Money Laundering News
Updated May 2008
PLEA NEGOTIATION CONSULTATION
Following the Government Fraud Review, the Attorney-General's office have issued a consultation paper on Plea Negotiation in Fraud Cases. Responses are requested by 3 July 2008.
A small number of complex fraud cases account for a significant proportion of court time and court and investigation costs. Much of this expense, it is argued, could be saved if suspected offenders would make an early admission of guilt. The consultation suggests that relatively straightforward procedural changes could help to bring this about, without the need for a new Act of Parliament.
However not everyone would agree. Concerns are being voiced that the proposed arrangements might conflict with existing legislation in the Criminal Procedure and Investigations Act 1996, and that any deal agreed might run counter to the Proceeds of Crime Act 2002.
Furthermore, the consultation paper does not seem to offer much of a carrot to the suspected offender to make it attractive to him to offer an admission of guilt.
It will be interesting to see what comes out of the consultation.
Furtherdetails at www.attorneygeneral.gov.uk/the_fraud_review_page.html.
GOING OFFSHORE?
A number of favourite offshore tax havens have announced new anti-money laundering legislation. Amongst the latest to announce changes are Jersey, where new legislation came into force in February, and the British Virgin Islands. The new provisions will have a familiar ring to those in this country currently getting to grips with the UK Money Laundering Regulations 2007.
SHED A TEAR FOR A LOCAL CHEMIST
Shed a tear for Mr Mohammed Shabir, a dispensing chemist in Leeds, who was convicted in July 2005 of defrauding the NHS of £464 in relation to forms submitted for payment in respect of prescription drugs and appliances which had not actually been supplied.
In January 2006 he was made subject to a confiscation order in the sum of £212,464. The bulk of this sum apparently arose because the dishonest entries had been made on forms which also covered a large number of items properly claimed. The evidence was that none of these forms would have been authorised for payment had the NHS known at the time that some of the entries on them were false. Instead the payments would have been suspended pending further investigation. As a result the total amounts claimed on each of these forms were regarded as a benefit obtained in connection with his criminal conduct.
Mr Shabir appealed. The Court of Appeal, in March 2008 said, "It seems to us there would be considerable force in a submission, bearing in mind the numerous authorities on this legislation, that, as the object of the exercise is to take from criminals the proceeds of their criminality, quite simply that to put the Crown to showing each and every transaction which was dishonest, in a case of what one might colloquially call "fiddling", would make the legislation unworkable. But obviously that would have, or could have potentially, very harsh consequences bearing in mind the very large number of cases when an application under the Proceeds of Crime Act could be made in such circumstances."
It is not looking good for Mr Shabir!
A FAMILY AFFAIR
It is often the case that, where a person is accused of theft or fraud, other members of his or her family are accused of money laundering. Often those money laundering charges are not pursued where the principal suspect offers a guilty plea. But are other family members ever prosecuted, or is it a bluff?
Recently, Mr Giovanni Falcone of Paignton, Devon, was sentenced to two years imprisonment for facilitating the use of criminal property. Peter and Michael Falcone, his sons, had previously been convicted of supplying cocaine. Their father had permitted them to use his bank accounts.
In another case, Michelle Barnett, from Salford, whose husband had been convicted of keeping a brothel, was given a suspended sentence after using a total of £9,000 to pay the mortgage on the family home. Mrs Barnett has also lost her job in a local school following her conviction.
One consequence of these convictions is likely to be confiscation based on the criminal lifestyle provisions of the Proceeds of Crime Act 2002. Where husband and wife jointly own the family home and other assets there may be difficulties in enforcing a confiscation order where only one spouse has been convicted.
DEFAULT SENTENCE
Talking of bluffing, does anyone actually serve a default sentence for failing to pay under a confiscation order? Ask Kelvin White.
Mr White was convicted in April 2006 of trading standards offences in relation to the sale of used cars which had been clocked. In December 2006 a confiscation order was made in the sum of £58,000 and he was given six months to pay, with a default sentence of 21 months.
In June 2007 the time allowed for payment was extended by a further six months to December 2007.
In April 2008 local magistrates committed him to prison for non-payment. They do say, "The millstones of Justice turn exceedingly slow, but grind exceedingly fine."
ARCHITECTURALLY INSPIRING COURT BUILDINGS
Recently there was some debate online about architecturally inspiring, or uninspiring court buildings.Lincoln Crown Court was regarded as one of the most attractive locations in which to meet one's fate. The Magistrates Court in Chorley, Lancashire got a hearty thumbs down!
I was amused to read during a recent visit to Winchester Crown Court, at which I was giving evidence in a theft case, that part of the building was constructed of "stainless steal". How appropriate!
REGISTRATION OF ACCOUNTANTS WITH
HMR&C
Under the Money Laundering Regulations 2007 all businesses
subject to the MLR 2007 are required to be subject to
supervision. This includes "accountancy service
providers" - accountants, bookkeepers, payroll agents, tax
consultants, etc. who offer services to the public.
Many firms of accountants have had their compliance with
MLR subject to supervision by their professional body
(ICAEW, ACCA, and others) for some years. Those
arrangements will continue unchanged. But for some
other accountants and bookkeepers this type of supervision
is new.
Member firms of, for example, the Institute of Certified
Book-keepers, the International Association of Book-keepers
and the Institute of Financial Accountants, will now be
supervised by those bodies.
Accountancy Service Providers who are not members of any
supervisory body will be supervised by HM Revenue &
Customs for MLR compliance.
HMR&C have now unveiled their registration
procedures. Applications are required to be submitted
by 1 July 2008. All applications will be processed by
1 October.
After 1 October 2008 it will be an offence for any business
(including a self-employed sole practitioner) to offer
accountancy services to the public unless they are either a
member of one of the supervising bodies or registered with
HMR&C.
HMR&C will charge a registration fee of £95 for each
office address registered with it.
Further details of the registration procedures and the
necessary forms can be found on the HMR&C website
at
www.hmrc.gov.uk/mlr/asp.htm.
TRUST
AND COMPANY SERVICE PROVIDERS
Where an accountant, bookkeeper, etc. offers accountancy
services to the public and is registered (or to be
registered) with HMR&C for money laundering compliance,
he may additionally be obliged to register with HMR&C
as a "trust and company service provider".
This will be the case where, for example, he provides the
registered office address for one or more companies and
charges for that service. The same will apply if he
provides a correspondence address and mail forwarding or
telephone answering service for which a charge is made.
Registration of trust and company service providers is
required by 1 April 2008. Each "relevant individual"
in the business will be required to meet "fit and proper"
criteria and there is a registration fee of £50 for each
relevant individual. Persons with certain criminal
convictions, disqualified directors and undischarged
bankrupts will not satisfy the fit and proper criteria.
Relevant individuals include anyone holding a greater than
25% interest in the business.
Further details of the registration procedures and the
necessary forms can be found on the HMR&C website
at
www.hmrc.gov.uk/mlr/tcsp.htm.
Accountants, lawyers and others who are supervised by a
body other than HMR&C will not be required to register
as trust and company service providers with HMR&C since
their own supervisory body will also deal with this aspect
of their supervision.
In many cases a client company may have its registered
office at its accountant's address, which the accountant
may permit without charge. Where there is no charge
for the service, and it is provided only to clients for
accountancy and / or tax services, it may be argued that
the service is not provided by way of business and that
registration as a trust and company service provider should
not be required. However the attitude of HMR&C to
such cases remains to be seen.
MORE
FRAUD THAN BEFORE
According to the regular KPMG survey of fraud cases there
were 198 large fraud cases (concerning losses of £100,000
or more) in court in 2007 with a total value of
£1,017,132,000. A total of £888 million of this was
accounted for by 66 frauds by professional gangs engaged in
carousel and other organised frauds, mostly targeting
government departments.
However it is good to see that there was still a place for
the enthusiastic amateur, like the Buckinghamshire
accountant who was given a champagne send off by his
employer when he went on honeymoon. Whilst he was
away his fraud came to light in the form of a £700,000
shortfall. He returned to find the honeymoon was well
and truly over! In all some £27 million of major
employee frauds came to court in 2007.
Our prize for the most innovative fraud goes to the chap
who regularly went shopping to his local hardware
superstore with a pocket full of fake barcode labels which
he stuck on goods before wheeling them to the
checkout. As a result he paid well under the true
prices for the goods, which he then resold on Ebay - making
£100,000 profit.
DATA
MATCHING
Data specialists Datanomic recently screened the Companies
House register of 6.8 million companies, company directors
and secretaries against World-Check's database of "high
risk" individuals and organisations. In total,
3,994 exact matches were recorded including 1,504
disqualified directors, some of whom, the study found, are
running companies from prison.
David
Leppan, chief executive and founder of World-Check said the
results were "truly beyond belief". "The problem
seems to lie in the fact that Companies House is not
required in its remit to actively screen applicants," he
added.
Companies
House said, "The great benefit of the companies register is
that it is open and transparent. We will continue to
work closely with law enforcement agencies and World-Check
to ensure that the information held is put to best
use."
CONFISCATION
A recent
Court of Appeal decision dealt with the amount of the
confiscation order to be made where the defendant’s home
had been searched and stolen goods worth £27,000 had been
found there. Subsequently £19,000 worth of these
goods had been returned to their rightful owners in usable
condition.
Perhaps
not surprisingly the Court held that the benefit for
confiscation purposes was the whole £27,000, not the £8,000
loss ultimately suffered by the victims. The case was
CPS Nottinghamshire v Rose [2008] EWCA Crim
239.
In
the same case the Court also dismissed a technical argument
that an accused had not "obtained" stolen goods within the
meaning of section 340(10) Proceeds of Crime Act 2002 since
he had not "obtained an interest in them". The Court
held that he had obtained "a right to possession" of the
goods which was an interest (albeit an interest of no value
since the goods were stolen property).
Equally
the Court found no evidence that prosecutors were charging
money laundering offences where this was not appropriate
and where the appropriate charge would have been one of
burglary, or of theft, or of handling stolen property, all
of which offences (unlike money laundering) would have
obliged the prosecution to prove dishonesty.
HELL
HATH NO FURY LIKE AN ACCOUNTANT SCORNED
A 44 year-old man from Sittingbourne, Kent, has been
sentenced to two years’ imprisonment for urging Moslems to
launch terror attacks on accountants.
The Old
Bailey heard that Malcolm Hodges, 44, had failed an exam
set by the ACCA ten years ago, and had been arguing about
it with the Association ever since. The grudge festered
over time, and Hodges widened his one-man campaign by
writing a series of letters to the royal family, the
Chancellor and the Prime Minister, outlining the “grave
injustice” behind his low marking.
Hodges’
mission changed from farcical to dangerous in November
2006, when he began writing to UK mosques, claiming to be a
follower of Osama Bin Laden.
“Brothers,
you are right to kill the infidels but you are making a
mistake to try and attack planes and other targets,” he
wrote. Instead Islamists would be better off declaring a
“jihad” against the four accountancy bodies.
“Striking at these targets will be striking at the infidels
where it hurts most”, the letter argued.
Judge
Roberts said that Hodges suffered from a “seriously
abnormal mental condition”, probably in “some form of
personality disorder”.
News
provided by David Winch of MRLO Support.