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Accounting & Bookkeeping Finance General HM Revenue & Customs, VAT & PAYE

The High Value Dealer and the new Money Laundering Regulations 2017

The High Value Dealer and money launderingMoney laundering is the process of making illegally-gained proceeds (i.e., “dirty money”) appear legal (i.e., “clean”). The first step in the process involves introducing cash into the financial system by some means, known in the jargon as “placement”.
Typically, this can involve making a purchase, or a deposit for the purchase of, a high value item from a business and paying in cash.
In 2017 the Government introduced the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations. This was a 4th update of legislation that was first introduced in 2003 in a bid to stamp out money laundering.
While the regulations deal with the criminal aspect of laundering money they have implications for reputable businesses that unwittingly might be targeted by criminals, among them High Value Dealers (other specified service providers are also detailed in the guidance).
A High Value Dealer (HVD) is defined as a firm or sole practitioner making, or accepting, cash payments of the equivalent of €10,000 or more.
Under the regulations HVDs must carry out a risk assessment on their business’ vulnerability to being used as a conduit for money laundering, review it regularly and keep records of both the transaction and the customer. They must also ensure they and all staff are trained to spot suspicious activity and they must carry out due diligence and risk assessments on clients to whom high value goods may be supplied. Again, all this must be documented.
HMRC (HM Revenue and Customs) oversee HVDs and its inspectors can turn up unannounced to check the records. If they do attend they will look most closely at cash receipts for goods and tend to make the assumption that the receipt is illegally laundered money unless the HVD can produce suitable checks on their clients.
HMRC has the power to impose fines for any infringements based on the failure to produce records and the penalties can be steep, up to 100% of the value of the sale. Since the regulations were brought into force HMRC has updated its guidance for HVDs, downloadable as a PDF

Are you a High Value Dealer?

Many SMEs may fall into the category of being HVDs without realising it.
Your company may be at higher risk if it has:

  • customers carrying out large, one-off cash transactions;
  • customers that are not local to the business;
  • overseas customers especially from a high risk third country as defined by the EU.

I recently came across a family business of 30 years–plus standing with an impeccable record of honest and debt-free trading selling large second-hand capital items.
While it had very few transactions involving cash payments, three were identified as being above the €10,000 cut-off point. Despite the fact that these three were with long-standing and known customers, the HMRC inspector ruled that the transactions had breached regulations, by not producing documents proving the identity (copy of a driving licence or passport) and place of residence (utility bill) of the customers concerned. HMRC imposed a fine on the company of £20,000, saying this was a 50% reduction on the maximum. Understandably my client is contesting this as being excessive, but the matter hasn’t yet been resolved.
With such legislation, HMRC might be seeking to maximise its revenue, but whether justified or not, it costs a lot of time and money for an SME to contest such a harsh judgement, one that can so easily have been avoided.
While my client, after 12 years of my support, now has a strong balance sheet and if necessary can pay the fine, it is easy to see that the size of the fines may push some SMEs into insolvency.
It therefore makes sense to know whether your business comes under the definition of a HVD and to ensure it is protected and complies with the regulations.

Categories
Business Development & Marketing General Uncategorized

Why should SMEs have a staff handbook?

taff handbookIt is important for employees, and management, to know exactly what is expected of them by way of appropriate behaviour, legally-imposed regulations and any specific company policies.
Businesses are required to oversee compliance by staff of all manner of regulations such as Health and Safety, manual handling, smoking, noise, abuse and discrimination to name just a few.
However, new laws and regulations are constantly being imposed on businesses and others are subject to change. While in the past such policies might have been incorporated into each employee’s contract of employment, the constant changes make updating them almost impossible. Instead contracts of employment can be quite short by referring to a staff handbook that can be kept up to date.
Businesses vary greatly in what they include in the employee handbook, but some can run to some 60 pages.
The essentials that should be in a staff handbook
Essentially, the handbook is combination of quality, management and reference manual. They are particularly useful when inducting new employees or as a reference manual when dealing with grievances and disciplinary matters, or sickness and absence.
Therefore, it makes sense for every business to have a well-structured staff manual, no matter whether it is an SME or a larger company.
Ideally, a staff handbook should be clear with an easy to search index so that it can be used for training purposes and referred to when dealing with problems that may arise.
It should contain company policies on dress codes and behaviour, information about claiming expenses, health & safety, security, personal safety, use of vehicles and driving while on company time, and lots of statutory policies.  It might include instructions for using technology and telephones, while most companies now forbid staff from using phones while driving and some forbid their staff from taking calls on business phones outside working hours.
Others have instructions for operating specific equipment or machinery as might relate to departments, while these can be incorporated into the staff handbook they might instead be appended in working instructions that apply to the relevant department. Either way such instructions should be referred to in contracts of employment and the staff handbook as observing them will be a condition of employment.
Staff handbooks should include reference to policies on equal opportunities, Disciplinary Rules and Procedures, Grievance Procedure and Health and Safety Policy.
While there is no need to include the details of the legislation they should point to where both staff and management can find more information.
There are many other policies, these days, that businesses may also have, such as on drug and alcohol consumption, especially where they expect employees to drive motor vehicles. Email security is also a major area where employee compliance is key including internet security, protecting company systems from unauthorised access and viruses, accessing inappropriate or non-work-related websites, personal use of company computers and telephones or social media. Sickness and absence, parental leave, data protection and whistleblowing are also normally covered.
Again, staff and management need to be familiar with the policies and procedures and know that they exist, and where to go for detailed information.
An up to date staff handbook should be available on staff noticeboards with notice of any changes that might be relevant. These should also be covered during a periodic staff review and every now and then an updated staff handbook should be issued to all staff.
It might need to be longer than 60 pages but, however long, every company that employs staff needs a staff handbook.