By Anita Rice
Money laundering reporting officers (MLROs) must notify the authorities of any suspicions that funds may include sums of unpaid tax - even if the business producing the profits is legitimately trading, it has emerged.
Meanwhile, the Law Society this week launched an online directory of solicitors with anti-money laundering practice expertise.
The extension of MLROs' reporting responsibilities follows the Court of Appeal judgment in R v I K [2007] EWCA Crim 491 clarifying when sums of money on which tax has not been paid become criminal property under the Proceeds of Crime Act 2002 (POCA).
Effectively, the ruling means that money laundering occurs when tax evasion has taken place, even though the proceeds of the business were legitimately earned. MLROs need to report suspicions of money laundering to the Serious and Organised Crime Agency, and this includes, even if trading legitimately, the proportion of proceeds that represents evaded tax.
However, Lord Justice Dyson said that cheating had to have already taken place for the funds to constitute a 'benefit of crime'.
Louise Delahunty, a corporate crime partner at Simmons & Simmons and member of the Law Society's money laundering task force, told the Gazette the development could be a worry for law firms.
'Although the court stated that it was not setting new principles, this is a development which may cause concern and should be given serious attention by business and those in the regulated sector, who may historically have held the view that clients' tax avoidance/evasion dilemmas were not a matter which engaged their POCA-reporting obligations,' she said.
Alison Matthews, MLRO at Irwin Mitchell, said: 'My view has been that this situation would be reportable. However, professional advisers and MLROs may have thought that if the business is trading legitimately, whether or not the business pays tax is their business. This ruling is a useful reminder of how far POCA extends.'
Solicitors listed in the online directory will provide fellow professionals with 30 minutes' free advice on money laundering issues - such as clarification about when professional privilege does, and does not, apply.
Law Society President Fiona Woolf said: 'This is another example that shows that the Society is stepping up its representational activities to help and support solicitors.'
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