For accountants, bankers and audit committees in general there is new guidance from the Financial Reporting Council (FRC) which affects their audit responsibilities.

These changes will also impact anyone who has audit and/or corporate governance responsibility within their organization or for clients. We have many larger corporate clients for whom this is an important accountability point and we support them in staying at the forefront of changes in legislation and/or legal responsibilities.

On the 29^th May 2015, the FRC issued a Practice Aid to help audit committees evaluate audit quality in light of section C3 of the UK Corporate Governance Code. (Get your copy here > “May 2015: Practice aid for audit committees”).

C3 requires an audit committee to report how it has assessed the effectiveness of the external audit process. Although this Aid is designed for listed companies, the FRC notes that it may assist other organisations, including those adopting the Code voluntarily.

In brief, it indicates that audit committees should focus more on seeking evidence of quality throughout an audit engagement rather than on the output of the external audit.

It sets out guidance on how this may be achieved and the inputs that could inform the audit committees’ assessment. These input sources include:

• the views of external parties (including investors and regulators);
• feedback from the organisation’s management team;
• the committee’s own observations of and interactions with the auditors; and
• the committee’s usual oversight of the financial reporting process.

Using these “inputs”, it recommends that the committee should assess the auditors on their:

• Mindset and culture
• Skills, character and knowledge
• Quality control
• Judgment

Whilst these elements may seem very subjective to make an assessment on, the FRC Practice Aid provides guidance on how the committee may evaluate each of these elements.

If you are not sure how these changes will impact your audit responsibilities in practice, please feel free to contact me on 01604 828 828 or via email. I work with a variety of organisations, from larger global corporations to small to medium sized businesses – so I am able to give you guidance based on your organisation and accountability.

Image courtesy of 123rf.com

The recent Channel 4 documentary “From Russia With Cash” has shown 5 London estate agents turn a blind eye to a potential money laundering scenario when presented with a corrupt foreign purchaser at a property viewing. The programme heightens the focus upon all agents as the profession is seen as facilitating money laundering.

If you have yet to see the documentary, I would strongly recommend that you and your team watch it and honestly appraise your own systems. Would your organisation have acted any differently?

What happens exactly in the documentary?

The scenario portrayed by the undercover reporters consisted of a Russian Healthcare Minister visiting the UK with his girlfriend and during the visit they seek to purchase a house in London. Whilst viewing each property, the official discloses to the various agents that the money to be used for the purchase comes from the Russian government and backhanders he has received to top up his low government salary. As a result, the bogus purchaser insists that the purchase has to be with absolute discretion and requests help in hiding his identity.

How did the estate agents respond?

Without exception, all of the estate agents indicated that they could assist although some suggested it was inappropriate for the prospective purchaser to tell them anything further. Others, however, disclosed how the transaction could proceed with absolute discretion suggesting the lawyers to approach, what information to give the lawyer and how to use an off shore company to conceal the identity of the purchaser.

The consequences…

This has not helped the perception that the National Crime Agency already has of the estate agency profession. Having been gatekeepers for law enforcement, the estate agents are now viewed as part of a growing problem. A paper written by Deutsche Bank this year showed that £1bn a month of unrecorded capital comes into the UK and much of that finds its way into the London property market. Most of the money was found to be from Russia. Further figures on corrupt cash produced by the NGO Transparency International indicated more than 36 000 properties in London had been bought through off shore companies with a high proportion purchased anonymously to cover up the source of funds.

Where does this leave the UK property industry?

The global Financial Action Task Force (FATF) are due to visit the UK and assess the effectiveness of our regulatory compliance. With many experts commenting upon London as the capital of money laundering, it could prove an uncomfortable visit and so we can expect regulators to tighten their controls. The problem is not isolated to London and the onus is on all of the regulated sector to ensure that their AML compliance is effective.

If you have any queries regarding your AML compliance, we are able to help. We shall also be running a course for Estate Agent Money Laundering Reporting Officers and Deputy Money Laundering Reporting Officers shortly. If you would like to register an interest in the course and receive more information, please let me know by commenting below or emailing me on sarah.canning@franklins-sols.co.uk.

Image courtesy of 123rf.com

It is important to value a claim accurately before taking your matter to court. It is essential because this vital step ensures that both parties base their pre-action and post-issue negotiations a factual position rather than the matter reach trial and they find the entire basis of their conduct is undermined by a grossly exaggerated claim.

An example of one such claim arose when, in the matter of Duncan V Churm, Oxford County Court (12 September 2014), HHJ Harris QC presided over a case where the figure claimed was exaggerated. The Claimant had commenced proceedings in 2011 and, in 2013, served a Schedule of Loss claiming £1 million. The Schedule of Loss was revised in 2014 to £500,000. The Defendant made a Part 36 Offer of £202,500 in January 2014 and the Claimant accepted the offer in July 2014.

The acceptance of the offer was after the expiry of the relevant Part 36 period. So unless the court ordered otherwise, the Claimant was entitled to recover the costs of proceedings to the date the relevant period expired, and the Claimant was liable for the Defendant’s costs for the period from the expiry of the relevant period to the date of acceptance. This rule is interpreted consistently by the Courts, unless it is unjust to do so.

What was the Judge’s finding?

When reflecting upon the case, the Judge held that, when it can legitimately be inferred that a case would have settled much sooner than it did, if the claim had been reasonable there was “every reason” why it should be reflected in costs. His findings were that the original claim value was likely to have greatly inhibited the prospect of an early settlement and it would be unjust for the Defendant to bear costs incurred when the Claimant was seeking to recover about 5 times what she eventually accepted as the true value of her claim. In this case, the Court ordered that the Claimant pay the Defendant’s costs incurred from the date of service of the initial Schedule of Loss back in 2013. Because the Claimant’s case was grossly exaggerated, she was forced to pay costs to the Defendant, which could have been avoided.

What can we learn from this case?

The case serves as a reminder to all Claimants to be confident in their valuation of their claim and similarly, to Defendants that, well placed Part 36 offers of settlement can be tactically beneficial when there is a distinct lack of evidence supporting a claim.

If you need support in preparing your claim or indeed need some specialised legal assistance in a claim that you wish to pursue – please feel free to ask me any questions below, or contact me on 01604 282 828. I am also on Twitter if you would like me to answer a quick question. (@SarahJCanning)

Image courtesy of 123rf.com

In the past, Landlords have previously been faced with confusion as to whether to serve a notice pursuant to Section 21 (1) or Section 21 (4) of the Housing Act 1988, when giving notice to end an Assured Shorthold Tenancy where the fixed term has expired and the tenant remains in occupation on a Statutory Periodic Tenancy.

The main difference between the two notices is that a notice served under Section 21 (1) does not have to expire on a specific date whereas a notice served under Section 21 (4) must expire on the last day of the tenancy and must specify that the landlord requires possession the day after the specified date.

Unfortunately, problems have arisen with the validity of notices served under Section 21 (4) where incorrect dates have been detailed on the notice. Consequently the Courts have refused possession in these cases on the basis of the tenant not being served with a valid notice.

The Court of Appeal has clarified the position in Spencer – v – Taylor [2013] EWCA Civ 1600 and it is now easier for landlords to serve the correct notice to end such tenancies.

In Spencer – v – Taylor [2013] the Court of Appeal held that when a fixed term of a tenancy expires and a tenant remains in occupation under a Statutory Periodic Tenancy, it is no longer necessary to comply with the criteria set out in Section 21 (4) Housing Act 1988. Provided it can be shown that Section 21 (1) has been fulfilled, the service of a notice pursuant to Section 21 (1) is sufficient.

The service of notices under Section 21 (4) will only be required where there was no fixed term agreed and the tenancy was a Statutory Periodic Tenancy from inception.

As well as clarifying the procedure in serving a valid notice, the additional benefit to landlords is that they may provide their tenant with two months’ notice at any time within the tenancy period. This is instead of giving two months’ notice from the beginning of the next tenancy period. As a result, landlords may recover possession of their property earlier.

If you are a landlord and you are still concerned about how to issue a valid notice or you have had some issues with issuing a notice, please feel free to contact me and I’d be happy to help guide you. Are you a tenant that has been served a notice that you are concerned about? Drop me a question in the comments section below – or feel free to contact me via email.

Image courtesy of 123rf.com

HM Revenue and Customs (HMRC) have a number of Anti-Money Laundering Compliance Officers working through registered agencies to ensure that each business is up to date with their compliance activities.

There are a number of regulations and obligations which Estate Agents have to adhere to before, during and proceeding a property transaction. Every agent must have an appointed Money Laundering Reporting Officer (MLRO) who will the person responsible for ensuring that the compliance practices are in place and are being carried out.

I would recommend that the MLRO or any deputy in place ensure that they are prepared for possibly receiving a call from the HMRC.

What you can expect from a call

The calls will begin with some initial security questions before progressing to discuss:

• day-to-day business activities,
• procedures for vendor ID, (i.e. what processes do you have in place to verify identification of your clients),
• queries regarding record keeping, and
• training.

The purpose of the calls

The calls are intended to provide HMRC with the opportunity to decide whether a visit is required to clarify any issues that have arisen during the call. Responses to the enquiries will therefore enable HMRC to understand which estate agencies are fully aware of the obligations under the Money Laundering Regulations and those that are not.

Not only is it therefore important to ensure that you are compliant with the Regulations, but also that all staff are aware that HMRC may call at any time and that the call must be transferred through to your MLRO or, if the MLRO is absent, the Deputy MLRO.

If you receive a call and HMRC contact you indicating that they intend to visit, it is vital that you are fully prepared for the visit and have all of your records up to date.

Should you require any help to update your policy documents or to prepare for a visit, please contact me on 01604 828270 or sarah.canning@franklins-sols.co.uk

Image courtesy of 123rf.com

If you work within the regulated sector, you may know that during the last 12 months, the UK Financial Intelligence Unit (UKFIU) has worked with the reporting sectors towards improving the quality of Suspicious Activity Reports (SARs).

This has included:

• dissemination of guidance review products;
• working closely with some of the sectors to show the requlators and trade bodies actual instances of poor quality; and
• presentations to reporters and regulators.

Unfortunately, these activities have not been successful in improving the quality of the SARs requesting consent. Consequently, the UKFIU has decided to bring in a new process in order to reduce the delays which impact on all areas of the SARs Regime.

Therefore as of 1 October 2014, for those SARs requesting consent which are missing the reason for suspicion or fail to identify the nature of the criminal
property, the case will be closed without further engagement from the UKFIU.The reporter will be sent a letter from the UKFIU explaining which parts of the
information are missing and that your case is closed.

So, as an accountant, banker or property agent (residential or commercial) this piece of information will be important for you. Your Money Laundering Reporting Officers need to be up to date, trained and ready to ensure that they are being as detailed as possible in their SARs – if they have requested consent to proceed, delays could occur if the report is not compliant.

If you have any questions about this NCA requirement or about Anti-Money Laundering Regulations as a whole – please feel free to contact me by commenting below, by email or by calling my team or myself on 01604 828 282 (Northampton) or 01908 660 966 (Milton Keynes).

Fines approaching £250,000 have been made against Estate Agents over the course of the last few months. If you are a Commercial or Residential Property Agent and not compliant with the Regulations to prevent money laundering then you too could be subject to a hefty fine.

On the 1st April 2014, HM Revenue & Customs took over the regulation of Residential Estate Agents and Commercial Land Agents for the purposes of money laundering. Enforcement proceedings will therefore continue with this transfer of responsibility from the Office of Fair Trading (OFT).

In order to comply with the regulations, it is essential that you have the following in place:-

• An internal money laundering policy;
• Procedures to identify a vendor’s identity before marketing a property for sale (unless exceptional circumstances arise);
• Retention of all records for a minimum of 5 years;
• Audits to ensure compliance with the policy; and
• Staff training

You must have an appointed nominated officer or Money Laundering Reporting Officer (MLRO) with a deputy in place to ensure the policy is up-to-date and adhered to.

Responsibilities of the MLRO

It is the responsibility of the MLRO to:

• review suspicious activity
• risk assess the business
• identify trends, and
• reporting these to senior management

Criminal prosecution as well as financial penalties can arise if the Regulations are breached. To avoid falling foul of the legal requirements, the documentation and policy must be in place.

Our firm has specific expertise in supporting clients in Anti-Money Laundering compliance and experience in defending investigations and enforcement. With bespoke policies and procedures available to you, we can advise you on how to protect your business and avoid facing a fine. Our service can range from the provision of policies and procedures through to training and support.

Should you have any queries, please do not hesitate to contact me on 01604 828270 or via email on sarah.canning@franklins-sols.co.uk

Image courtesy of 123rf.com

Commercial landlords historically found themselves in a difficult position when their company tenants went into administration. Many landlords had found tenant companies entering administration on the day immediately following a quarter day, thus avoiding liability to pay rent even where the administrators continue to trade from the premises.

Court rulings had left landlords in an unenviable position. However earlier this year, the Court of Appeal delivered a unanimous judgment clarifying the obligations on the part of administrators to pay rent to a landlord. The case of Pillar Denton Ltd and Ors v Jervis & Ors [2014] EWCA Civ confirmed that the rent, accruing during a period where the administrator continues to use the premises for the purposes of the administration, is to be treated as an expense of the administration irrespective of the date upon which the rent fell due.

The impact of this is that rent will therefore be calculated on a daily basis for the period in which the administrator uses the premises. The encouraging outcome from this ruling is that Landlords will now be paid their rent as a priority ahead of other provable debts thereby increasing their chances of recovering their rent payments.

Further litigation is likely to continue but, for the time being, there is at last some protection for commercial landlords.

I represent many commercial landlords, some of which have had some tricky situations occur where their company tenants have gone into administration and they have been left with huge unpaid rents. I am pleased that I now have some recourse to advise my clients on, in terms of some level of protection which will secure their right to still earn rental income on their property during a tenant’s administration process.

If you find yourself in a position where your company tenant has gone into administration and you aren’t sure where you stand in your particular situation – please comment below, tweet me on @SarahJCanning, email me or give me a call on 01604 828 282.

Image courtesy of 123rf.com