Professional Negligence and the Forensic Accountant

Having spend the best part of two days writing my latest newsletter, printing it, wrestling with getting a colour header (and failing), signing it and stuffing around 750 into envelopes with a covering letter, I did not feel like spending the last hour or two of today, the first day of December, doing any proper work! Actually I did have help with my mailshot so I shouldn’t grumble too much.

Writing the newsletter always makes me take stock of some of the current issues that affect us forensic accountants. This time I noticed that professional negligence of accountants and lawyers have been figuring rather a lot recently through a number of cases that I have been doing recently.

When looking at accountants’ obligations these days it is easy to see why they fall foul of the regulators’ interest from time to time. An accountant is the very veneer every organised criminal needs to assist with laundering his proceeds of crime! Criminal Proceeds and Money Laundering are of course very big now – especially since the Proceeds of Crime Act 2002. Some say it has draconian provisions – that allow an errant accountant to face up to 14 years in jail if they are found guilty of assisting in the laundering of the proceeds of crime.

This may seem harsh, a professional should have client confidentiality surely? No, not so, the professionals must act as gatekeepers in the authorities’ fight against crime. Even a lawyer cannot claim legal priviledge if trying to conceal money laundering from the authorities.

Accountants are firmly within the regulated sector, as far as Anti Money Laundering Guidelines go. This means that they must carry out KYC – know your client – checks. Also, if they come across something untoward in their client’s records they must make a suspicious activity report (SAR). So accountancy is a regulated activity. However, much of forensic accounting is not!

If I provide expert witness services to the police, I hardly need to verify that they are the authorities that they say they are. I mean – meetings are held at the police station….! If I work for the defence, I hardly need to report the details of the fraud to the authorities who are already investigating it. In fact, the Money Laundering Regulations do say that publicly funded work is not a regulated activity.

But, if I should be asked to investigate for a private client I will most definitely need to have regard to the KYC and SAR requirements like my normal accounting colleagues.

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