Charities and internal investigations
A recent ICAEW Disciplinary Committee decision has highlighted the importance of adhering to your reporting obligations.
Mr R provided accountancy and tax advice to a company between January 2009 to November 2013. During this time, HMRC began an enquiry in to the corporation tax return of the company. The Director of that company subsequently disclosed to Mr R that she had over-claimed her mileage expenses and was asking a new firm of tax specialists to negotiate a settlement with HMRC on her behalf. Mr R then ended the business relationship. It subsequently came to light that the Director been involved in a large fraud against the NHS.
Mr R was subsequently convicted of an offence under the Proceeds of Crime Act 2002. It was found that Mr R had reasonable grounds for suspecting that the Director was engaged in money laundering and failed to disclose this to the appropriate individuals.
It was accepted that Mr R had no knowledge of the larger fraud, however it was found that Mr R should have been aware of his professional obligations concerning disclosures of this type. It was highlighted that a belief that the disclosures would be made by the newly instructed tax specialists was not sufficient to negate the obligation to disclose.
Mr R’s conviction was referred for consideration by ICAEW’s Disciplinary Committee. By virtue of ICAEW’s Disciplinary Bye-Laws, Mr R’s conviction was conclusive evidence of the matters which he had been convicted of.
The Disciplinary Committee found that Mr R should have properly disclosed the over claimed mileage expenses. Despite the involvement of another firm of accountants at the time the disclosure was made to Mr R, it was considered by the ICAEW Disciplinary Committee that the larger fraud may have come to light sooner if Mr R had notified HMRC at first knowledge. The Disciplinary Committee imposed a sanction of a severe reprimand and a direction to attend appropriate money laundering training.
This case provides an important reminder for professionals to ensure that they fully understand the rules concerning money laundering and their reporting obligations. In particular, professionals should be aware that the involvement of another professional or accountancy firm does not devoid you of your individual reporting obligations if you become aware of information in the course of business that should be disclosed.
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