PAYROLL INSIGHT
Anti-money laundering
Richard Simms, managing director for F A Simms &Partners Limited, discusses scope, implications and practical steps
T he Proceeds of Crime Act 2002 to proceeds of crime. Criminal activity creates criminal property – both defined by POCA – so doing anything connected to this is highly likely to be money laundering. ‘Criminal property’ doesn’t just mean physical property, as it could also be, for example, the reduction in a liability. The proceeds of any criminal activity will be criminal property and pretty much anything in connection with this criminal property will be money laundering. Here is a summary of the three key money laundering offences set out in sections 327, 328, 329 of POCA: ● ● concealing, disguising, converting, transferring or removing criminal property from the jurisdiction ● ● entering into or becoming concerned in an arrangement, knowing or suspecting that it facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person ● ● acquisition (without adequate consideration), use or possession of criminal property. (Counter terrorist financing follows along with anti-money laundering (AML).) Services regulated for AML A ‘relevant person’ is the terminology used by the Money Laundering Regulations 2017 (‘the Regulations’) for someone subject to AML regulation. A relevant person includes (POCA) defines money laundering, at its simplest, as ‘doing stuff’ in relation
someone providing accountancy services by way of business whilst undertaking that business; it’s only when you are providing those services to a third party – an ‘external accountant’ – and not when you are an employee. Accountancy service providers include accountancy and bookkeeping, tax advice, insolvency and auditing. The sector’s AML guidance (‘the Guidance’; http:// bit.ly/2ESjhPH) – which is the only HM Treasury approved guidance for the sector – adds further detail to the Regulations’ definition of an ‘external accountant’. ...anything in connection with this criminal property will be money laundering At para 1.2.2, the Guidance says “Regulation 11(c) of the Regulations defines an ‘external accountant’ as someone who provides accountancy services to other persons by way of business. There is no definition given for the term ‘accountancy services’, however for the purposes of this guidance it includes any service which involves the recording, review, analysis, calculation or reporting of financial information, and which is provided under arrangements other than a contract of employment.”
The term ‘tax adviser’ is defined in the Regulations as “A firm or sole practitioner who, by way of business, provides advice about the tax affairs of other persons, when providing such services”. Application Where does payroll fit in to the Regulations and the Guidance? If you’re providing external accounting services, you’ll be regulated straight away. Though ‘payroll’ is not mentioned in either the Regulations or the Guidance, does that mean that operating payroll, without being the client’s accountant or bookkeeper as well, is not regulated for AML? For me, the calculation of tax due on payroll is performing the role as a tax adviser. I would say that payroll also falls within recording and calculation of financial information. This then means that a payroll provider can’t allow themselves to focus only on the risks associated with the payroll and so should take a step back and overview the client’s business and its environment. The obligation is to risk assess the business as a whole and not just the aspect that you are dealing with. But why as a payroll provider would I need to undertake a risk assessment of my exposure to money laundering that covers the client as a whole? Well, I’d certainly feel a bit silly if I’d run the payroll for a company that turned out be a complete sham. But feeling a bit silly would be the least of my worries as I may just have been
| Professional in Payroll, Pensions and Reward | April 2019 | Issue 49 26
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