For practising accountants, their role in the fight against money laundering continues to attract the keen interest of law-makers.
The requirements of the second EU directive on money laundering, which was implemented here by regulations taking effect on 1 March, will shortly be added to by the adoption of a third directive. Among other things, this is likely to lead to a new registration and licensing system for company formation agents and others who provide business addresses for third parties.
Currently, though, attention is being cast back to the second directive, and the issue of whether accountants have been treated unfairly in the UK’s implementation.
Under the second directive, member states are required to take necessary steps to ensure that those covered by the legislation pass on suspicions of money laundering to the national authorities information.
But member states have the option of exempting from this requirement ‘notaries, legal professionals, auditors, external accountants and tax advisers’ in respect of information acquired in the course of ascertaining a client’s legal position or defending or representing the client.
The UK government interpreted this option selectively. Instead of applying the exemption to all five listed categories, it afforded exemption from the requirement to pass on information to a money laundering reporting officer only to ‘professional legal advisers’, and only in privileged circumstances. Accordingly, the exemption from reporting was not extended to accountants and auditors.
What is now being formally re-examined by the government is whether the way that the UK has enacted the directive in fact breaches it. As well as considering whether all the listed categories should have been covered in any exemption from reporting, the question of inequality of treatment arises. The directive states those services that may be provided to clients by accountants and auditors, as well as legal professionals, should be treated in the same way by the law.
The question of whether accountants and auditors are capable of acquiring information in privileged circumstances is complex, and the accountancy profession has sought legal advice on the issue.
But the government seems now prepared to admit that the UK regulations have been drafted wrongly and that suitable amendment should be made in the near future.
The re-exploration of this issue has coincided with the consideration by the House of Lords of the scope of legal professional privilege. The Court of Appeal had decided in March that communications between the Bank of England and its solicitors were admissible as evidence in the case brought against the Bank by the liquidators of BCCI.
This would have thrown the whole notion of legal professional privilege into turmoil – but the Law Lords reversed the decision, which means that the scope to assert privilege over client communications is protected.
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- John Davies is head of business law at ACCA
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