In several recent blogs we looked at some examples of money laundering in practical day to day business life.
Here is another one that is based on an example from the latest Consultative Committee of Accountancy Bodies (CCAB) AML Guidance released on 4 March 2022.
Your client has paid a dividend based on draft accounts. Subsequent adjustments reduce distributable reserves to the extent that the dividend is now illegal. Do I need to report this as a money laundering offence?
The answer is that whether it is money laundering or not will depend on the circumstances and the intentions of the Directors.
- Report as a money laundering offence – If there is suspicion of fraud.
- Do not report as a money laundering offence – If there is no such suspicion. It may be a simple error and will need rectified without delay.
The payment of an illegal dividend is not a criminal offence under the Companies Act.
A company can only pay a dividend if it has sufficient ‘distributable profits’ (as defined) available for distribution. Sections 124 and 125 of the Companies Act, 2014 are the principal sections that deal with declaring dividends and the Directors ought to prepare calculations in advance, based on the company law requirements, to ensure they are calculated from profits that are available for distribution, as defined in Section 117. If a dividend is declared unlawfully the directors are potentially liable to repay it to the Company.
Please note that potential money laundering reporting scenarios are not usually clear cut and legal and professional advice may be necessary to fully understand your obligations. There is a significant technical document available on the ICAEW website, Tech 02/17BL, which, although based on the UK Companies Act, 2006, would be persuasive under Irish company law, as GAAP in both Ireland and the UK is the same (at least for now) and both countries have the same accounting frameworks with similar underlying legal principles.
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