Do We Report Client with Undisclosed Overseas Bank Account?
Question from a firm – I am the MLRO in our firm. I am not sure whether I must or cannot report a situation I have been made aware of. Our client came to Ireland some years ago and for a few months she was unemployed but lived in a hotel.
Our Tax Manager asked her how she managed to fund this and she mentioned an offshore bank account of which we were unaware. The Tax Manager explained that any income would need to be declared on her tax return and the client asked her to forget she had mentioned it as she didn’t want the Revenue to know about it because the money had come from a friend. The Tax Manager came and reported to me as the MLRO.
My understanding of the rules is that because we were not being asked to give legal advice or clarify the law, legal professional privilege doesn’t apply to us here, but this is an area about which I am not too familiar, so I am grateful for some advice.
Answer – You are absolutely correct in your understanding. You need to consider the original source of the information. In this case it arose from a routine question during normal compliance work and so is not covered by the privileged circumstances exemption from reporting in privileged circumstances (see more in Chapter 7 (paragraph 7.4) of the latest CCAB-I AML Guidance updated in March 2022. It seems clear that the client is evading tax, and since the information came to you in the course of a regulated business you must report it as a suspicious transaction report (STR) to the Garda and the Revenue Commissioners as money laundering.
The other issue is that you cannot submit a tax return that you know to be incorrect; otherwise you would be involved in an arrangement to help your client defraud the Revenue.
You also need to consider your ethical position. The Code of Ethics of all professional accountancy bodies will state something to the effect that you cannot continue to act for a client on tax matters where you know her tax affairs are deliberately misstated, other than to help regularise the situation. If the client persists in this position you will need to resign.
Had the client come to you and openly disclosed the offshore account and was willing to get her tax affairs regularised while asking for your advice on what she should do, then the information would have been received in privileged circumstances (see Section 46 of the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2021) and you would not be able to report. You would still be in the same position from an ethical standpoint.
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