Hope someone can give me a bit of help with this, as to be honest this is the area that confuses me the most. I struggle to understand what constitutes an event that I would have to report.
Example 1:
If a client ran a business but failed to give you till receipts, would this in itself create an event one needs to report. Although there may be no evidence in itself that Income and therefore statutory taxes are being avoided, it could be inferred that it's a reasonable and logical conclusion?
Example 2:
You run a payroll for a client but it seems reasonably certain that the payroll maybe understated e.g. it looks like there's insufficient hours being claimed by the staff to cover normal working hours
Example 3:
A client used unlicensed software.
Which if any of the above leads to Client benefiting from the proceeds of crime? Or in fact are all of them?
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
I started to write a whole speal about what I might do but thought about it a bit more and decided that before you can have a supiscion of wrong doing, you need to seek explaination. You haven't said if you have approached the client(s?) about these issues.
Obviously, any answer, will depend on the individual circumstances.
In case1 You say the client failed to give you the till receipts. Do they exist? or is there any other record kept (day book, or similar). Although till receipts are ideal, not every business uses them.
Case 2 Get an explaination for the short fall from the client, there could be one
Case 3 If the client is aware of the fact they are using unlicensed software, you could report it to FAST, who can take action. I haven't used it so advise you read the full site first to satisfy yourself that it is what you should be doing. (Ordnance Survey and Symantec are among it's members)
Not a great deal of help but I wouldn't go ahead without a firm suspicion that an intent to commit a crime is there (apparently intent has to be there, for a crime to be commited - maybe case three)
Thanks for the reply Bill. Perhaps I phrased the post badly but it's an "if this happened" question?.
I've read, and re-read the money laundering manual from ICB and numerous web-sites and I'm still confused about what a "crime" is under MLR and when a bookkeeper does and doesn't have to report it. So I was trying to think of different scenarios to try and help me understand it all.
I guess this proves just how confused I am.
edit: reading your reply again bud, would you consider the examples a reporting event - if one wasn't happy with the clients explanation
-- Edited by ADAS on Saturday 2nd of July 2011 04:57:19 PM
-- Edited by ADAS on Saturday 2nd of July 2011 04:57:39 PM
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
I know exactly what you are saying, it is a bit of a minefield, and very confusing.
If, in your scenarios, you believe that in cases 1&2 that there is an actual case of false accounting going on, with the intent to make a gain, then there are grounds to make a report.
If in case 1 the client presents the value of till takings as a total physical count of what's in the till at the end of each day, then I can't see that there is anything to report. Obviously some record needs to be given to you to make your bookkeeping entries. My personal view is that all dealings with clients is based on trust (both ways), and that until that trust is broken, what my client tells me, or present to me is fact.
In case 2 If the client is making a gain because of an error, then there is no intent, and no procedes of a crime. That will happen if he becomes aware of the error and does not correct it.
Case 3 is There is an offence being committed, if the unlicenced copy is being used,. Who is committing the offence may be something else.
In cases 1 and 2 there is the potential that a crime is being committed but not nececcerily that one is being committed.
The guidance says that a suspicion should be based on reasonable grounds, using any skills, training, professional knowledge you have, to form a reasonable suspicion. It also needs to be weighed up against the risk factor involved with the business (high value cash only, foreign trading, would obviously be a high risk). They finish by saying, if in doubt report it!
Edit: Forgot to add that is important to make necessary enquiries, that a professional person with a certain skill level, qualification, and experience, should make, to satisfy themselves of the legtimacy of the transactions (again, from the manual)
Chapters 2.24 thru to 2.32 of the ICB manual, sort of define knowledge and suspicion.
Wonder how many people have been told "off the record" about a back pocket transaction and turned a blind eye? There's another offence being commited by the bookkeeper/ accountant!!
Bill
-- Edited by Wella on Saturday 2nd of July 2011 06:01:15 PM
This is a very interesting question, and one that I've also struggled with loads. On the SOCA website once you sign up with them they send you a book of examples, 'helpfully' none of them relate to accounting. After discussions with ALMCC (who I have my money laundering product with) I have to say I wasn't much clearer, however as Bill says it all comes down to suspicion and gain.
The client has to be gaining something out of not declaring or altering income/expenses. If you suspect them of this then you have to report them. In your example 1, failing to give you till receipts doesn't necessarily create suspicion of tax avoidance, but it does provide suspicion of bad record keeping, but that't not necessarily with the intent to defraud. From my conversation with AMLCC the general outcome seemed to be give the client the opportunity to correct the situation, if they are unwilling to then report them.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
I worked for a company and the managing director was taking money out of the account and not providing receipts. I discussed the matter with the company secretary and when the managing director suddenly left taking another chunk of money with him, we informed the police. The case has now been to court and settled and the money is to be paid back.
The time period for this event of money being taken out of the account was 6 weeks and as the sums initially were only £100 I was expecting receipts to match up but never received them. That is when alarm bells rang and I reported this within the company but had no suspicion that he was a crook as he said he would sort the receipts out.
I have made notes in my file but not submitted a report as the police were involved and the case went to court.
Now to me that's just directors not understanding the difference between company money and their moeny.
I would just be putting ad hoc unexplained withdrawals to that directors loan account which invariably ends up as a dividend.
As this director left assuming that there was a final salary payment or severence package then you would deduct from that.
Taking ex directors to court can be costly so can I assume thatt the amount was substantially more than could have been retained from their final payment?
This comes down once more to the fact that there must be segregation between authorities (approval, custody and recording must never fall to the same person no matter how high up they are within a company).
The money taken by director A should never have been paid without approval by director B. If a company has slap dash internal processes and procedures what do they expect will happen.
I don't have all of the facts but I suspect that a good solicitor could win this case for the accused director. They're just going to say that this withdrawing money in this manner was an established pattern of past practice and that the court case is petty vengeance by an agrrieved remaining director. Bosh, case over methinks and the company just ends up with a big legal bill.
However, that's getting off subject. I would not have considered that case to come under money laundering. That's just (right or wrong) normal day to day running of many companies which gets sorted out at the period end.
kind regards,
Shaun.
P.S. edited because for some reason I put "Hi Roz" after the initial paragraph (Doh!)
-- Edited by Shamus on Monday 4th of July 2011 10:39:30 AM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The company had very bad controls on the bank account and there was a great deal of trust. A lesson has been learnt and tighter controls are now in place. All the transactions were done via internet banking, hence the director taking off with yes a substantial amount of money plus a spending spree on company credit card.
Although he has been ordered to pay the money back plus our costs, I cannot see this happening quickly as his house has now been repossed and he is trying to seek a new life in Australia.
Thanks for your comments, it has made me feel happier. When things happen so quickly when do you suspect mal practice?
glad to hear that at least this has served to tighten up the companies procedures. Every cloud has a silver lining and all that.
if the conviction for fraud goes ahead the director can forget getting into Australia as being a convict is no longer a prerequisit and is actually frowned upon.
The company could use that to get their money back. If this was kept out of the courts then the ex director might be forthcoming eith the readies in order not to mess up their hopes of a new life down under.
Then again, it will have already gone too far methinks and the investigation into the ex directors past will show this case up.
So, no money and a fraud conviction... Personally I think that the only way that they will now get into Australia is to start off in a boat somewhere in South East Asia and go in under cover of darkness!
kind regards,
Shaun
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Supposing I've satisfied myself that the client has omitted £3000 cash sales from a turnover of £100,000. I believe this is technically proceeds of crime. I would not, however lose sleep on it if I forgot to report it.
I would though, lose sleep if I forgot (unlikely) to add further sales to cover the shortfall and submitted a Tax Return showing turnover of £97k.
I wouldn't concern myself with 1+3, but 2 might be serious enough. I'd like to say more, but only in a PM.
-- Edited by Don Tax on Monday 4th of July 2011 08:17:43 PM
This is a problem many of us run into as I know this to be true. (It was brought up with HMRC at a WTG meeting by a number of accounting firms).
1. We know out client is technically "money laundering" and after we speak to them, they refuse to stop 2. We complete a SOCA report to cover our backs 3. Two years later the client is still technically "money laundering" because no-one from SOCA or HMRC have followed up on your report and you feel really stupid having told the client its illegal, reported them (but they don't know this) and nothing has happened.
To be honest I would not report any of the examples given. ML is also based on intention. Failing to provide receipts including till receipts etc in its self not illegal - as long as it does not cause a "material" problem its not ML.
The second one - well a few years ago, I mentioned to the MD of a company who had recently employed me that the 40 hours that the factory employees were logging on thier time sheets were fiction as I beleived they actually worked 37.5 hours! When he asked the factory staff about it, the just laughed, confirmed that they did work 37.5 hours and always recorded it as 40 hours. They were surprised they had got away with it as long as they had (about 8 years). What happened was the had previously been given 37.5 hour week contract, but when the company had been taken over the were told that they would in future have to work 40 hours for the same money. So they just changed the time sheets, but not the actual times they worked! The MD had purchased the company from the previous owners and renegotiated their contracts so they worked 40 hours and got paid for 40 hours. Would you say the staff were ML just because they were told to work more hours for the same pay?
The last one.... mmmm As someone who often purchases software only to find that if I don't pay a renewal licence I cannot use the software (which for company I used to work for - software £20k, annual licence £4k and they had lots of problems with the software) anymore, I don't have a problem with anyone using unlicenced software. In fact its not always illegal to use it. What I think is illegal is selling it/buying it, so that a single licence can be used by more than one person at the same time. I don't pay for Iphone apps but I hate paying for something I don't like - and if I don't like an app I will delete it. I am not breaking the law, and Apple knows I do it, as I know one of the (not free, but I think it should be) apps I use keeps telling me that I have an unlicenced copy and if I want to update through them I have to pay for it, so I wait untilsomeone is offering the hacked update for free . If the app was really good and gave me a benefit I'd pay, but I will automatically try to use the free ones - but some charge even though it may not be any good. I know its not illegal to have "hacked" copies of apps on a Iphone. I am surprised to find I actual spend about £3k a year renewing licences and buying new software, but that because I need software that has no problems and is upto date, which sometimes unlicenced software isn't either.
If anyone is unsure of what to do in any circumstance, just send the specific question to your monitoring body by e-mail or letter. The reason they are your monitoring body is to help you. If something goes wrong, it is your monitoring bodies job to look after you, and if you have gone to them directly for advice and can prove it by having it in writing to them - then you have done what is required of you under the ML regulations. Your monitoring body must give you advice you on what to do (or not to do, if relevant). This is one of the responsiblities of a monitoring body, to advice on specific (not general) ML potential problems of a particular member.
-- Edited by YLB-HO on Monday 4th of July 2011 07:04:32 PM
I am a little shocked, and confused, by your comments.
Your point 3 is very weak, SOCA and HMRC will not be able to respond to every report, but we have seen that they do respond to most. They obviously cannot respond straight away, as they don't want to make it obvious you made the report (i.e. two days after the client gets a new bookkeeper they are investigated).
You want to make sure you are covered, not necessarily by putting in a report to SOCA, but by your Risk Assessment and/or comunication with your MLR body.
Assuming you have spoken to the client and they make their excuses but continue, what you see might only be the tip of the iceberg. If SOCA/HMRC do an inspection, targeted or random, and they see your the bookkeeper and havent noticed (or mentioned) the illegal software, missing receipts, dodgy payrol etc, you would be investigated too. If you put in a report and they ignore it, the onus is on them. You have complied.
It is a suspicious activity report, so it does not have to be terrorist funding for you to report it. SOCA may already have a file on them, so you reporting that they fail to license their software, or they have a lot of unexplained cash lying around, may be the cherry on the cake for them to investigate further.
If you download a copy of software without paying for it, or its license, it is illegal. Regardless of whether you sell it on.
The same goes for if you buy 1 copy of software, but use it on multiple machines.
I am unsure what you mean about iPhone apps, as you get them from iTunes and unless they are free you need to pay for them before you download them.
Now in most cases it will be client misunderstanding, or just bad record keeping. Talk to them, educate them on the benefits of keeping receipts etc, how it helps you do your job and therefore saves them money.
Always talk to your MLR body if you are concerned, complete the Due Diligence and Risk Assessment to show you are concerned about things. Then if they change their ways you can alter your Risk Assessment.
At the end of the day you will know the client and have a feel for whether it is just bad bookkeeping on their behalf (if they were good at it they wouldn't need you ) or if they are a 'dodgy' character trying the pull the wool over your eyes.
I have attended many WTG meetings with Agents & HMRC, where the subject has come up. Agents (Some are even large well know practices as well as smaller ones), have complained bitterly that they regulary make reports on their clients and nothing ever happens. They are still working the clients who are still ML and they feel many clients have ceased to take it seriously as despites their accountants pointing out that what they are doing is wrong, as nothing happens the client just continues.
I only know of one case where SOCA actually did something - but the amount involved was over £1.5m and they already had been watching this particular group of people before the Bookkeeper reported them as there had been lots of cash transactions over £50k each time going through the accounts, and when she queried it, she was told it money leant to the business by family members. Rightly she thought it was suspicious and made a report.
I myself have made one report and I resigned from working with the client, as I was not prepared to continue working for him. The client is still trading, but with another accountant and nothing has changed.
I don't get my apps from the apps store - only the free ones from them. When the app store tells me there is an new update available - they will only let me download it if I pay the original charge (which I never paid in the first place). So I don't use the app store update. I wait until I can get it free from someone else who is prepared to provide it for me. I can get them from anywhere that cares to supply them. Apple tried to make it illegal to get their apps (even hacked) from elsewhere and they LOST the court case. So downloading apps free from elsewhere is not illegal. Even apps if downloaded from from the apple store which normally were not free.
I have software which I have one licence for. I have checked the the companies and they have all agreed that I may load it on several computers, but as long as I only use the software (and therefore only on one machine at any time) it is not illegal. If I allow someone else to use it the same time as me only then does it become illegal.
Sorry I've become quite cynical about all this... but I do see the abuses (not my clients) and see too many people get away with things.... We stress about things that are not important - but don't get me wrong - we do still need to be careful, just in case. As long as we make sure we don't do anything that would get us personally into trouble and document everything, and if in doubt consult our MLR body - then we should not worry about something that may never happen.
-- Edited by YLB-HO on Tuesday 5th of July 2011 02:18:20 PM
....... tip of the iceberg. If SOCA/HMRC do an inspection, targeted or random, and they see your the bookkeeper and havent noticed (or mentioned) the illegal software, missing receipts, dodgy payrol etc, you would be investigated too.
I find it impossible to believe that SOCA would investigate or prompt HMRC to investigate a bookkeeper / accountant who failed to report illegal software or missing receipts. Dodgy payroll, possibly, but only if there were already "a file on them".
Anything more serious, say bullion or drug smuggling and I think most of us would have the common sense to resign rather than put our careers at risk.
The reason why there are so few responses from SOCA, and, I suspect, why so few advisers are investigated is because the legislation is too broadly drafted, and thus, far too many reports are being filed.
I empathize with ADAS because my old boss has been panicking the whole office on and off since the regulations came in, but I don't think it is the intention of SOCA to denigrate our work-flow. Providing we're not involved in fraud, smuggling, evasion etc, then realistically, there is nothing to fear.
) or if they are a 'dodgy' character trying the pull the wool over your eyes.
