By John Davies, head of technical, ACCA
There is no doubt that professional advisers have on occasions been implicated in money laundering schemes.
Numerous cases have been reported of solicitors being successfully prosecuted for being involved, innocently or otherwise, in such activities; there have been other cases where solicitors have been found to have been actively complicit.
Given the expertise that is called for in order to devise and execute the more sophisticated laundering schemes, it is perhaps only to be expected that criminals will seek out the advice of technical experts who understand how business works and how laws and practices can be manipulated to facilitate substantial transfers of criminal property.
The UK Government is conscious of this and is seeking to step up its efforts to tackle serious organised crime. In a new Bill, presented to Parliament last week, the Government has included a clause to make it a criminal offence to ‘participate’ in an organised crime group. While there is no express reference in the Bill to accountants and lawyers, the Home Office’s press briefings in advance of its publication made it clear that accountants and lawyers were very much the targets of the new measure.
The Bill would make it a criminal offence to take part in any activities that the person concerned knows or suspects are the activities of an ‘organised crime group’ or which would provide help to such a group.
Few would argue with the proposition that involvement in serious criminal activities should be actively discouraged by the law.
The question is whether we need another criminal offence in this area with the additional pressure and uncertainty it would impose on professional advisers.
Under the Proceeds of Crime Act as it currently stands, any person, whether a professional adviser or not, commits an offence if s/he becomes directly involved in holding or transferring criminal property or becomes involved in an arrangement which s/he knows or suspects facilitates such activity.
Accountants and lawyers have additional specific responsibilities to inform the authorities, again on the basis of either knowledge or suspicion, if they come across information suggesting that any of the aforementioned offences have been committed. While there is an exemption from disclosure to cover circumstances of legitimate professional privilege, that exemption is not available where the adviser is aware that the client’s motives in seeking advice are criminal.
In addition to the above, accountants and lawyers are obliged to take all reasonable steps to verify the identity of new clients, ascertain their motives and to monitor on an on-going basis the financial transactions of their clients.
Failure to comply with any of these requirements is already a serious matter and punishable by large fines and long prison sentences. The following comment by a solicitor jailed in 2006 for failing to satisfy a court’s retrospective judgment about what he should have known about his clients sums up the force of the current law:
‘I made a simple mistake, amounting even in its worst interpretation, to no more than an error of professional judgement, from which I made no benefit … all sole practitioners and money laundering reporting officers (MLROs) in professional practices should take heed.’
So what will the new measure achieve that is not achievable under the present rules? As the above example shows, those who conduct professional work for groups of individuals who turn out to be criminals, already run a serious risk of prosecution and imprisonment, even if they make an honest mistake about the client’s motives. An accountant or lawyer who has even a suspicion that he has come across an organised crime gang in the course of his work will already be covered by an obligation to pass on his information to the authorities.
Rather than introducing stringent new offences which don’t appear to add much to what we have, we should surely be focusing on ensuring that we optimise the effectiveness of the existing framework. The regulated sector in the UK, one of the most comprehensive of its kind in the world, provides over 300,000 suspicious activity reports to the National Crime Agency every year, yet there remains a widespread perception that the extensive efforts that go into providing this information do not translate into effective enforcement action against serious crime.
A study by CCAB, to be published on 23 June, brings together the views of stakeholders on both sides of the fence about the operation of the UK’s anti-money laundering regime. It reports that some practising accountants are not convinced that the regime is as efficient as it might be. In particular some feel that there is too much regulatory focus on prosecuting cases of non-compliance with rules and too little emphasis on using the information advisers supply to clamp down on serious criminal activity. They call for a greater effort by regulators to share information with individual firms about how the system is working, with the intention of encouraging more of a shared commitment to the ultimate aims of the exercise.
The Government should heed the feedback from practitioners before it enacts its new Bill. Tackling money laundering is a cause that is vital to both the economy and wider society, and one that accountants and other regulated parties are generally happy to contribute to for that reason. But buy-in from those at the sharp end is crucial, and for that to happen the authorities need to resort to the carrot as much as the stick.