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It won't wash
The Government is bringing in new regulations to try to prevent money laundering - turning the proceeds of crime into apparently "innocent" funds which can be spent without creating suspicion. New laws were passed after the terrorist atrocities of September 11 2001, but the detailed rules have not yet come into effect. The final version was due before Parliament's summer holiday, but the changes proved too difficult to agree on, so we are still waiting.
 The problem is that the new rules require a wide range of people to report suspicious transactions to the National Criminal Intelligence Service, and they cover any crime at all, not just terrorism and drug-dealing. Failure to report is a criminal offence. Telling the person concerned that you are reporting a transaction is also a criminal offence. Both offences come with a heavy maximum jail sentence.
Accountants are very concerned about these rules because they affect our profession. We will be supposed to make such reports - with no minimum level which we can ignore - or suffer the wrath of
NCIS. In fact, NCIS will be completely swamped with the amount of information that they are likely to receive from people "covering their backs", so it is hard to see how the system can possibly work. But until the practicalities become clearer, everyone will be nervous.
What it means to you is that we may need to ask you questions that have not previously been necessary, and which may seem intrusive or excessive, particularly if we have known each other a long time. But until we know how NCIS will behave, we may need to be able to document the sources of large amounts of money, and also to prove the identities of the people we deal with.
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More information on money laundering can be found on the
Treasury's website. The index is located
here, and a number of different documents can be found from that location. When the rules are finally agreed, it is likely that there will be numerous articles in the professional press to explain them in more detail.
The main offences in relation to money laundering, sometimes called the "core" or "assistance" offences, are:
1. Entering into, or becoming concerned in, an arrangement to retain or control the use of criminal property.
2. Acquiring, using or possessing criminal property (although there is an exclusion where the property in question was acquired for 'adequate consideration').
3. Concealing, disguising, converting or transferring criminal property or removing it from the UK.
Disclosing a suspicious prospective transaction to NCIS is a defence against being accused of committing these offences. If NCIS have not responded within 7 days (which seems unlikely, given the volume of disclosures they will have to deal with), the transaction can be carried out without the adviser attracting a liability.
However, telling the client that a report is being made is also a criminal offence ("tipping off"). This is very difficult - if a client (or prospective client) discloses suspicious transactions to an accountant, the accountant will want to advise the client on how to regularise the position, while being forced also to report to NCIS "behind the client's back".
There is some discussion of how the rules are expected to work in Taxation, 15 May 2003; the Inland Revenue's Working Together, Issue 13 (available on the Revenue's website); and Tax Adviser May 2003
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