The Debate: New money laundering rules


By Felicity Banks

Many accountants fear that the enforcement of the new money laundering regulations will undermine relationships with their clients.

In particular – to a profession steeped in the concept of materiality – the lack of de minimis provisions appear unreasonable in the extreme.

As time has passed, however, and more thought has been put into the actual operation of the legislation, the government has been acting to ensure the burdens on accountants and their clients will not be disproportionate to the benefit gained. Law enforcement, after all, will not benefit from large numbers of reports with insignificant intelligence value.

Work is progressing in the area of abbreviated reports and similar methods of reducing costs and information to what will actually be of use.

What is left, that will require to be reported by accountants, will include instances of real criminality, including intentional tax evasion. The people who should fear this are the tax evaders and other criminals, not accountants or their law-abiding clients.

Accountants generally already do everything they can to make sure their clients account truthfully and fairly, and will resign if they have reason to believe this is not being done.

To follow their resignation with a private and unsensational report to law enforcement will require a change in thought processes by most accountants, whose first thought might well be in terms of breach of client confidentiality.

How does this differ in principle, though, from audit reports, which report corporate misbehaviour to ‘outsiders’, who are entitled to learn the truth and to benefit from the work done in their professional work by accountants? In several ways, of course, but there are also similarities.

A report of suspected tax evasion will find its way back to those entitled to know – the tax authorities – and that evader will find they have far fewer opportunities to evade taxes under the auspices of a new, and perhaps more compliant, adviser. For a profession committed to true and fair accounting, that would be appropriate.

  • Felicity Banks is head of business law at the ICAEW.

By Michelle Perry

UK accountants have been up in arms over the incoming anti-money laundering rules for fear, among other concerns, they are being forced into the role of unpaid informer to the tax authorities.

The outcry stems from the requirement for accountants to file suspicious activity reports on their clients if they suspect that money laundering is occurring, no matter how small the amount involved.

This last bit is what is causing all the fuss – the lack of a de minimis reporting requirement. It will mean that accountants have to report their clients if, for example, they have made £50 without paying tax on it.

This is an extra burden on practitioners already facing reams of red tape and will inevitably turn the stream of reports to the National Criminal Intelligence Service currently receives into a veritable flood. If accountants fail to file these reports, they face a prison sentence.

You could argue accountants brought this on themselves. Since the nineties, they have been encouraged to file reports of suspicious transactions.

But over the years, NCIS has become frustrated by the lack of reports.

In fact, NCIS began naming and shaming the profession. And as anecdotal evidence shows that most financial crimes are committed with the involvement of an accountant and/or lawyer, they seemed the ideal professions to target for more information.

What the government seems to have overlooked is the intimate relationship accountants have with their clients, bringing many out of the black and into the legitimate economy.

A de minimis requirement ought to be seriously considered before it’s too late. If not it could push many businesses, legitimate and otherwise, into the arms of unregulated accountants, defeating the whole object of the new laws and jeopardising the future of an entire profession.

The cost of money laundering to UK business is phenomenal. If all parties work together to finalise the rules in the most workable manner then perhaps costs will come down as money launderers realise the UK is no easy target.

  • Michelle Perry is features editor of Accountancy Age.

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