Money laundering

Business life will never be quite the same again for accountants, estate agents, lawyers, and other firms that accept large cash payments, as well as for their clients and customers.

On 1 March 2004 these and other similar businesses joined financial and investment firms in the regulated sector for money laundering. They now have to report all known or suspected money laundering to the National Criminal Intelligence Service (NCIS), otherwise they themselves could face serious criminal charges.

Customers need to be aware of the obligations that regulated firms have to report suspicions of money laundering to NCIS — without telling the customer. Regulated businesses also have to make stringent identity checks on new customers in the same way as banks.

The term money laundering is popularly associated with drug dealing and terrorism, but the new money laundering rules cover any benefit that a person knows, or even suspects, represents the proceeds or benefits of any criminal conduct. That includes not just robbery, drug dealing and the like, but also tax and VAT evasion, petty theft, bribery and criminal failure to comply with a regulatory requirement leading to costs savings or profits, for example ignoring health and safety rules.

It does not matter how small the criminal proceeds involved. And where in the world the offence was committed is not relevant if the conduct would have broken the law in the UK.

Regulated businesses cannot avoid the obligation to report to NCIS by simply claiming they did not know what a client was doing. People who shut their minds to the obvious or deliberately refrain from asking awkward questions will not have an excuse for failing to report money laundering offences. However, a suspicion of money laundering must have some objective foundation to be reportable.

To comply with their obligations, regulated businesses must appoint a money laundering officer, set up internal procedures, train staff to recognise potential money laundering and carry out identification procedures. Businesses that fail to report any offences or carry out the correct procedures can face an unlimited fine and those responsible can be imprisoned.

Accountants have been reported to be making around 100 reports a day to NCIS since the rules came into force. Many of them involve suspicions of tax evasion and the Inland Revenue has said the reports will be a "valuable source of intelligence".

NCIS will become part of the new Serious and Organised Crime Agency (SOCA) if proposals in a recent White Paper go ahead. The White Paper explains that SOCA will target "professional facilitators" who help organised criminals launder the proceeds of their crimes. SOCA is likely to have the power to require individuals to produce documents and answer questions.

Businesses miss out on bank interest

UK businesses miss out on £422 million in interest a year because they do not shop around for the best bank accounts, according to a study commissioned by the Alliance & Leicester bank (A&L).

There are about one million business deposit accounts in the UK, of which smaller businesses with a turnover of under £1 million hold roughly 830,000. In contrast, the largest 5% of businesses hold nearly two-thirds of the total value in all bank accounts.

British businesses hold more than £36 billion on deposit — an average account value of £58,000. A&L said it is "difficult to understand" why businesses are not looking to make their money work harder.

According to the study, undertaken by two independent research groups, 57% of bosses opened their business account with the same bank as their private account provider. Many businesses seem to be relaxed about cash in hand, and just under half could not specify the amount of interest being paid by their bank.

Inertia is the main reason why businesses do not earn the interest they could. The research suggests that half of all businesses are overlooking the benefits of deposit accounts and so missing out on maximising the return on any surplus funds. A Competition Commission report published in 2002 has made account switching easier, but many business owners continue to feel uneasy about businesses that swap accounts.