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HMRC internal manual

Money Laundering Regulations: Compliance

Compliance visit tests: monitoring suspicious activity reports: Information relating to tax risks

During visits to check compliance with the Regulations, Officers may inadvertently come across information that represents a risk of tax evasion or an undeclared tax avoidance schemes. For example, during a visit to a HVD “off record” cash sales are identified.

Again it is important to draw a distinction between risks associated with the activity of the business and risks associated with its customer’s especially under any circumstances where legal privilege could apply. See MLR3C8580 for further details.

Tax evasion is strictly a criminal offence but is normally subject to a civil and not a criminal investigation by HMRC.

It is more likely that COfficers will come across potential tax evasion relating to Direct Tax, VAT or Excise Duties.

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Even if there are grounds for suspicion that the customers of a business are involved in tax evasion Officers must proceed with great caution. In practice it will be not be possible to identify tax evasion by checking CDD on customer’s transactions or business relationships at the level required to evaluate MLR compliance. Officers must not under any circumstances attempt to obtain additional details for any other purpose other than ensuring the business is compliance with the Regulations.

If a higher level of information is provided by a business which in some way provides stronger evidence of Evasion or Avoidance then it is legitimate to ask whether this has been subject to a SAR or disclosure to HMRC. For example, an ASP may voluntarily show you a clients accounts to demonstrate how he has established if they consider them to be high or low risk client.

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Officers should make themselves fully aware of the CCAB and CIOT guidance on reporting before visiting ASPs. The golden rule is that any information collected during the course of compliance visits must have been obtained whilst ensuring the business’s compliance with the regulations. Compliance Officers have an obligation to protect the confidentiality of a business’s customers and must ensure all customer information is handled in like with HMRC’s HUMINT process

Under no circumstances should an officer disclose to anyone else information in SARs whether they relate to money laundering in relation to tax evasion or any other criminal offence.