Joint Committee on The Draft Corruption Bill Written Evidence


Memorandum Submitted by PricewaterhouseCoopers LLP (DCB 16)


  1.  This memorandum focuses on issues arising out of the draft Corruption Bill ("the Bill"), with regard to the activities and responsibilities of accountants. While this memorandum sets out some significant practical issues for accountants raised by the Bill, it does not go so far as to propose changes to it. Some of these issues are not entirely new, as they relate to the inherent difficulties in detecting corruption, which have always existed. Others arise from the broad scope of the Bill, and the relative complexity of its interpretation in certain respects, which is somewhat at odds with the attractive simplicity of the drafting. These practical issues are raised with the aim of assisting an informed discussion of the impact of the Bill as drafted.

  2.  Corruption is an insidious threat to economic development and prosperity wherever it occurs. It distorts competition and markets, increases costs and reduces quality for consumers, undermines legitimate government and stunts economic growth, particularly in developing countries which can least afford it. PricewaterhouseCoopers fully supports the sentiment and the broader objectives behind the Bill. In common with other reputable firms, PricewaterhouseCoopers has a code of conduct which embodies the firm's commitment to supporting international and local efforts to eliminate corruption and financial crime and explicitly prohibits the making or receiving of bribes by partners and staff. In addition, the firm has for many years and in various ways supported Transparency International, a leading international non-governmental organisation in the fight against corruption.

  3.  In summary, the key issues for accountants arise in the following areas:

    (a)  Certain elements of the corruption offences as defined in the Bill and/or of the available defences to them, which rest in part on facts or circumstances which may not be easily ascertained or verified or where there may be considerable subjectivity;

    (b)  The inherent practical difficulties in identifying instances of corruption and/or in judging when there are reasonable grounds for suspicion thereof, arising from the many ways in which it can be perpetrated and disguised; and

    (c)  The requirement to report corruption offences (the scope of which is extended under the Bill) under the Proceeds of Crime Act 2002 ("POCA"), as supplemented by the draft Money Laundering Regulations 2003. [36]The issues in this regard relate in large part to those set out in (a) and (b) above, but also include basic logistical and compliance aspects.

  4.  In terms of the breadth of scope of the Bill, one matter worth highlighting here is the absence of an explicit exemption for "facilitation payments", which might render illegal under the Bill payments which companies and individuals feel compelled to make simply to obtain within a reasonable timeframe (or at all) certain rights, services or supplies to which they are legally entitled. It is noted that the treatment of facilitation payments is a matter specifically raised by the Joint Committee for discussion and it is hoped that the relevant parts of this memorandum will contribute usefully to that debate. Doubtless others will also express views on this difficult topic.

  5.  The impact of the Bill from the point of view of accountants cannot be fully assessed in isolation. Rather, the Bill needs to be considered in conjunction with POCA and the draft Money Laundering Regulations 2003, as many of the actions required of accountants who come across corruption in the course of their work stem from them.

  6.  It is very difficult to predict with any certainty the impact of the reporting requirements on accountants (whether firms or sole traders). It seems likely that there will be a noticeable increase in reports by accountants to the National Criminal Intelligence Service ("NCIS") arising out of POCA and the Money Laundering regulations 2003. Some element, probably a relatively small proportion of this overall increase, is likely to relate to the widened scope of corruption offences in the Bill. Given the difficulty of detecting corruption, such reports are likely to include some false alarms, while genuine cases may well go undetected. Within firms, which are required under POCA to have a Money Laundering Reporting Officer ("MLRO"), some of the false alarms may be filtered out before reporting to NCIS. Inevitably, firms will bear additional costs in this process, albeit that this is not possible to quantify with any precision at this stage.

  7.  In considering these issues, the following matters are examined:

    —  Activities in which accountants may engage and the various ways in which they might commit corruption offences or certain other offences linked to corruption offences;

    —  The scope of the Bill as it affects the activities of accountants;

    —  The interaction between the Bill and the POCA and related statutory instruments, which is fundamental to a proper understanding of the overall impact of the Bill on accountants; and

    —  Practical issues in relation to the various kinds of services that accountants provide.


  8.  For the purposes of this memorandum, the term "accountants" is broadly construed and encompasses any individual or firm providing any of the services outlined below (or any other accountancy service that may not be explicitly listed below), regardless of whether or not that individual or firm is a member of a recognised professional body. For the purposes of this memorandum, the position of in-house accountants in business is not specifically considered. Accountants and their activities can be characterised in one of two ways:

    (a)  Accountants are engaged by clients to use their skill and expertise to provide statutory audit and other attestation services, as well as a wide range of accounting, tax and advisory services. The distinguishing feature of these services is that the accountant audits, records, monitors, reviews or advises, but does not transact for or on behalf of the client; or

    (b)  Accountants may take the role of an agent or intermediary for a client. Activities in this regard might include, for example, handling client monies, negotiating and transacting as agent on behalf of a client. Accountants may operate in a quasi management role, for example as officers of the Court in carrying out their responsibilities as insolvency practitioners. In this context, they will transact for and on behalf of the estate of the individual or corporate entity which is the subject of the insolvency proceedings under the supervision of the Court. Trusteeships may also be considered to fall into this category, where accountants will transact on behalf of the trust.

  9.  The above areas of activity are not necessarily mutually exclusive. Nor are the examples given exhaustive of all possible arrangements between accountants and their clients. However, they serve to illustrate generically the kinds of professional relationship in which an accountant may become involved. Each type of engagement places the accountant in a different position in terms of his level of knowledge of and involvement in the activities of his client.

  10.  It should not be overlooked that accountants are also business people, who transact on their own account with other parties, their clients, to provide services of the kind outlined above in return for fees. These clients may reside in the UK or overseas and may be in the private or public sector. In this regard accountants are no different from any other business person or enterprise seeking to sell goods or services to customers.

  11.  It follows from the above that accountants may, knowingly or otherwise, come into contact with corruption as defined in the Bill in any the following ways:

    (a)  By providing services of the kind envisaged in 8(a) above to a client who is, or has been engaged in corruption, but where the accountant has no direct or active involvement in the corrupt conduct;

    (b)  By providing services of the kind envisaged in 8(b) above and, in the course of doing so, committing corrupt acts as defined in the Bill for and on behalf of a client or, indeed, against the interests of a client; or

    (c)  By committing corrupt acts on their own account, for example in order to influence the awarding of a lucrative contract or the provision of services to a client.

  12.  Each of the above situations is examined in more detail below. In summary, the accountant may render himself criminally liable in one or more of the following ways in relation to corrupt acts:

    (a)  By committing a corruption offence under the proposed law set out in the Bill;

    (b)  By committing a money laundering offence under sections 327 to 329 of POCA; or

    (c)  By failure to report a corrupt act of which he has gained knowledge (or reasonable grounds for suspicion) pursuant to sections 330 et seq of POCA, as supplemented by the draft Money Laundering Regulations 2003.

  13.  With regard to the criminal liability or otherwise of the accountant in relation to corruption, the impact of the Bill can only be fully assessed in conjunction with POCA and related regulations. The following sections contain a brief (and somewhat simplified) outline of the key provisions of relevance in this regard.


  14.  The intention of the Bill is clearly to cast as wide a net as possible in relation to corrupt acts. In this regard the Bill defines the key terms broadly. Amongst other things:

    (a)  An advantage which is corruptly conferred or obtained may take any form and need not be received directly by the person who is corrupted;

    (b)  Indeed, the advantage may not in fact be conferred or obtained at all. For a person to perform his function corruptly, it may suffice that he did so in the hope or expectation of obtaining an advantage at some time;

    (c)  The corrupt act may take place anywhere in the world, as may the business transaction to which it relates;

    (d)  The provisions of the Bill apply equally to corruption in the private and public sectors; and

    (e)  There is no de minimis exemption.

  15.  With regard to the point in 14(d) above, we note that the extension of the law to cover corruption which takes place entirely in the private sector exceeds the requirements of the OECD Convention on Corruption, [38]which restricts its scope to the corruption of public officials. Likewise, and for the same reason, the Bill is more wide-ranging than the United States Foreign Corrupt Practices Act 1977 ("FCPA"), the first, and for many years the only, significant anti-corruption law with international reach. We see no compelling reason to differentiate between the public and private sectors in relation to corruption and we therefore have no concerns about the Bill in this regard.

  16.  Furthermore, unlike the FCPA, the Bill does not appear to exclude from criminal sanction so-called "facilitation payments". Under the FCPA facilitation payments are defined as "any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official." The definition of "routine governmental action" includes: "obtaining permits, licenses, or other official documents; processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery; providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products; and scheduling inspections associated with contract performance or transit of goods across country." Routine government action specifically does not include decisions to award new business or to continue business with a particular party.

  17.  The spirit of the FCPA definition of a facilitation payment appears to be that the person making the payment is simply seeking to facilitate or expedite the provision of some benefit (be it a service, utility, or whatever) to which he is in any case entitled. Under the FCPA facilitation payments are treated as an exception and are not subject to criminal sanction.


  18.  The basic money laundering offences are as follows. Pursuant to section 327 of POCA, and subject to certain defences, a person commits an offence if he conceals, disguises, converts, transfers or removes from the UK any criminal property. For these purposes, concealing or disguising criminal property includes "concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it." [39]Under section 328 of POCA, and subject to certain defences, a person commits an offence if he "enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person." [40]Under section 329 of POCA, and subject to certain defences, a person commits an offence if he acquires, uses or has possession of criminal property, unless the property was acquired, used or possessed for adequate consideration.

  19.  Pursuant to section 340 of POCA, property is criminal property if "(a) it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or in part and whether directly or indirectly), and (b) the alleged offender [ie the person allegedly committing or, alternatively, failing to report the money laundering offence] knows or suspects that it constitutes or represents such a benefit"[41]. For these purposes, criminal conduct is any conduct which "(a) constitutes an offence in any part of the United Kingdom, or (b) would constitute an offence in any part of the United Kingdom if it occurred there." [42]

  20.  It follows from the above that any property of whatever kind which changes hands in connection with corruptly conferring an advantage or corruptly obtaining an advantage (pursuant to sections 1 and 2 of the Bill respectively), and presumably any economic benefit accruing to the person or organisation conferring the advantage, must constitute criminal property for the purposes of POCA. In other words, a corruption offence is a predicate offence for the purposes of establishing a money laundering offence.

  21.  Pursuant to section 330 of POCA, which makes failure to report money laundering an offence, a person commits an offence if all of the following conditions are met: first, that he "(a) knows or suspects, or (b) has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering"[43]; secondly, that the information or other matter on which his knowledge or suspicion is based "came to him in the course of a business in the regulated sector"[44]; and thirdly, that he fails to make the required disclosure "as soon as is practicable after the information or other matter comes to him." [45]

  22.  The definition of what constitutes "business in the regulated sector" is set out in Schedule 9 to POCA, as supplemented by the draft Money Laundering Regulations 2003. Pursuant to the latter, "relevant business" includes "the provision of accountancy services by a body corporate or unincorporated or, in the case of a sole practitioner, by an individual." [46]The term "accountancy services" is not defined in the current draft, however the thrust of the explanatory notes contained in the Consultation Document released with the draft suggests that the term is to be widely construed. In particular, "accountancy services" includes services related to accounting matters provided by persons who are not members of a recognised professional body and are therefore not otherwise regulated in such activities.


  23.  The effect of the Bill, in conjunction with POCA and the Money Laundering Regulations 2003 (as outlined above), will be to require an accountant to report any instance of corruption by (or, in certain circumstances, against) a UK client of which he becomes aware or of which he has reasonable grounds for suspicion as a result of his work. Such a report will be made in accordance with the relevant provisions of POCA. Accountants who are not sole traders are likely to have appointed a Money Laundering Reporting Officer ("MLRO") as a "nominated officer" responsible for collating reports from individuals within their firms and for making reports to the appropriate authorities.

  24.  In practice, corruption can be particularly difficult to identify. Almost by definition, it involves dishonesty and concealment. Also, there may be no immediately apparent loss or victim. To illustrate this, it may be helpful to examine in general terms some of the ways corruption may occur and can be more or less actively concealed.

The client as perpetrator

  25.  From the point of view of the accountant, a client might seek to conceal the perpetration of a corrupt act in many ways. By way of example, monies to be used as bribes may be paid away under cover of apparently bona fide invoices, perhaps purporting to relate to consulting or similar services. If the accountant were to examine these transactions in the course of his work (for example, as auditor), he might have no reason to doubt their validity. Once the monies have been transferred in this way, they might be pooled in an account of which the auditor has no knowledge in the name of an apparently unrelated entity. Such monies could then be used as and when required for corrupt purposes.

  26.  Another scheme might entail the payment of monies to a lawyer, accountant (see also below) or other intermediary for onward payment to the recipient of the bribe. Again, this might be concealed by invoices or other supporting documentation designed to disguise the true nature of the transaction.

The client as victim

  27.  An alternative scenario is that the client is a victim of corruption. In broad terms, this might occur in various ways, including the following:

    (a)  There is collusion between an employee of the client and a third party to the detriment of the client. An example would be where a third party supplier bribes an employee in the client's purchasing function to award an order to that supplier. The client typically suffers as a consequence by paying for goods which are over-priced, or paying for goods not received or of sub-standard quality. The bribe may take many forms, the common feature being that it will, of course, appear nowhere in the client's books; or

    (b)  The client fails to secure a contract because a competitor obtains the business by corrupt means. In such a case, there may be no more than a general suspicion that corruption has occurred, as the client may have severe difficulties in producing concrete evidence.

  28.  The circumstances outlined in 27(a) above are extremely difficult to identify in practice without extensive investigative work. The purchase of goods resulting from the corrupt arrangement between the supplier and the employee will most probably be processed and accounted for quite normally and properly and, from the point of view of the accountant, there may be no obvious grounds for suspecting that anything is amiss. For example, an auditor would not normally be expected to consider value-for-money or similar commercial issues in auditing payments for goods and services and would probably not identify over-pricing resulting from corruption, unless this were significant and obvious.

  29.  The circumstances set out in 27(b) above, while clearly detrimental to the client's business, would, on the face of it, have no direct impact on the client's accounts. Having said this, such a set of circumstances might be reportable under POCA by the accountant, notwithstanding that there was no direct involvement of his client.

  30.  It will be apparent that all of the schemes described above are designed to evade detection. In practice, instances of corruption tend to come to light as a result of tip-offs, for example by suspicious colleagues or disgruntled competitors.

  31.  Leaving aside the practical difficulties in identifying even straightforward cases of corruption, there will inevitably be instances which give rise to a degree of uncertainty as to whether or not the particular facts constitute corruption as defined in the Bill (and are therefore reportable). The following aspects may give rise to practical difficulties for accountants:

    (a)  The lack of a de minimis exemption;

    (b)  The non-exemption of facilitation payments (adopting for present purposes a definition along the lines of that used in the FCPA); and

    (c)  Corrupt acts committed by overseas subsidiaries of UK companies.

No de minimis exemption

  32.  The breadth of definition of corruption in the Bill and the lack of a de minimis exemption (which is consistent with the approach taken in POCA and, indeed, generally in criminal law) is clearly designed to avoid the creation of "loopholes" by which the intention of the Bill might be confounded. Arguably, the lack of a de minimis exemption is mitigated by the definition of the term "corruptly" in the Bill, which requires that for any of the corruption offences to have been committed, the person who acts as agent for another must do so "primarily" in return for (or in anticipation of) an advantage. This means that, regardless of the value of the advantage conferred, obtained or anticipated, the test of whether an offence of corruption has been committed involves determining whether the person receiving, or expecting to receive, the advantage acts or acted primarily in return for that advantage. If such is not the case, then even a substantial payment, gift or other advantage is, on the face of it, neither corruptly conferred nor so received.

  33.  We have no fundamental concern with the above approach. However, it follows that one of the crucial tests of whether corruption has taken place rests on facts or circumstances which may not be ascertainable by the accountant in the normal execution of his role—namely, the significance of a payment, gift or other advantage in influencing the actions of the person on whom such advantage is conferred. The accountant will be called upon to use professional judgement and common sense in determining whether the facts known to him give rise to a sufficient degree of suspicion or certainty to conclude that a corruption offence has been committed, and in taking further action accordingly.

Non-exemption of facilitation payments

  34.  As previously observed, there is no explicit exemption from criminal sanction of facilitation payments. Like any other potentially corrupt payment, facilitation payments may be difficult to detect as such. In some circumstances, it might not even be clear to the individual making such a payment, either on his own account or as an officer or employee of a company, that it represents a facilitation payment rather than, say, a normal up-front fee, such as a connection charge for a utility supply. Notwithstanding this, such a payment could at first sight meet all of the criteria necessary to constitute a corrupt payment under the Bill.

  35.  Having said this, the situation envisaged above, ie where the person making a facilitation payment did so in the belief that it represented a legitimate charge, might fall within the defence that the person making the payment assumed that the recipient's principal (employer) consented to the payment. Pursuant to section 7(2) of the Bill, such consent could be imputed from the genuine belief that such consent had been given, or would have been given if the facts were known, even if the belief turned out to be erroneous.

  36.  An alternative defence might run as follows: a facilitation payment does no more than induce the recipient to do his job, albeit perhaps sooner than might otherwise have been the case. This being so, it might be argued that the person receiving the facilitation payment then acted primarily because it was his job rather than because of the payment. Intuitively, this could only apply where the recipient was not in any way acting in breach of his duty to his employer, agent or the public interest, as appropriate.

  37.  To put the issue in concrete terms, it is not unknown in some countries for public officials to abuse their position by demanding payment from the unwary (or unlucky) for the granting of basic rights. A policeman might demand money on threat of arrest on false charges. An immigration official might demand payment for the return of a passport innocently handed over in the normal course of entry to (or exit from) the country. A company might find that the only way to restore its water or electricity supply, deliberately cut off or wilfully withheld, is to make some form of facilitation payment. Intuitively, payments made in such circumstances might be felt not to offend against justice or the public interest, which the Bill (like any other law) aims to serve. In practice, in spite of the potential defences under the Bill suggested above, it appears that the maker of such payments could be caught under the Bill.

  38.  Once again, from the point of view of the accountant observing evidence of such transactions in the normal course of his work, the test of corruption rests on facts and circumstances which may not be capable of verification. If told that a payment was made, or some other advantage conferred, in the belief that the principal of the person receiving such advantage had consented, the accountant would have to decide whether to accept such an explanation or not, having regard to all of the information available to him. Of course, the consent point would apply to any and all potentially corrupt payments and not merely those which might, using the FCPA definition or similar, be defined as facilitation payments. Similar practical issues might arise for the accountant in evaluating circumstances of the kind outlined in paragraph 36 above.

Corrupt acts by overseas subsidiaries

  39.  The Bill encompasses acts of corruption committed overseas by persons who are UK nationals and entities incorporated under UK law. This is no more than a fulfilment of the UK's commitment as a signatory to the OECD Convention and we fully support the principle of international jurisdiction in corruption matters. From the point of view of the accountant's ability to determine whether corruption has occurred, the question naturally arises as to the extent of criminal liability of UK companies in respect of overseas operations. As far as operations in overseas branches (as opposed to subsidiaries) of UK companies is concerned, any corrupt act would be deemed to have been carried out by the UK company acting by an officer or employee located in an overseas territory. In this situation the UK company is involved directly in the corrupt act and there is no question but that it would be in contravention of the Bill.

  40.  The situation with regard to corrupt acts carried out by or on behalf of overseas subsidiaries of UK companies is more complex. In the UK, the law generally does not automatically impute to parent companies absolute control over or knowledge of the actions of their subsidiaries. This means that a corrupt act committed by an overseas subsidiary may not necessarily render the UK parent company criminally liable under the Bill. To do so would appear to require evidence that the UK parent company had in some way directed or otherwise influenced the subsidiary to commit the corrupt act. The Bill caters for such a situation by defining as an offence (at section 13(3)) ". . . an attempt, conspiracy or incitement to commit [a corruption offence] . . ." as well as ". . . aiding and abetting, counselling or procuring the commission of [a corruption offence]".

  41.  Once more, the devil is in the detail. Whether or not an offence covered by the Bill has occurred will depend upon the extent of knowledge and control of the UK parent company vis-a"vis the relevant activities of the overseas subsidiary. From the perspective of the accountant, this is another area where absolute certainty is unlikely to be achievable and professional judgement is called for. In practice, the accountant may have to rely to some extent upon management representations as to matters of knowledge and control.

  42.  Even in a situation where there was no evidence of the involvement of a UK national or a UK registered company in a corrupt act, the facts may indicate that an act or omission has taken place which, had it occurred in the UK, would have been a criminal offence (regardless of who committed it). In such a case, pursuant to section 340(2) of POCA[47], this might (although this aspect of POCA is not entirely clear) be reportable by an accountant who became aware of it or had reasonable grounds for suspicion.

  43.  Having considered some of the problems posed by corruption in its different forms, it may be helpful to examine the activities of accountants introduced in the opening paragraphs of this memorandum.


  44.  For the purposes of examining the impact of the Bill on the activities of accountants characterised in 8(a) above, it is appropriate to distinguish the statutory audit role from other attestation, accounting, tax and advisory roles. The reason for doing so is that, in contrast to the other roles, the statutory auditor's responsibilities and scope of work are prescribed in considerable detail in company law and in auditing guidance, such as Statements of Auditing Standards ("SASs") issued by the Auditing Practices Board.

UK auditing guidance

  45.  As a general principle, in undertaking the audit of a set of financial statements, auditors should ". . . obtain sufficient appropriate audit evidence . . . to determine with reasonable confidence whether the financial statements are free of material misstatement; . . .". [48]From this it will be apparent that there is no such thing as absolute assurance in an audit. An auditor does not (and could not possibly) examine every transaction in an entity of any significant size, but adopts procedures including, where appropriate, sample testing, which are designed to obtain the "reasonable confidence" required to form an opinion on the financial statements. In practice, an auditor in full compliance with applicable auditing standards may examine only a minute fraction of the total number of transactions entered into by his client in the period subject to audit.

  46.  Auditors plan and execute their work so as to have a "reasonable expectation" of detecting material misstatements arising from fraud or error. However, "an audit cannot be expected to detect all errors or instances of fraudulent or dishonest conduct", since such conduct ". . . is usually accompanied by acts specifically designed to conceal its existence . . .". [49]

  47.  In summary, auditors are not policemen. The responsibility of the auditor does not extend to the active detection of all fraud and other dishonest and/or illegal acts by or against an audit client. Furthermore, in terms of the completeness of disclosure of such acts and their effect on the financial statements, the auditor must inevitably rely to some extent upon complete and honest representations by management. This is valid so long as the auditor does not have reason to doubt the completeness and honesty of such representations. The same principle applies to the examination of other documentary audit evidence, the integrity of which the auditor is entitled to accept, unless he is aware of any reason which might call this into question.

  48.  It follows from the above that the auditor, notwithstanding that he fulfils his duties as such with the required degree of diligence, skill and care and in accordance with applicable auditing standards, may not uncover corrupt payments or other acts of corruption, which have been perpetrated by his client, or, indeed, against his client.

Implications of the Bill for the auditor

  49.  The Bill, in conjunction with POCA and other applicable laws and regulations, undoubtedly widens the scope of potentially reportable matters which may come to light in the course of an audit. Because of the nature of corruption and the scope of the statutory audit, as outlined above, it is likely that some instances of corruption may well continue to go undetected.

  50.  In any event, the auditor will have to make a number of judgements, including:

    (a)  Whether there is sufficient evidence that all of the conditions for a corruption offence under the Bill are present;

    (b)  If not, whether the auditor has a legal and/or professional obligation to make further enquiries to establish whether such evidence might exist; and

    (c)  Whether, in all the circumstances, a duty to report exists.

  51.  In practice, as previously indicated, some of the key elements of a corrupt act are deliberately concealed and bypass the books of the company entirely and are not therefore readily visible to the auditor. Individually, corrupt transactions will in most cases not be material to the financial statements subject to audit, such that the auditor may in conducting an audit in accordance with generally accepted auditing standards have no cause to examine them specifically.


  52.  Similar issues to those outlined above present themselves to the accountant acting in an accounting or advisory capacity, or in providing tax advice, or, indeed, in the provision of other, non-statutory attestation services. The difference between the statutory audit and such other services is that, in the latter case, the scope and terms of reference of the accountants work will be unique to each specific assignment. It is therefore difficult to generalise about the extent to which the accountant may be expected to detect corruption in the course of his work.

  53.  Clearly, if the accountant does detect corruption or form reasonable grounds for suspicion thereof, then he is subject to the requirements concerning reporting to third parties, which are discussed elsewhere in this memorandum.


  54.  Where the accountant acts in some quasi management or fiduciary capacity, using his initiative to transact for the benefit of those whose interests he is charged with safeguarding and promoting, for example as an officer of the Court in an insolvency or as a trustee, then he will be criminally liable for any corrupt act committed by him or on his instructions as if he were acting on his own account or that of the firm for which he works. In this regard the matter is clear and the position of the accountant is no different from that of any other person subject to UK law.

  55.  Where the accountant acts on the instructions of a client, perhaps in some intermediary capacity, his knowledge concerning the transactions he may undertake for and on behalf of that client is not necessarily identical with that of his client. Under POCA and the draft Money Laundering Regulations 2003, the accountant is under a legal obligation to take reasonable steps to ascertain the true identity of his client. Furthermore, the accountant should have procedures in place to assist in satisfying the requirement to report suspicious transactions, so as to avoid the risk of committing an offence under POCA by handling criminal property, as outlined in paragraph 18 above. Even if the funds or assets were initially not criminal property, they would become so if used for corrupt purposes under the Bill. In such a situation, the accountant could fall foul both of POCA and of the Bill.

  56.  Accountants who act honestly as agents or intermediaries for clients will undoubtedly have to take even greater care than before to ensure that they understand the nature of the transactions they are carrying out on the instructions of clients.


  57.  As with the situation described in paragraph 54 above, the accountant acting on his own account is in no different a position from that of any other individual or company involved in commercial activity. In this regard, there are no obvious issues arising from the Bill which do not equally apply to non-accountants.

May 2003

36   The Money Laundering Regulations 2003, draft dated 5 November 2002, Part I, section 2 (2) (i), which includes the provision of "accountancy services" (currently undefined) within the definition of a "relevant business" for the purposes of the various money laundering offences. Back

37   Except as otherwise stated, this memorandum deals only with laws, regulations and professional guidance governing the conduct of UK accountants (or overseas accountants performing services in the UK). In certain circumstances, UK accountants are required to comply with the laws, regulations or guidance of other countries. For example, a UK accountant conducting the audit of a company registered with the US Securities and Exchange Commission ("SEC") is required to perform the audit in accordance with US Generally Accepted Auditing Standards ("GAAS"). No attempt is made here to cover every possible implication of the Bill arising out of its interaction with overseas laws, regulations or other measures. Back

38   OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions, adopted on 21 November 1997. Back

39   POCA, section 327 (3). Back

40   POCA, section 328 (1). Back

41   POCA, section 340 (3). Back

42   POCA, section 340 (2). Back

43   POCA, section 330 (2). Back

44   POCA, section 330 (3). Back

45   POCA, section 330 (4). Back

46   Draft Money Laundering Regulations 2003, section 2 (2) (i). Back

47   See also paragraph 19 above. Back

48   SAS 100 "Objective and general principles governing an audit of financial statements", (SAS 100.1). Back

49   SAS 110 "Fraud and error", paragraph 18. Back

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