UK Accountants Seek To Reassure Lawyers Over Privilege Extension

by Robin Pilgrim, LawAndTax-News.com, London

20 September 2004

The Institute of Chartered Accountants for England and Wales (ICAEW) last week sought to reassure the UK's legal community that the accounting sector is not seeking the extension of legal privilege in certain tax evasion and money laundering cases in order to extend the professional remit of accountants.

Under the UK's new anti-money laundering laws, professional intermediaries are obliged to report clients to the Inland Revenue if they suspect that tax evasion has taken place, and to the National Criminal Intelligence Service if they suspect that the client has been involved in money laundering activity. Professionals who fail to make suspicious activity reports face prosecution themselves.

However, if a client is on the verge of making good a mistake in tax reporting, lawyers are exempted from the requirement to report them to the authorities under privilege rules. The government is currently consulting on the extension of this exemption to "other relevant professional advisers", including accountants.

Although the news of the consultation was welcomed by the accounting community when it was announced earlier this year, many in the legal profession have argued that extension of the exemption could undermine the purpose of the 2003 Money Laundering Regulations. The reduction of the consultation period from sixteen weeks to eight was also criticised, with many lawyers accusing the government of trying to rush through the change.

Speaking to the Law Gazette last week on behalf of the accounting industry body, Simmons & Simmons partner, Colin Passmore explained that:

"Accountants are not going to start advising on legal issues that they do not already advise on, and lawyers will not lose businesss as a result of this. All we are persuading the government to do is bring our legislation into line with Europe, in the interests of the people who matter most, who are not the accountancy profession, but clients."

Chairwoman of the ICAEW's money laundering working party sought to underline this reassuring message, explaining that:

"This (the exemption extension) only applies to highly specific circumstances regarding reporting under money laundering duties. It could provide benefits to the way lawyers and accountants work together for clients."

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