Accountant Interims and the Money Laundering Regulations 2007

31 March 2008

Regulatory Compliance

The introduction of the Money Laundering Regulations 2007 (MLR) has caused interim managers who are professionally qualified as accountants to consider how the compliance requirements of their Institutes and of the Regulations marry up. This article is intended to provide a route map along the path through this complex area; inevitably however, it deals with generalities, and any specific queries must be resolved with your relevant professional Institute.

The starting point is to consider whether what you do for your clients means that you should have a practising certificate from your Institute. In broad terms, the determining factors are whether you provide ‘accounting services’ to your clients, and the nature of your relationship with the clients.

The expression ‘accounting services’ covers a wide range of activities. In its guidance for members on practising certificates, the ICAEW lists 20 activities which it regards as accounting services, and eight which potentially could be but are not. The list of 20 includes:

• Bookkeeping, and preparation of management or financial accounts
• Preparation of cash flows, budgets, or business plans
• Advice/consultancy on accounting and financial reporting systems
• Due diligence into the accounting or financial aspects of a transaction such as a company take over
• Business/share valuation
• Dealing with personal/business tax returns or providing tax advice

The other Institutes making up the CCAB will have similar definitions. It is difficult to see how an Interim manager involved in a financial management role at a client would not undertake any of the above activities at some stage of an assignment.

If accountancy services are provided, the second element to consider is your relationship with the client. If your relationship is akin to employer/employee, depending on the viewpoint of your Institute, you may not need a practising certificate even though you are providing your services on a business basis. However, you will need to consider how a claim not to need a practising certificate for such business activities will impact on the treatment of your assignment contracts for the purposes of IR35.

If you provide accounting services on a business basis, you are within the relevant definition in Reg 3(7) of the MLR, and therefore within the Regulated Sector. If you do not provide accounting services on a business basis, you may nevertheless be within the Regulated Sector under the Trust & Company Service Provider (TCSP) definition in Reg 3(10)(b) – this covers anyone (whether a qualified accountant or not) who, on a business basis, acts as a director or company secretary to their client if a company, or in an equivalent position in a partnership or any other legal entity.

If you are in the Regulated Sector and have a practising certificate, you will be entitled to be monitored for compliance with the MLR in accordance with your Institute’s practice assurance scheme. If you operate through a personal services company (PSC), The PSC should also be within the practice assurance scheme, but you need to ensure that it is.

If you are within the Regulated Sector but do not have a practising certificate, your Institute’s practice assurance scheme will not automatically monitor either you or your PSC (if relevant). It may be possible to arrange with your Institute that you voluntarily obtain a practising certificate or otherwise contract both yourself and, if relevant, your PSC into the practice assurance scheme.

However, if you do not take steps to get you (and your PSC) within your Institute’s monitoring arrangements, the default position is that the monitoring role must be carried out by HMRC. If you opt to go this route, you must formally register with them – yourself if you operate as a sole trader, your PSC if you operate through one. The deadline for submitting an application to HMRC for registration as a TCSP has recently been changed from 1 April to 29 May. If you fail to register in time, you are trading unlawfully if you take on roles as a director/company secretary, and are potentially subject to an unlimited fine and two years imprisonment.