Transcript Ray Cross - Bookkeepers

Ray Cross
Director ICB
with specific responsibility for Compliance
Content
• Background to MLR
• Recent changes & implications for bookkeepers
• SAR’s –registering online with SOCA
- tips when submitting SAR’s
• Most common ML occurrences confronting ASP’s
• What a member can expect from an inspection
• Most frequently asked questions- examples
AML Supervisory Bodies
ICB became AML Supervisor in July 2007
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Compliance Manual inc. CCAB Guidance
AML forms (MLR1-8)
Professional Conduct Rules
UK wide AML Seminars
More recently AML Online
28 supervisory bodies meet tri –annually @ AMLSF and AAG
List of 28 AML Supervisors
Professional Bodies Part 1
ACCA (Association of Chartered Certified Accountants)**
CLC (Council for Licensed Conveyancers)
Faculty of Advocates
General Council of the Bar
General Council of the Bar of Northern Ireland
ICAEW (Institute of Chartered Accountants of England and Wales)**
ICAI (as above but in Ireland)**
ICAS (as above but in Scotland)**
Law Society
Law Society of Scotland
Law Society of Northern Ireland
List of 28 AML Supervisors
Professional Bodies Part 2
AAT (Association of Accounting Technicians)**
AIA (Association of International Accountants)**
ATT (Association of Taxation Technicians)**
CIMA ( Chartered Institute of Management Accountants)**
CIPFA (Chartered Institute of Public Finance & Accountancy)**
CIOT (Chartered Institute of Taxation)**
Faculty Office for the Archbishop of Canterbury
IPA (Insolvency Practitioners Association)**
ICB (Institute of Certified Bookkeepers)**
IFA (Institute of Financial Accountants)**
IAB (International Association of Bookkeepers)**
** Accountancy Affinity Group
Others (Public Sector Bodies)
Department of Enterprise, Trade & Investment Northern Ireland
FSA (Financial Services Authority)
Gambling Commission
HMRC (HM Revenue & Customs) ** when acting as default regulator for ASP’s
Insolvency Service
OFT ( Office of Fair Trading )
The following bodies are part of AMLSF but not as such designated supervisors
HMT (HM Treasury who are effectively the supervisors Supervisor)
SOCA
CARB (Chartered Accountants Regulatory Body)
SRA (Solicitors Regulatory Association)
Regulated Sector
• Credit institutions – FSA
• Auditors, insolvency practitioners, external accountants & tax
advisors – AAG
• Independent legal professionals- Law Societies
• Trust & Co Service Providers – HMRC
• Estate Agents- OFT
• High Value Dealers – HMRC
• Casinos- Gambling Commission
Why are Bookkeepers in the regulated sector?
1.
International reports have highlighted the army of professionals involved, mostly
unwittingly in any major ML scheme.
2.
We are one of the “gate keepers” of the financial industry giving air of legitimacy &
commerciality to the transactions we participate in.
3.
Poor reporting within the accountancy sector compared with other sectors.
A Bookkeeper’s obligations under MLR 2007
• MLR 2003 – Accountants
• MLR 2007 – All ASP’s inc Bookkeepers
(should have been included in 2003 legislation)
- CDD on new & existing clients
What is an ASP?
Accountancy Service Provider.
• Auditor
• An external accountant i.e. any firm or sole practitioner
who by way of business provides accountancy services
which include bookkeeping, payroll, tax returns.
• Tax Advisor- any person who by way of business provides
advice about the tax affairs of another person
All ASP,s must be registered for AML supervision with a professional
supervisory body or they must register with the default regulator HMRC
Changes to MLR and the implications for Bookkeepers
Following long consultations, the government made some
changes to MLR 2007 most of which will have little impact on you
and these took effect from 1st October 2012
• The definition of “Estate Agent” is amended to include those
selling property outside the UK within the scope of MLR 2007.
• It adds consumer credit financial institutions to the list of bodies
who may be relied upon for the purpose of carrying out CDD
under the 200t Regulations and provides that members of all
professional bodies listed in both Parts 1 and 2 may now be relied
upon for these purposes.
• A new power was introduced to enable supervisory authorities
to share information with each other subject to certain conditions.
SAR’s and using the SOCA Online SAR system
The preferred method of reporting is the electronic submission of SAR’s.
The advantages of using this system are;
1.
Allows for 24/7 reporting
2.
Is secure
3.
Creates an electronic acknowledgement for each SAR & produces a
unique reference number for the reporter
Enables SOCA to make SAR information more speedily available to
investigators.
4.
SOCA
•
All new users must first register. This can be a little time
consuming and is a one- off exercise and we highly
recommend that you register even though you currently
have no SAR’s to submit.
•
To register for the online system go to the SOCA website
home page www.soca.gov.uk and in the top right corner
click on the link ’Reporting SAR’s’ this will bring up a
“Welcome to the SOCA SAR Online System” page and
then on the task bar above this heading click on the word
register and follow the instructions.
Tips from SOCA when submitting a SAR
•
Initial Summary
It is good practice to open the SAR with a brief summary to
illustrate the reasons for suspicion & provide a chronological
sequence of events detailing the dates of any activity or
transactions. Keep all SAR content clear, concise and simple.
•
Provide explicit details of reason for suspicion
The quality and content of the SAR can affect SOCA’s ability
to prioritise & process the report and LEA’s decision to
investigate. Often a seemingly irrelevant piece of
information can became a valuable piece of information.
Therefore when you provide information giving the reasons
for suspicion, ask yourself this question “ If I knew nothing
about this matter would I be able to understand what had
been the trigger for suspicion?”
To assist you, try to answer the six basic questions;
Who? What? Where? When? Why? How?
Include all known details relating to the subject of the SAR
In circumstances where the subject of the SAR is a client, a
significant amount of information should already be held for the
purpose of CDD. Please provide all relevant CDD detail known
which should include as a minimum full name/s, DOB, nationality
and address.
If any additional information is held e.g. additional addresses
such as previous and business addresses ensuring that postcodes
are included. Any car details, phone numbers and bank account
numbers would also be useful.
Include the context of your reason for submitting the SAR
Include details of the background of the SAR being submitted e.g. the
nature of the business activity you were engaged in with the person or
business against which you submitted the SAR. In over 50% of SAR’s
sampled by SOCA, the type of service being provided e.g. audit,
insolvency, taxation were not indicated.
Avoid using acronyms or jargon within SAR’s
These should be avoided as they may not be understood by the
recipient and may be open to misinterpretation.
Negative aspects
Automatic time-out session of 20 minutes for each page so it is
recommended to save your work at regular intervals to re-set the
timeout clock before the session expires.
Common money laundering occurrences
Definition of criminal property
(a) Property is criminal if it constitutes a person’s benefit from
criminal conduct or if it represents such a benefit (in whole or
part and whether directly or indirectly) and
(b) the alleged offender knows or suspects that it constitutes or
represents such a benefit.
Some examples that staff may come across during their day to
day work and which accounts for the majority of money
laundering offences.
Under or over declarations on tax returns
This is perhaps the most common of money laundering
offences encountered by practices and will either involve the
under-declaration of income or the over- claiming of
expenses on a tax return or both
Whilst this is not a sophisticated money laundering scheme,
many would argue that such offences should not be grouped
with such transactions but this is what the legislation states
and the saving of tax by intentionally falsifying a tax return is
included in the definition of money laundering as defined by
POCA 2002.
Use of business assets
This is a common offence and one which clients are unaware they are
committing due to the fact that they fail to differentiate between
their business and themselves personally.
An example: Your client is involved in property development and
employs workmen who carry out building work. He also purchases
raw materials to carry out this work.
Your client wishes to construct an extension to his own house and
uses the company workmen and the materials for this purpose.
This is all well & good provided that the taxman gets all that is due.
If the client conceals the fact that employees and materials belonging
to the company have been used for his personal benefit then this is a
criminal offence and a report should be made.
Cash businesses
A common occurrence and one that is very difficult to detect.
An example:
A client who is a painter & decorator. You prepare his accounts
as a sole trader and compute his income from the copy
invoices he gives you. Has he given you all the invoices or more
likely has he carried out a number of cash jobs & not declared
this income?
It is difficult to detect because you are effectively trying to
prove a negative i.e. that some income has not been declared.
One tool at your disposal is to look at the clients standard of
living. Does he drive an expensive car, take expensive
holidays, send his children to private schools? If so can he
afford this on his declared income? Provided you are sure
that he does not fund this expenditure from other sources,
then you may be suspicious that not all his income has been
declared.
Be careful as you must not make a SAR based on mere
speculation i.e. that all painters and decorators fail to
declare some income. You must have a suspicion which goes
beyond mere speculation and has evidence to support it i.e.
an expensive lifestyle.
Overseas bank accounts
This is an area that has received a lot of both media and HMRC
attention of late. Evidence supports that many millions of pounds are
invested in overseas bank accounts and not declared.
In the past HMRC have granted an amnesty to those who failed to
declare such accounts in the past but there is no doubt that many of
these accounts still exist. Recently whistle-blowers have brought
about the sharing of tax information between the UK and Germany,
Switzerland, Liechtenstein and most recently IOM.
If a client has an interest bearing account overseas he will be unable
to bring any interest received back to the UK by legitimate means
without disclosing the fact that he had an account.
What happens if he goes abroad on holiday and draws from his bank
account to fund the holiday?
Directors expenses
If you have a client who owns and runs his own business, there
may be times when expenses are claimed as a director which have
little or nothing to do with the business? This may take the form of
entertaining, running a car or simply enjoying private expenditure
at the business’ expense.
Once again, there is nothing wrong with this provided that the
expenditure is declared and the proper tax paid.
I have not attempted to discuss all money laundering offences but
merely tried to emphasize that the vast majority of offences have
little or nothing to do with sophisticated ML offences carried out
by professionals.
What can a member expect from an ML compliance inspection ?
• ICB’s responsibility as an HMT appointed supervisor to ensure that all members comply with
MLR 2007.
• It is the member’s duty and obligation as an ASP to comply with MLR 2007
• AML Compliance team
• Selection for inspection
• Inspection procedure
• What will the inspector need to see?
• How is it arranged?
• Where will it take place?
• Duration
• Preparation for the inspection
• Result of the inspection, the various possibilities
• Penalties.
Most frequently asked questions
If we submit a SAR to SOCA, should we resign from the client?
If we have suspicion or knowledge of an ML offence and have sent a SAR to
SOCA must we resign? You must first ask yourself how serious was the
offence and what is the likelihood of further offences occurring?
If you feel that this is a one-off and that the client has learned his lesson and
paid off any penalties due, then there is no reason why you should not
continue, however, you should carry out additional on-going monitoring of
him in the future.
If you feel that the matter is extremely serious and he is the type of client
who might err again, then it may be safer to part company.
Be careful, if you have made a report to SOCA watch out for the reasons you
give to the client for resigning. In giving your reasons for resigning do not
inform the client that a report has been sent otherwise this could constitute
the offence of tipping off.
Where suspicion of an ML offence arises, should firms
make their suspicions known to the client?
It appears that there is often a lot of confusion here because firms are
concerned that by doing so they may be tipping off the client which is an
offence in itself.
My advice is be upfront with the client:
• Ask yourself whether a criminal offence has been committed?
• To establish whether this is so, confront your client with your findings
to see whether it is a genuine error.
• If it is an error, request that the client corrects the error and do NOT
make a report.
Where suspicion of an ML offence arises, should firms
make their suspicions known to the client?
continued….
• If he refuses you should make a report and consider whether to continue
to work for this client.
• If having made the report you inform the client of this fact you will have
committed the offence of tipping off.
• If you have confronted the client BEFORE making the report, there is no
danger of tipping off (unless an investigation was already under way)
Sub-contracting to Chartered Accountants.
What are the ML implications for me?
• You should get something in writing as evidence of the contract
between you and the accountant which does not have to be a legal
document.
• Since it is the accountant who is paying you the fees for your services,
he becomes your client and consequently you need to do CDD on him.
• You do not need to carry out CDD on his clients because you are
“deemed” to be in the accountant’s employ whilst you are working for
him and can therefore use his Policies & Procedures including AML.
Sub-contracting to Chartered Accountants.
What are the ML implications for me?
continued….
• Questions have been asked by members who just sub-contract and have
no other clients as to whether they need a Practice License since they are
bound by the Chartered Accountants ML procedures and also do they
need PI insurance?
• The answer is of course yes you do, because to be an ASP you need to be
supervised by an AML Supervisor before you can offer your services,
therefore, without the P/L you would be trading illegally.
• You also need the insurance because if the accountant sues you for poor
work or alleged poor work, you are covered.
We have recently lost a client to another firm and they have
contacted us asking if they can rely on our CDD. We are happy
that we have fully complied with the legislation in respect of our
CDD but do we have to comply with their request?
• Firstly, this question would not have applied to you prior to 01/10/12
when government changed the regulation relating to third party
reliance. Prior to the change, as bookkeepers supervised by a Part 2
professional body, we were not permitted to allow other entities to rely
on our CDD, this has now changed and a level playing field exists
between Parts 1 & 2 supervisors (except for HMRC)
• The law does not require you to comply with this request even though
you are happy with the CDD you carried out and whilst it might seem
unhelpful, I would advise you to decline and suggest to them that they
carry out their own CDD. By doing this you are in no way exposing
yourself to potential problems.
Professional letters of enquiry –
Guidance for sending & replying to these.
• Under no circumstances may anything be said that could be construed
as “tipping off”
• Unpaid fees should be pursued through normal credit channels, Client
papers should not be retained once you have ceased to act.
• The clearance letter is not a “reference” and should not be worded as
such. It merely indicates that you were not aware of any professional
reason why a new bookkeeper should not act for the client.
• No response can be given without the authority of the client and no
client details or documents released without such written authority.
Scenario 1
You have just lost a client to another firm who have sent their
professional enquiry letter. In addition to the normal content
of this letter, the incoming firm have asked whether, in the
past, you have had any suspicions or knowledge of a money
laundering offence having been carried out by the client or
whether you have had cause to make a report to SOCA.
How should you respond?
The incoming firm should know better than to ask these
questions. It is their responsibility to carry out their own due
diligence procedures and should not be placing reliance on
whether to take on the new client based on information
given by you.
Simply state in your response that it is not the policy of your
firm to answer such questions in the positive or negative.
Remember that to state that a report has been made to
SOCA could put you in danger of tipping off.
Questions?