| Imagine the following dilemma
A medium sized manufacturing company was acquired by a large multinational group and one of the groupís accountants became the companyís Financial Director.
The Financial Director soon became concerned about transactions that were processed via the consumable materials account. It was discovered that the sale of waste was credited to this account whilst the purchase of consumable materials was debited to it. On making further enquiries the Financial Director found that on the Friday of each week the Transport Manager would pass a large amount of cash, typically £20,000, to the Cashier who banked the money into the companyís bank account. The Sales Ledger Manager was advised of the amount who then arranged for a sales invoice to be raised to the value of the cash received. The invoice was addressed to a local waste recycling company and the output VAT was properly accounted for. It was never sent out in the post, it would always be passed to the Transport Manager for hand delivery. It was also discovered that at the end of each month the Managing Director would pass a purchase invoice for consumable materials to the Purchase Ledger Manager who would arrange for a cheque to be raised which was first signed by the Company Accountant and passed to the Managing Director for a second signature. The Managing Director would keep the cheque. The value of a purchase invoice would always be equivalent to the value of the sales invoices raised for the sale of waste for the particular month and there were no contracts or delivery documentation in place to support the invoice.
The Financial Director spoke with the accountant of the waste recycling company and found that they never purchased waste from the company. When enquiries were made of the supplier of the consumable materials it was established that it was a limited company properly registered at Companies House. It was also discovered that the companyís Managing Director and Transport Manager were the two shareholders in this company. What is more the Financial Director strongly suspected that the cash involved in the arrangement was criminal property.
The Financial Director had an informal meeting with the Company Accountant, the Cashier, the Sales Ledger Manager and the Purchase Ledger Manager. The main purpose was to establish whether they ever considered anything was inappropriate. The practice had been going on for many years. The four people expressed the same view which was that they would not risk their jobs by challenging the actions of the Managing Director and Transport Manager.
Imagine you are one of these four people. Do you think you would adopt the same stance or would you be concerned that, under The Proceeds of Crime Act 2002, you might be committing a criminal act?
If the cash was criminal property and if it is considered that there were reasonable grounds that they should have suspected that was the case, all four of the individuals may well have committed a money laundering offence. The penalties for which would be a fine, imprisonment for up to fourteen years, or both.
This would represent a dilemma for many people. The dilemma being; yes I could be committing a Money Laundering offence but if I report it to the police I will blow the whistle on my employer. If you should find yourself in such a situation, observing the new legislation, you should make an authorised disclosure to NCIS. The NCIS website explains how you do this.
This story highlights how easy it is for people to become involved in Money Laundering. The Transport Manager placed the dirty money into the company, the four people cleaned it and the Managing Director integrated it into another company.
The Proceeds of Crime Act 2002
Part 7 of this Act defines the new offences. The Act has been amended by The Serious Crime and Police Act 2005. There is not a publicly available document which incorporates these changes. We have therefore reproduced Part 7 of The Proceeds of Crime Act 2002 as amended by The Serious Crime and Police Act 2005 which you can view by going to the link opposite.
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