JOURNAL 15

MONEY LAUNDERING – US STYLE

An article in newKerala.com recites that last November the Nuns of the Holy Name Monastery, a Benedictine nunnery in St Leo, Florida had its bank account frozen for a week last November causing cheques to bounce and taking three months to straighten out.

The Bank apparently blamed section 326 of the Patriot Act. This requires financial institutions to institute a Customer Identification Program (CIP) that contains reasonable risk – based procedures to verify that customers are who they say they are to the extent reasonable and practicable and to maintain records of customer information and methods used to verify that identity.

Sound familiar? Just like the UK’s money laundering rules.

The nun’s bank apparently realised that they did not have on file the social security number and photo-identification of one of the cheque signatories – an 80 year old nun. They seem to have decided that this meant they could not verify who their customer was. Don’t they have phones in Florida? Couldn’t they have phoned the nunnery and explained the problem? And what risk were they concerned about that made it so vital to freeze the account?

Ironically the Regulations promulgated by the US Treasury include “Treasury and the Agencies acknowledge that the proposed rule might have had unintended consequences for bank-customer relationship and that the risk-based approach suggested by commentators would avoid these consequences. Accordingly the final rule excludes from the definition of a customer a person that has an existing account with the bank, provided that the bank has a reasonable belief that it knows the true identity of that person”.

They also say, “After revisiting the issue of whether a signatory should be a “customer”…the proposed provision defining customer to include a signatory on an account is deleted. Instead the final rule requires bank’s CIP to address situations where the bank will take additional steps to verify the identity of a customer that is not an individual by seeking information about individuals with authority or control over the account, including signatories, in order to verify the customer’s identity”.

So the bank seemingly didn’t even have an obligation to verify the nun’s identity! All they were required to do was ask someone at the nunnery who she was!

Robert W Maas

JOURNAL 13

HMRC CUSTOMER SERVICE

David Varney, the new chairman of HMRC, has said that the focus of the new organisation is on customer service. I have recently had a couple of occasions to look for things on the HMRC website and have been left with the impression that his perception of that phrase is somewhat different to mine!

A friend of a friend thought that he had received a large tax demand which he could not understand and spoke to my friend who spoke to me. The friend of a friend is semi literate. I was readily able to resolve the problem because when I saw the communication from the Revenue it was not addressed to him but to somebody else.

However having looked at his papers, it was apparent that he is entitled to a significant tax refund. He has been unemployed for most of the last years but has worked occasionally both under PAYE and on building sites under the Subcontractor’s Scheme.

I accordingly suggested to my friend that she should write to HMRC and claim a tax refund for her friend. She asked me to whom she should write and I naively thought that I would find this on the HMRC site.

The individual concerned lives in Kent. On the “contact us” section of the website there is a facility called “contact by post”. This tells me that if I key in a tax office reference it will tell me where the office is. I picked a reference from one of the P45’s, 921. The tool told me “no match found”. Was I on to a scandal? Had some unscrupulous employer invented a tax office? I looked at the form more closely. The “employer” was the local job centre. I somehow don’t think that the DWP invents tax offices to try and defraud HMRC. It seems to me more likely that the HMRC contact tool does not work. I then tried “contact your tax office by phone”. No luck. It only gives numbers of call centres. In desperation I tried “face to face”. This gave me the address of Woolwich Enquiry Centre and helpfully told me that it was almost five miles from the individual’s home. However it did not give me a phone number and I knew that the individual’s tax file would not be there.

Fortunately my friend who works freelance does some work for an accountant in South London and she said that she does a lot of letters to the South East London area and perhaps she should contact them. I hope it works.

I pity those who do not have such local knowledge and have to rely on the HMRC website. Of course the individual could have given up a half days work to go in person to the Woolwich Enquiry Centre, but as he does not understand the bits of paper that he has I somehow doubt it would have been a very productive meeting.

This morning I decided to look up the Revenue’s Prosecution press releases. Because I have looked at these in the past I knew there was a website. Could I find it on the HMRC website? No. I tried everything I could think of. I did a search for “prosecution press releases”. This gave me lots of hits which included the word “prosecution”. I did a search for “press releases”. This gave me another long list none of which were terribly helpful and suggested that I should try “press notices” which gave me another long list and suggested that I should try “press releases”.

I actually know that the HMRC press releases are on the Government News Network site not the Revenue site. However I could not find a link to them on the Revenue’s site. I went to “YouGov”. Again I could find no link to press releases. Eventually I found HMRC Prosecution press releases but there’s nothing on it for several months. I then realised that I should have looked for “HMRC Prosecution Office press releases”, where I found what I wanted.

I do not claim to be computer literate but at least I knew the website I was looking for existed so I persevered until I found it. I suspect most people would have given up when they could not find it on the HMRC website.

I would like to know how David Varney defines customer service!



Robert W Maas

JOURNAL 14

HOW SERIOUS IS TAX EVASION?

I read in Private Eye the other week that the 12½year jail term imposed on Ian Leaf for tax evasion is thought to be the second largest jail sentence ever imposed for a white collar crime. My train of thought moved on to how does society rate tax evasion as compared with other crimes. I have therefore done a quick survey from the newspapers over the last week or so to compare Ian’s 12½year jail sentence with sentences for other crimes.

Actually I am not sure whether Ian’s jail sentence is 12½years or 22½years. He is estimated to have made a profit of £22million from his crime and the courts have said that if he does not repay £98million he must serve an extra 10 years. Most of us would find it difficult to pay £98million our of £22million of assets, so I suspect the real jail sentence is 22½years. Ian has asserted that he does not have £98million. It is not clear whether this is the amount that the Revenue are claiming i.e. tax plus interest plus penalties of up to 100% of the tax, or whether it is their estimate of how much money he might possibly have earned by investing the £22million. I suspect it is the former.

So how does Ian’s 22½years compare with sentences for other crimes:

Raping a 22 year old stranger snatched off the street 12 years
Street gang who beat up and killed a stranger in an all night orgy of violence
1 member 3 members 8 years 12 years each
Borrowing (and returning) 3 buses from garages 8 months
Beating up a stranger including inflicting severe brain injuries which left him in a coma for 2 months - 18 months
Led a gang of 6 into a two person flat for people in care, tied up the two victims and pistol whipped one of them 10 years

I seem to recollect a lot of the newspapers recently talking about prison not being the right punishment for those who are unlikely to re-offend. I would have thought that Ian is unlikely to re-offend, and would still be unlikely even if he were not in his 70s by the time he completes his sentence. Accordingly we must presumably assume that the 22½years includes a massive discount for the fact that he is unlikely to re-offend, so as to make it comparable to the other sentences which are predicated on that basis.

I find the comparison fascinating. Personally I would not have thought that tax evasion was twice as heinous as snatching a 22 year old stranger off the street and raping her. Does society really think that? I suspect not, but the courts clearly do. Does this mean that the courts are not representative of the society or is it an indication that the judges would like society to adopt a concept of tax evasion being far more serious than virtually any other crime than murder?

Of course Ian’s offence is exceptional. Most tax evaders do not evade £22million. Equally though, most tax evaders know what they are doing. I do not know Ian Leaf. I have never met him. However the impression I get is that he did not consciously intend to evade tax. He thought that what he was doing was avoiding tax (which is legal) and a jury held that he was evading tax. I suspect I am not along in thinking that the punishment for deliberately committing a criminal offence ought to be longer than the punishment for doing so in circumstances where one believed that what they were doing was legal.

My thoughts turned to sentences for other tax offences. I accordingly went to the HMRC Prosecution’s website. There are 7 cases listed for the last year. These are of course cases where HMRC has opted to issue a press release. There may well be other cases in which it has not done so. I set out below the sentences. I have used the HMRC description of the fraudster. Most believe that people involved in tax such as Tax Inspectors, solicitors, accountants and magistrates are treated far more severely by the court than other people. Or are they? What do you think?

Former magistrate 9 months suspended
Tax cheat (former Inland Revenue employee) 4 years
Hairdresser (mother of 2 young children - £26,000 false claim) 5 months
Tax Inspector (£10,000 loss) 6 months
Tax fraudsters (£500,000 loss)
1 3 years
1 2 years
1 18 months
1 2 years suspended
Cheating Taxman (£300,000 loss) 3½years
Company director 1 year


Robert W Maas