Money Laundering regulations need to be taken seriously
I’ve just read the outcome of a case before the First Tier Tribunal where they actually increased the percentage penalty charged above that originally set by HMRC.
In the case HMRC found that a small practice with only 75 clients had failed to provide its supervisor, namely HMRC, with evidence that it had complied with its obligations under the Money Laundering Regulations.
It seems that no or insufficient work was undertaken in the areas of “Client due diligence” or indeed on “ongoing monitoring” of its business relationships. It appears that the accountant having a small client base offered up that they knew all their clients and how they operated but simply could not demonstrate this to the satisfaction of its supervisor and indeed the FTT.
HMRC could charge 10% of the GROSS PROFIT as a penalty and originally reduced the penalty by 50% on the grounds that it was not deliberate however the FTT felt that the Accountant had not cooperated sufficiently during various visits and increased the penalty by reducing the mitigation to 20%.
This case is a clear warning to even the smallest of practices that the Money Laundering Regulations have to be adhered too and simply saying you are undertaking due diligence is not going to be tolerated. You may well know your client and you may well know how they operate but if you don’t document the work you undertake to enable you to make the statement then you leave yourself open to punishment.
The Money Laundering regulations have been in since 2007 and I’m astonished that there are still some Accountants out there who are just paying lip service to the rules without actually doing the necessary work to ensure the rules are followed.
In these cases this ruling should shake a few from their torpor.