Tax and Money Laundering

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Q. When must I disclose?

Q. What is money laundering?

Q. What does that mean in plain English?

Q. What is a criminal offence?

Q. What is the significance of an offence generating proceeds or property?

Q. What if I discover that a client has accidentally committed a criminal offence but has put things right?

Q. What if I believe that someone else has already made a report?

Q. What if the business is a cash business and there is a difference on the cash control account?

Q. Do I need to investigate the difference to try to identify the reason?

Q. Do I need to make a report if the FIRS enquire into my client's tax returns and as a result of the enquiry there is more tax to pay?

Q. What if I agree with the FIRS that profits should be increased?

Q. I doubt that any accounts are 100 per cent accurate. Does this suggest that a report ought to be made to the NFIU on a protective basis every time a set of accounts is submitted to the Revenue?

Q. My client has installed a new swimming pool at his home. The business bank account shows three large cash cheques posted to drawings as payment for the swimming pool. Do I need to make a report to the NFIU?

Q.  If my client initially denies tax evasion but admits a deliberate omission from his return during the course of a FIRS enquiry do I still need to inform the NFIU? Surely the only people who could conceivably be interested are the FIRS?

Q. Once I have made an initial report, if I do further work and turn up an additional amount the next day do I need to make a further report to NFIU?

Q. What should I do if a new client or prospective client tells me that he has evaded tax?

Q. Does this mean immediately he tells me I need a few weeks to investigate how much is involved?

Q. Is there any downside in notifying NFIU of every mistake I come across to be sure that I am safe?

Q. What is suspicion? 

Q. Is a succession of reports to NFIU of minor tax offences committed by a particular taxpayer likely to prompt the FIRS to open a full enquiry into that taxpayer's latest return?

Q. So do I need to investigate the facts before I can say that I am suspicious?

Q. To what extent am I entitled to investigate the facts before forming a suspicion?

Q. I understand that I myself commit a criminal offence if I tip off the client. What is meant by tipping off?

Q. Suppose that I make a report to the NFIU that I suspect a client of tax evasion, the FIRS subsequently open an enquiry and the client expects me to handle the enquiry. How do I avoid tipping off?

Q. If I make an adjustment to a draft tax computation prepared by the client which results in an increased tax liability and I show the client the amended computation does that constitute tipping off?

Q. I do tax consultancy work for other firms of accountants. Can I rely on them to carry out the client identification?

Q. How do I carry out client identification on a large partnership?

Q. I have heard it suggested that reporting very trivial offences might be regarded as wasting police or NFIU time. Is this true?

Q. I doubt that any accounts are 100 per cent accurate. Does this suggest that a report ought to be made to the NFIU on a protective basis every time a set of accounts is submitted to the Revenue Service?

Q. My client has installed a new swimming pool at his home. The business bank account shows three large cash cheques posted to drawings as payment for the swimming pool. Do I need to make a report to the NFIU?

Q. If my client initially denies tax evasion but admits a deliberate omission from his return during the course of a FIRS enquiry do I still need to inform the NFIU? Surely the only people who could conceivably be interested are the FIRS?

Q. Once I have made an initial report, if I do further work and turn up an additional amount the next day do I need to make a further report to NFIU?

Q. What should I do if a new client or prospective client tells me that he has evaded tax?

Q. What should I do if a new client or prospective client tells me that he has evaded tax?

Q. Does this mean immediately he tells me I need a few weeks to investigate how much is involved?

Q. Is there any downside in notifying NFIU of every mistake I come across to be sure that I am safe?

Q. What is suspicion? 

Q. Is a succession of reports to NFIU of minor tax offences committed by a particular taxpayer likely to prompt the FIRS to open a full enquiry into that taxpayer's latest return?

Q. So do I need to investigate the facts before I can say that I am suspicious?

Q. To what extent am I entitled to investigate the facts before forming a suspicion?

Q. I understand that I myself commit a criminal offence if I tip off the client. What is meant by tipping off?

Q. Suppose that I make a report to the NFIU that I suspect a client of tax evasion, the FIRS subsequently open an enquiry and the client expects me to handle the enquiry. How do I avoid tipping off?

Q. If I make an adjustment to a draft tax computation prepared by the client which results in an increased tax liability and I show the client the amended computation does that constitute tipping off?

Q. I do tax consultancy work for other firms of accountants. Can I rely on them to carry out the client identification?

Q. How do I carry out client identification on a large partnership?

Q. How can I be sure that the FIRS will not let slip to the client that an investigation has started with a notification by me to the NFIU?

Q. I have heard it suggested that reporting very trivial offences might be regarded as wasting police or NFIU time. Is this true?

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Q. When must I disclose?
A. When you know or suspect (or ought to have known or suspected) that a person is engaged in money laundering and the knowledge or suspicion came to you in the course of your profession (ie while undertaking the provision of accountancy, taxation or auditing services).

Q. What is money laundering?
A. Concealing, disguising, converting, transferring or removing criminal property from Nigeria, plus acquiring, using or possessing criminal property, or entering into arrangements to help another person in the acquisition, retention, use or control of criminal property. Criminal property is a person's benefit from criminal conduct where the alleged offender knows or suspects that the property constitutes or represents such a benefit. It is specifically provided in the legislation that concealing or disguising criminal property includes concealing or disguising its nature, source, location, disposition movement or ownership or any rights with respect to it.

Q. What does that mean in plain English?
A. You must make a report to the NFIU if you believe that something you come across in the course of your profession involves criminal conduct and represents funds or property that derives from a criminal offence.

Q. What is a criminal offence?
A. You don't need to know. You are not expected tobecome a criminal lawyer. You are however expected to have the knowledge that a reasonable person in your position would have. You would also be expected to have a more detailed knowledge of certain areas because of the nature of your work, for example tax.
Thus you should be able to recognise the major offences that are likely to generate proceeds, such as theft, fraud and tax evasion. Burglary, shoplifting, robbery, drug smuggling and gun running are also obvious criminal offences that are likely to generate proceeds or other property. You do not have to be sure. It does not matter whether or not something is actually a criminal offence. It is sufficient that you suspect that it is.

Q. What is the significance of an offence generating proceeds or property?
A. If a criminal offence does not generate money (or some other benefit) there is nothing to launder. For example, dangerous driving is a criminal offence but as it produces no funds there is no need to make a report of it. Remember though that some offences which at first sight do not appear to involve property may generate a pecuniary benefit, albeit minor, in which case that benefit will be criminal property. For example, owning an unlicenced gun is a criminal offence which on the face of it does not generate proceeds, but the owner will have obtained a pecuniary benefit by virtue of not having paid the licence fee and that benefit can trigger the obligation to report.
 
Q. What if I discover that a client has accidentally committed a criminal offence but has put things right?
A. In general it is not possible to accidentally commit a criminal offence.  To do so requires:
knowledge (that what you are doing is wrong), and
intention (to carry out the criminal act knowing that it is criminal).
If a person unintentionally does something and puts it right it is probably not a crime at all. If he or she puts it right only because he or she is caught out it may be a criminal offence though.

Q. What if I believe that someone else has already made a report?
A. The requirement to report is a personal one.  You need to make a report even if you think � or even know � that someone else has already done so.

Q. What if the business is a cash business and there is a difference on the cash control account?
A. Differences are not of themselves indicative of a criminal offence. A difference could for example arise from poor record keeping, mistakes in giving change or, if a business operates several tills, putting cash into the wrong till. It is only if you suspect that the difference is due to defalcation that the obligation to report arises. Even then in many cases no offence will take place until accounts reflecting underdeclared income are or a VAT return underdeclaring output tax is sent to declared.  If you credit the difference to sales in the accounts it is unlikely that a reportable offence has been committed. Even if you credit it to the client's capital or loan account, it depends on why you do so. If you think he or she has mixed personal cash with business cash and that the difference is really his or her own money there is probably nothing to report.

Q. Do I need to investigate the difference to try to identify the reason?
A. No. If you have no reason to suspect that the difference represents theft you are not required to do anything.

Q. Do I need to make a report if the FIRS enquire into my client's tax returns and as a result of the enquiry there is more tax to pay?
A. It depends on why there is more tax to pay. If it is because the Revenue took a different view from you on the allowability of an expense and were able to persuade you that you were wrong that is not a criminal offence. If the client underestimated private usage of his or her car that is not a criminal offence (unless he or she deliberately put forward a figure he or she knew was unjustifiable). It is only if the enquiry unearths a deliberate attempt to evade tax (or some other money laundering offence) that the duty to report arises.  back to top

Q. What if I agree with the FIRS that profits should be increased?
A. It depends on why you agree. If it is because you believe that takings have been deliberately underdeclared then you evidently suspect that a criminal offence has been committed.  However there are cases where the Inspector is prepared to settle the case if you agree to extra taxable profits of say NGN50,000 and you advise the client to accept that figure even though you believe the accounts to be correct, because the costs of taking the case to appeal are likely to exceed the tax that the Inspector will settle for. In such circumstances there is nothing to report.

Q. I doubt that any accounts are 100 per cent accurate. Does this suggest that a report ought to be made to the NFIU on a protective basis every time a set of accounts is submitted to the Revenue?
A. No. It is only if you know or suspect that the client has committed a crime, for example evading tax, then a report needs to be made. There are a lot of reasons other than fraud why accounts might not be 100 per cent accurate. For example some figures might need to be estimated or differences might be accepted as being immaterial.  You are only obliged to make a report when you have a suspicion. Reporting on speculative or protective grounds is not encouraged.

Q. My client has installed a new swimming pool at his home. The business bank account shows three large cash cheques posted to drawings as payment for the swimming pool. Do I need to make a report to the NFIU?
A. It depends on whether you have a suspicion of tax evasion.  There could well be innocent reasons why the supplier might want to be paid in cash. Do you have a reason to suspect that he is evading tax?  If so you need to make a report to the NFIU.

Q.  If my client initially denies tax evasion but admits a deliberate omission from his return during the course of a FIRS enquiry do I still need to inform the NFIU? Surely the only people who could conceivably be interested are the FIRS?
A. Yes, you need to tell the NFIU.

Q. Once I have made an initial report, if I do further work and turn up an additional amount the next day do I need to make a further report to NFIU?
A. It depends on what you disclosed. If it is the same criminal conduct and the new discovery merely helps clarify the figure there is normally no need for a further report unless the original one stated a specific figure. If the original offence appeared to involve NGN50,00 and the next day you discover NGN50 million it would be sensible to make a further report. If the additional amount relates to a different type of criminal conduct to that which you originally suspected you ought to make a further report.

Q. What should I do if a new client or prospective client tells me that he has evaded tax?
A. You must make a report to the NFIU as soon as is practicable.

Q. Does this mean immediately he tells me I need a few weeks to investigate how much is involved?
A. Yes, it does mean as soon as possible after he has told you about it, eg immediately after the meeting at which he tells you that he has evaded tax, even if you do not have a clue at that stage as to how much is involved. However if you require a short time to establish whether you indeed have a suspicion or to verify factors which could be determinant in whether you have a suspicion then you may be able to justify a delay.

Q. Is there any downside in notifying NFIU of every mistake I come across to be sure that I am safe?
A. You are protected against a claim by the client for breach of confidentiality only if you had knowledge or reasonable grounds for suspicion of a criminal offence. Bear in mind also that your reporting obligation to the State will only override your professional duty to your client if you have a genuine suspicion of money laundering criminal conduct.

Q. What is suspicion? 
A. As stated in the introduction suspicion is more than a vague idea that something may be wrong. It is different to scepticism. If you are sceptical about a transaction you may need to ask for explanations and consider carefully whether such explanations are plausible. If you believe that the evidence contradicts the explanation given you may well have formed a suspicion that money laundering is involved, but will not necessarily have done so.  Suspicion is a subjective concept; it depends on the individual facts.

Q. Is a succession of reports to NFIU of minor tax offences committed by a particular taxpayer likely to prompt the FIRS to open a full enquiry into that taxpayer's latest return?
A. Assuming that NFIU passes on such minor reports to the FIRS (we do not know if they will) such reports will obviously be a factor that the will be taken into account in deciding whether to open an enquiry.    back to top

Q. So do I need to investigate the facts before I can say that I am suspicious?
A. You need to ask the questions you would normally ask in carrying out your professional job and then try and reach an understanding of the information you have obtained in deciding whether or not you are suspicious. You are not, however, required to turn into a detective and try and investigate the matter. It is important to realise that you need to have a suspicion of an offence

Q. To what extent am I entitled to investigate the facts before forming a suspicion?
A. You are entitled to investigate in as much depth as you wish.  Conversely there is no obligation on you to carry out an investigation unless you consider it appropriate. You must not however turn a blind eye to information that you have or fail to make such enquiries as an honest and reasonable person would make if he or she had the same knowledge of the circumstances as you.

Q. I understand that I myself commit a criminal offence if I tip off the client. What is meant by tipping off?
A. Tipping off occurs where you know or suspect that a disclosure has been made and you make a disclosure to the client (or to someone else) which is likely to prejudice any investigation that might be conducted following the disclosure. 

Q. Suppose that I make a report to the NFIU that I suspect a client of tax evasion, the FIRS subsequently open an enquiry and the client expects me to handle the enquiry. How do I avoid tipping off?
A. You should not indicate to the client that you have made a report to NCIS, nor should you do anything that will prejudice the enquiry. It is highly unlikely that simply representing the client in the enquiry will constitute tipping off. Indeed, pressing the client to disclose irregularities and helping him or her to present these to the FIRS is hardly likely to prejudice the enquiry; it is far more likely to assist it. You obviously should not say to the client, �The enquiry probably arises because someone has told NFIU that they suspect you of tax evasion�.

Q. If I make an adjustment to a draft tax computation prepared by the client which results in an increased tax liability and I show the client the amended computation does that constitute tipping off?
A. Following your normal professional procedures in dealing with clients' tax affairs are unlikely to result in tipping off. At this stage of the proceedings it is unlikely that a report would have become necessary in any event. If the tax computation has not been submitted it is highly improbable that any criminal offence has been committed.

Q. I do tax consultancy work for other firms of accountants. Can I rely on them to carry out the client identification?
A. It is your responsibility to obtain the evidence you need, but there is nothing to stop you asking the accountant to provide you with certified copies of documents held by him or her. You need to decide what evidence is satisfactory. You also need to consider whether you need to identify both the accountancy firm and its client whose affairs are the subject of the consultancy work. This will depend on who is the �applicant for business� and whether they are acting on behalf of someone else, in which case that person must also be identified.  

Q. How do I carry out client identification on a large partnership?
A. You need to exercise your commercial judgement. It may be appropriate to obtain identification details for the partnership itself, the partners who have executive control and also those that have the largest 'equity' shares.

Q. I have heard it suggested that reporting very trivial offences might be regarded as wasting police or NFIU time. Is this true?
A. It is hard to see how you can be criticised for carrying out the statutory duties the law has imposed on you.

 Q. I doubt that any accounts are 100 per cent accurate. Does this suggest that a report ought to be made to the NFIU on a protective basis every time a set of accounts is submitted to the Revenue?
A. No. It is only if you know or suspect that the client has committed a crime, for example evading tax, then a report needs to be made. There are a lot of reasons other than fraud why accounts might not be 100 per cent accurate. For example some figures might need to be estimated or differences might be accepted as being immaterial.  You are only obliged to make a report when you have a suspicion. Reporting on speculative or protective grounds is not encouraged.

Q. My client has installed a new swimming pool at his home. The business bank account shows three large cash cheques posted to drawings as payment for the swimming pool. Do I need to make a report to the NFIU?
A. It depends on whether you have a suspicion of tax evasion.  There could well be innocent reasons why the supplier might want to be paid in cash. Do you have a reason to suspect that he is evading tax?  If so you need to make a report to the NFIU.

Q. If my client initially denies tax evasion but admits a deliberate omission from his return during the course of a FIRS enquiry do I still need to inform the NFIU? Surely the only people who could conceivably be interested are the FIRS?
A. Yes, you need to tell the NFIU.   back to top

Q. Once I have made an initial report, if I do further work and turn up an additional amount the next day do I need to make a further report to NFIU?
A. It depends on what you disclosed. If it is the same criminal conduct and the new discovery merely helps clarify the figure there is normally no need for a further report unless the original one stated a specific figure. If the original offence appeared to involve NGN50,00 and the next day you discover NGN50 million it would be sensible to make a further report. If the additional amount relates to a different type of criminal conduct to that which you originally suspected you ought to make a further report.

Q. What should I do if a new client or prospective client tells me that he has evaded tax?
A. You must make a report to the NFIU as soon as is practicable.

Q. Does this mean immediately he tells me I need a few weeks to investigate how much is involved?
A. Yes, it does mean as soon as possible after he has told you about it, eg immediately after the meeting at which he tells you that he has evaded tax, even if you do not have a clue at that stage as to how much is involved. However if you require a short time to establish whether you indeed have a suspicion or to verify factors which could be determinant in whether you have a suspicion then you may be able to justify a delay.

Q. Is there any downside in notifying NFIU of every mistake I come across to be sure that I am safe?
A. You are protected against a claim by the client for breach of confidentiality only if you had knowledge or reasonable grounds for suspicion of a criminal offence. Bear in mind also that your reporting obligation to the State will only override your professional duty to your client if you have a genuine suspicion of money laundering criminal conduct.

Q. What is suspicion? 
A. As stated in the introduction suspicion is more than a vague idea that something may be wrong. It is different to scepticism. If you are sceptical about a transaction you may need to ask for explanations and consider carefully whether such explanations are plausible. If you believe that the evidence contradicts the explanation given you may well have formed a suspicion that money laundering is involved, but will not necessarily have done so.  Suspicion is a subjective concept; it depends on the individual facts.

Q. Is a succession of reports to NFIU of minor tax offences committed by a particular taxpayer likely to prompt the FIRS to open a full enquiry into that taxpayer's latest return?
A. Assuming that NFIU passes on such minor reports to the FIRS such reports will obviously be a factor that will be taken into account in deciding whether to open an enquiry. 

Q. So do I need to investigate the facts before I can say that I am suspicious?
A. You need to ask the questions you would normally ask in carrying out your professional job and then try and reach an understanding of the information you have obtained in deciding whether or not you are suspicious. You are not, however, required to turn into a detective and try and investigate the matter. It is important to realise that you need to have a suspicion of an offence

Q. To what extent am I entitled to investigate the facts before forming a suspicion?
A. You are entitled to investigate in as much depth as you wish.  Conversely there is no obligation on you to carry out an investigation unless you consider it appropriate. You must not however turn a blind eye to information that you have or fail to make such enquiries as an honest and reasonable person would make if he or she had the same knowledge of the circumstances as you.

Q. I understand that I myself commit a criminal offence if I tip off the client. What is meant by tipping off?
A. Tipping off occurs where you know or suspect that a disclosure has been made (to either the NFIU or internally to an MLRO) and you make a disclosure to the client (or to someone else) which is likely to prejudice any investigation that might be conducted following the disclosure. 

Q. Suppose that I make a report to the NFIU that I suspect a client of tax evasion, the FIRS subsequently open an enquiry and the client expects me to handle the enquiry. How do I avoid tipping off?
A. You should not indicate to the client that you have made a report to the NFIU, nor should you do anything that will prejudice the enquiry. It is highly unlikely that simply representing the client in the enquiry will constitute tipping off. Indeed, pressing the client to disclose irregularities and helping him or her to present these to the FIRS is hardly likely to prejudice the enquiry; it is far more likely to assist it.  back to top

Q. If I make an adjustment to a draft tax computation prepared by the client which results in an increased tax liability and I show the client the amended computation does that constitute tipping off?
A. Following your normal professional procedures in dealing with clients' tax affairs are unlikely to result in tipping off. At this stage of the proceedings it is unlikely that a report would have become necessary in any event. If the tax computation has not been submitted it is highly improbable that any criminal offence has been committed.

Q. I do tax consultancy work for other firms of accountants. Can I rely on them to carry out the client identification?
A. It is your responsibility to obtain the evidence you need, but there is nothing to stop you asking the accountant to provide you with certified copies of documents held by him or her. You need to decide what evidence is satisfactory. You also need to consider whether you need to identify both the accountancy firm and its client whose affairs are the subject of the consultancy work.

Q. How do I carry out client identification on a large partnership?
A. You need to exercise your commercial judgement. It may be appropriate to obtain identification details for the partnership itself, the partners who have executive control and also those that have the largest 'equity' shares.

Q. How can I be sure that the FIRS will not let slip to the client that an investigation has started with a notification by me to the NFIU?
A. The FIRS are used to maintaining confidentiality where a tax investigation starts from a tip off by a third party.  They recognise the importance of not discouraging people from providing such information to them. Q. I have heard it suggested that reporting very trivial offences might be regarded as wasting police or NFIU time. Is this true?
A. It is hard to see how you can be criticised for carrying out the statutory duties that the law has imposed on

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