Money Laundering Regulations - The Book-keepers Forum (UK)

KHagland · Veteran Member

Money Laundering Regulations

attilabenko · Guru

Hi Kelly,

Did you get your MLR folder from ICB? There are some useful things in it what you should be checking. I don't think it is about what questions to ask but what things to check yourself ( copies of passport, utility bills,etc.).

KHagland · Veteran Member

I do have the MLR folder but there are a lot of other things in there besides the ID aspect which I find it difficult to establish with the client through general conversation. For example HMRC registrations, is the business solvent, internal controls.

Also I have no facility to take a copy of their driving license or passport, is it enough to just take the passport and driving license number.

Thanks
Kelly

kjmcculloch · Guru

My own personal opinion is that the numbers are enough to prove you have seen the passports and have satisfied yourself that you know your client. Others may have a different view on this. One thing to bear in mind taking copies of passports is that they must be black and white only.

Kris

Peasie · Expert

KHagland wrote:
Also I have no facility to take a copy of their driving license or passport, is it enough to just take the passport and driving license number.

I asked about this before and I've come to my own conclusion that when the time comes I'm just going to take a photo of their driving licence or passport using my Iphone then store the photo securely elsewhere.

ICBUK · Guru

Hello,

The guidance says you should have copies of documentation proving ID. The ICB read that to mean actual copies, rather than just some of the information.

If you get visited by your supervisory body, it would make it much harder to prove your due diligence if all you had was numbers. They would have to do some passport number check or something. If you had actual copies then it would be a quick glance and that would be it.

Phone or camera is a good idea, you would need to copy them over quickly in case you lost it with all that information on.

You don't need to take a black and white copy, colour is fine, however black and white is also fine if your client doesn't want colour copies.

Kelly if you need advice you call 0845 060 2345 for MLR support or email mlr@bookkeepers.org.uk

kjmcculloch · Guru

HMSO issued guidance some time ago that categorically forbids the colour copying of passports, have these changed?

http://www.hmso.gov.uk/copyright/guidance/gn_20(old%20format).htm

Kris

attilabenko · Guru

Hi Kelly,

If your client is Ltd it is a bit easier, firstly you can check them on Companies House website, you can ask them for last years set of accounts, registration certificate. From those you can see their financial position. With self-employed clients, they not going to have most of those, maybe last years accounts.
To my knowledge if you can't make the copies and the client have to do them for you they might have to be certified copies but if you see the copy infront of you and their passport, you can compare and it should be enough.
HMRC registrations are their resposibility but you can ask if they are registered as self-employed, VAT registered or not and how they pay NI and if they have employees on PAYE or not.
I am not sure if these are part of MLR, personal opinion if client forgot to register as self-employed is not money laundering as the whole purpose of laundering money would be to put illegal money thru legal channels so your client would try to make sure everything looks legal.
This whole MLR thing is far not as much as people think (well at least not in my opinion)
To a lot of questions you only gonna get answers once you started with their books.

kjmcculloch · Guru

Some interesting guidance from the JMLSG:

http://www.swat.co.uk/NewsViews/TechnicalNews/tabid/149/articleType/ArticleView/articleId/2648/JMLSG-Guidance-on-Identification.aspx

Kris

ICBUK · Guru

Kris:
The ICB contacted the HMSO now run by OPSI (Office of Public Sector Information) who said there is no restriction on colour copies. They gave us this link:
http://www.opsi.gov.uk/advice/crown-copyright/copyright-guidance/reproduction-of-the-british-passport

However, as black and white is acceptable for MLR maybe just do black and white?

Attila:
Tax avoidance is covered under Money Laundering, (as money laundering was started to avoid tax). not being registered with HMRC and therefore not paying proper taxes is avoiding tax.

Having said that, I doubt they would hire a professional bookkeeper if they were doing that on purpose. It is just to make you think about what may seem odd.

kjmcculloch · Guru

Thanks James,

Typical government agency. One hand doesn't know what the other is doing. You'd think if guidance is superseded the old stuff would be removed.

I'll stick to how I'm doing it, just in case as the new guidance doesn't actually say you can do it in colour.

Kris

ICBUK · Guru

Tell me about it, don't even start me on Data Protection Act :)

kjmcculloch · Guru

I have had the misfortune of speaking to the ICO, called 3 times, got 3 different answers.

Kris

attilabenko · Guru

HI James,

My personal opinion. If I discover someone is commiting crime i have to report it to the police, fair enough. Someone is not paying taxes, well other people getting paid to discover that, and they are getting their salaries from our taxes. They should do their job if they need my help give me discount on my taxes...
Obviously I am following the MLR, that's part of my job but I don't like some of it. Of course if I discover clients are taking suitcases of money to the Caymans I will report it, in my opinion that is real money laundering. If I see someone is trying to avoid NI payments all I can do is advise them to check the regulations. I am not allowed to advise them on any aspects of tax, I am not trained or qualified on it and it is not part of any ICB syllabus either so if ICB as an MLR supervisor wants me to check on these things should train me on it first...
Again obviously if I am sure about the rules I will advise client where to look or who to ask for info. I don't think any of the above is a matter for the Serious Organised Crime Agency. Ok apart from the Caymans ;)
All that is just opinion, I am still following MLR, I like to have a practice licence...

ICBUK · Guru

Hi Attila,

I see your point, and the bit about discounted taxes :)

But the law is law, and if you know someone is not paying taxes and don't question or report it, you could be in trouble.

Their are obviously limits to what you can do, which is why the ICB designed the forms to help you prove you have done everything you can in the event of an inspection.

kjmcculloch · Guru

I think the problem with the MLR, like so much legislation, is the fact it is open to interpretation. Sometimes you could drive a coach and horses through it.

Take the photocopying of documents, the ICB's interpretation is that you should take photocopies, but the law says:

Customer due diligence measures means

(a)identifying the customer and verifying the customer's identity on the basis of documents, data or information obtained from a reliable and independent source;

19. (1) Subject to paragraph (4), a relevant person must keep the records specified in paragraph (2) for at least the period specified in paragraph (3).

(2) The records are

(a)a copy of, or the references to, the evidence of the customer's identity obtained pursuant to regulation 7, 8, 10, 14 or 16(4);

The POCA 2002 used to cause me no end of problems back when I was a manager of a credit union. Tipping off scared the life out of most of the staff, to the extent they didn't really know what to do. If someone normally paid £10 per week into their account, and one week they paid in £50 they would be terrified by it.

It's just something we need to live with, but it has become so complex for the smaller practice.

Kris

Peasie · Expert

kjmcculloch wrote:

I think the problem with the MLR, like so much legislation, is the fact it is open to interpretation.

The problem with the MLR is like a lot of legislation they use a real threat and then bring in regulations that cover everything they wouldn't otherwise get away with. But mention terrorism and you can legislate for anything.

I haven't started advertising yet (I'm waiting till I've passed level III) but when I do advertise I'm going to have to tell any potential clients that anything slightly dodgy and they will have to make sure I don't know about it otherwise I become either a criminal if I turn a blind eye or I lose a client as I have to report them. I've heard stories third hand of people employing accountants and they'll tell them the income they want to end up with and be taxed on and the accountant then has to come up with the figures to suit this. That's an extreme case. Obviously not caring about MLR.

People under MLR are now unpaid employees of HMRC. They have to carry out the work HMRC sould otherwise they become a criminal. This wasn't what MLR was brought in for but that's how they can now use it. Same with the regulations that lets councils spy on people. Not what it was originally brought in for but put enough clauses in the bill and you'll get away with it because who's going to argue with a bill trying to stop terrorism.

You know, (I'm on a roll now), whenever I hear of an increased terror threat, I think to myself the security services must be running out of money so they'll increase the terror threat and that requires more money to be spent.

I'd better stop now or I'll end up sounding like me role model Peter Griffin.

Don Tax · Expert

kjmcculloch wrote:
... but the law says:

Customer due diligence measures means

(a)identifying the customer and verifying the customer's identity on the basis of documents, data or information obtained from a reliable and independent source;
.....
I was irked at having to request proof of ID. Clients understood for a few weeks after a terrorist attack, but soon forget and more than one existing client expressed some resentment. Eventually, I decided discretion is the better part of valour and subscribed to an ID check service at £75 for the first 15 searches. The next 25 searches cost around the same.