The Debate – Reporting money laundering

Do the right thing

By Nigel Cotterill

The Proceeds of Crime Act 2002 makes it an offence to launder money, and places a duty on everyone in the UK to report anyone who is known or suspected of laundering money.

The regulations make it plain that financial services professionals must put in place systems that are designed to enable them to detect and deter money laundering.

Some feel this is a bad thing and they want to sidestep the duty that is placed on everyone else to report suspicions. At the forefront of those trying to avoid that duty are accountants.

This is a serious error of judgment. Accountants are in a strong position when it comes to identifying suspicious transactions – and in a weak one when it comes to saying ‘I did not know’.

If they do not identify suspicion and make appropriate reports, then the courts may find that they are ‘wilfully blind’ or that they had ‘reasonable cause for suspicion’ and decide that they did, in fact, know. The court should decide that, not the accountant.

Far from being an imposition, the regulations protect the accountant by making sure they have a system in place to collect and act on information, which may result in suspicion of money laundering and that they know what to do when such suspicion is identified. Yes, there are criminal sanctions for that failure – but that is consistent with overall international policy.

A person who knowingly advises on a money laundering scheme is a money launderer – this has been the case since 1994. Those who take in funds from a money launderer where they know, suspect, or have reasonable cause to know or suspect that the person is a money launderer are themselves money launderers.

The 2003 regulations serve to protect those who might otherwise inadvertently act in such a way that they are exposed to money laundering.

Accountants want to have the equivalent of legal professional privilege, but that is a different debate, and taking steps to militate against the effectiveness of counter-money laundering laws is the wrong battleground to choose, both for society and for the accountants themselves.

  • Nigel Morris-Cotterill is director of The Anti Money Laundering Network.

…but only if its worth it

By Peter Mitchell

A Home Office informal consultation seeks to redress one of the two principal concerns practitioners have with money laundering regulations, possibly restoring to professional accountants the professional privilege currently provided to lawyers when providing tax advice. However, the most significant issue to practitioners – the lack of a de minimus reporting level – has yet to be addressed.

While we will happily report the occasional criminal that crosses our paths, it was predicted that many of the reports for low value tax omission would not be acted upon by Customs and Excise or the Inland Revenue. They simply cannot have the manpower to collect insignificant sums – it would not be cost effective.

But it isn’t cost effective to make such reports in the first instance as nobody pays the reporting accountants for their involvement, where an estimated minimum £250 per report is incurred in lost chargeable time.

It is still early days, and hopefully NCIS is analysing reports filed so that scatter graphs can be provided of frequency by value, which will probably bear out the well established Pareteo theory that 80% of reports by volume will be worth only 20% in value.

Additionally, NCIS should be monitoring action taken, or not, by tax collection agencies on reports sent to them and, out of courtesy, should also report this action or inaction to the report originator.

Collectively, such wasted reporting is costing our profession a small fortune, and it’s likely that 80% of our effort creates no further income for the Exchequer. It cannot be beyond the wit of our tax collection agencies to provide guidance to NCIS on what is worthwhile chasing and what is not, to relieve us of this unpaid burden.

A minimum of £1,000 lost tax would be a sensible reporting level, below which we would still encourage clients to make identified corrections. With almost all other European countries operating a de minimus level hopefully it will not be too long before sanity is restored to this particular system, and this huge amount of wasted effort on uncollectable sums is halted.

  • Peter Mitchell is chairman of the Society of Professional Accountants.

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