us as it is to lawyers. We do acknowledge that it isn’t as essential to our areas of practice – except perhaps in relation to tax advice, where many accountants will represent clients at tribunals.’ But she does concede that it is something that is ‘pretty far down the line’.
For the time being, accountants will have to be satisfied with the mooted Home Office concessions. Although not yet set in stone, most experts agree that it soon will be.
Felicity Banks, head of business law at the ICAEW, says it is a hugely important concession.
‘The Proceeds of Crime Act was very, very disturbing. The lack of a de minimus figure most upsets them, but what came a very close second was a reduction in client confidentiality. This very much corrects that,’ says Banks.
‘The institute is, in principle, in favour of fair competition between people who provide the same services.’
On top of the breakdown in trust between accountants and clients, it can be argued that accountants must bear an unfair cost burden as a result of the need to submit so much to NCIS, and the Home Office consultation paper goes some way to address this.
The paper says a study of the costs in 2001 estimated ‘an approximate cost to industry of making a report of money laundering of £250 per report’, but goes on to say that this is likely to have decreased since NCIS introduced a less burdensome format for disclosures. Still, it is a significant amount.
Whatever the cost implications, Morris-Cotteril said accountants are playing a dangerous game in trying to remove the requirement of reporting certain activities to NCIS. He claims accountants should be saying a ‘big thank you’ to the government for introducing the legislation in the first place. ‘Otherwise they would be in grave danger of being prosecuted for money laundering.’
Money laundering regulation has, he argues, given accountants the ‘tools’ to detect illegal activity. He says it would be ‘completely silly’ to believe that anyone is better at second-guessing whether a client is involved in laundering money than NCIS.
It is a valid point, but one that is unlikely to sit well with accountants. Accountants could argue they are in the perfect position to determine whether their clients’ conduct amounts to criminal activity or not.
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