IMPACT OF THE PROCEEDS OF CRIME ACT 2002 AND THE MONEY LAUNDERING REGULATIONS 2003

You may have read in the national newspapers about legislation on Money Laundering, which will have an effect on many businesses. The two separate pieces of legislation are the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2003. A particular issue which is explained below is that Money Laundering is defined as being the process of what happens to the proceeds of any crime whatsoever, however trivial.

The main effect is on businesses, which are in what is known as the regulated sector. Until now this has been mainly Banks and the Financial Services Industry. There have been a number of well-publicised stories where an individual has not been allowed to open a bank account, because he/ she cannot prove his/ her permanent address by presenting utility bills or a driving licence. Or where someone has tried to pay a cheque into a building society account, which has not been used for six months and they have been amazed to be asked to prove their identity. These issues will now affect even more of us!

The reason is that the regulated sector is now much wider. It includes accountants, tax advisors, auditors, lawyers, estate agents, company formation agents, insolvency practitioners, casinos etc and any business wishing to sell goods for cash to an amount greater than 15,000 Euros (which is about £10,000).

All businesses in the regulated sector are required to have a Money Laundering Nominated Officer (MLNO - a designated senior person responsible for ensuring compliance with the rules), thorough identity procedures for new clients (and this includes proof of identity for each cash transaction greater than the amount referred to above), internal documentation for recording what are known as "suspicious transactions" and published procedures and training for all employees. All employees are required to report "suspicious transactions" to the MLNO and are guilty of a criminal offence if they fail to do so. The MLNO is required to report virtually all such transactions to a police authority known as NCIS (the National Criminal Intelligence Service).

It is a criminal offence for someone in the regulated sector not to report a suspicion of a crime (which has led to the criminal benefiting in some way) to his or her MLNO. This would apply to any suspicion, which they come across anywhere in their professional work and the law does not refer to any minimum value for such crime. An employee who suspects a theft, a fraud, any criminal act or some form of tax evasion must submit such a suspicious transaction report. A further complication is that the person and business who make such a report to NCIS must not reveal that they have done so. Letting the suspected party know of the suspicion is a further criminal offence called "tipping off".

We give below some examples of criminal offences which if known or suspected we will in future be bound to report:

1. Overpayments by customers being taken to income rather than returned to the customer or clearly shown in the accounts as being due to him

2. Vehicles or plant under Hire Purchase agreements being sold without the HP company's knowledge

3. Manipulation of HP agreements, for example with false trade in values to secure 100% finance or to indicate that the security for the HP company is greater than reality

4. Non declaration of VAT errors which come to light during our work on the accounts or at any other time

5. Saving money by not implementing statutory Health and Safety requirements

6. Securing false references to obtain finance

7. Intentional non compliance with PAYE regulations eg cash payments

8. Inappropriate incentive payments to third parties

9. Deliberate understatement of taxable income

The Police have made it quite clear that anyone guilty of these Money Laundering offences could find themselves in prison.

We trust that this section has helped explain that we, in common with all accountancy and legal practices, now have new obligations imposed on us by statute