MONEY LAUNDERING REGULATIONS

What is Money Laundering?
Money Laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. If undertaken successfully, it allows them to maintain control over those proceeds and, ultimately to provide a legitimate cover for their sources of income.

Why is it relevant to us as your professional advisers?
What more legitimate cover could be had for the proceeds of crime than laundering it through a business?
By setting up a UK company for someone we could be providing a legitimate cover and when we prepare accounts for a client we would be in a position to notice if they could not explain the source of all the money coming into the business accounts.

In addition we’re not just talking about the proceeds of gun-running, drug-trafficking or terrorism it’s the proceeds of any criminal activity. Defrauding the Revenue (or tax authorities in any jurisdiction) is a criminal activity so a client who comes to us for UK tax advice may give us reasonable suspicion that they have laundered the proceeds of that crime.

What are our responsibilities?
Before accepting instructions from you as a new client we must be satisfied that you are not involved in any activity which is Money Laundering and that we will not be drawn into assisting you with Money Laundering. In addition we must have sufficient information to be able to file a report if we later have a reasonable suspicion that you have been involved in Money Laundering at any time in the future.

To protect ourselves we are required to put in place procedures to enable us to be satisfied in this respect.

The procedures are:

1. Before acting for a new client we must obtain and retain satisfactory evidence of the new client’s identity. Where the new client is or may be acting on behalf of another person we must take reasonable measures to obtain evidence of that other person’s identity. (See here for what constitutes satisfactory evidence).

2. We must maintain records of all transactions we undertake on your behalf.

3. All new staff must be educated and trained on their responsibilities with regard to the Money Laundering regulations, and existing staff must be provided with updates and refresher courses.

4. We must also have in place an internal reporting procedure for any suspicions of Money Laundering.

What are the consequences of being involved in Money Laundering activities?
Under the legislation it is a criminal offence to:

1. conceal, disguise, convert or transfer another’s proceeds of criminal conduct - max penalty 14 years imprisonment and/or a fine

2. assist another to retain the benefit of criminal conduct - max penalty 14 years imprisonment and/or a fine

3. acquire, possess or use the proceeds of criminal conduct - max penalty 14 years imprisonment and/or a fine

4. to tip off in respect of a report of, or investigation into suspected Money Laundering - max penalty 5 years imprisonment and/or a fine

5. in the case of drug trafficking and terrorism, to fail to report knowledge or suspicion of Money Laundering where that knowledge was acquired in the course of a trade, profession, business or employment - max penalty 5 years imprisonment and/or a fine

We hope that you can see why we have to take these matters seriously

Reporting procedure
Any suspicions should be reported to the National Criminal Intelligence Service ("NCIS"). They have the power to inform the Inland Revenue a record should be maintained of the date and nature of any reports to the police.

Satisfactory evidence of client’s identity
We need to identify you and confirm that the your address is a legitimate address.

Identity - we need to see the original of 9 formal photocard identification, ideally a passport or drivers licence.

- if the form of identification expires then we must re-evidence with the new identity document

Address - a recent utility bill (within the last three months) showing the address is suitable for evidencing the address

- a certified copy should be maintained on the permanent file.

Further clarification
Reporting a suspicion of Money Laundering to the police does not breach any professional duty of confidentiality to the client and cannot be overridden by commercial contract.

The legislation does not preclude us from advising you on negotiations with the tax authorities in cases even if you have evaded tax, provided that full disclosure of the evasion is made to the authorities. We have considerable experience in advising clients who decide that they need to make a “confession” to the Inland Revenue. Nothing in this legislation prevents us offering this as a service. However we are unable to offer advice on your specific circumstances unless you give us authority to notify the Inland Revenue once we have completed our report.

In our free introductory meeting we are happy to discuss, in general terms, the tax rules on evasion and the attitude of the authorities to a full disclosure but not your particular circumstances. At the end of this half hour discussion we will ask you whether you wish to appoint us as your tax advisors. Only if you agree, sign our Client Service Agreement and go through the identification process can we begin to act for you. From this time on we will be bound by the rules for Money Laundering.