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Fast-track defence against money laundering lane opens for insolvency practitioner

Author: ICAEW Insights

Published: 25 Aug 2021

Practitioners who take on urgent insolvency cases will be prioritised for AML defence under a new agreement secured by the ICAEW.

Under new guidance approved by the Home Office and the National Crime Agency, insolvency practitioners working on the most pressing appointments where they suspect criminal proceeds may exist in the entity can obtain a fast-tracked safeguard measure.

Rather than the usual seven working days it can take to obtain a Defence Against Money Laundering (DAML) request, practitioners can obtain consent to take the appointment in just 24 hours. Similarly, if an insolvency practitioner needs to make urgent distributions or payments, a DAML request may be approved in under 48 hours. The agreement is a major step forward for ICAEW members dealing with the challenges of urgent and often risky insolvency work where the entity may have been tainted by criminal proceeds.

Such fast-track agreements are unique in their rarity and as a result reserved for truly urgent insolvency appointments. This may include occasions where failure to take the appointment or make payments/distributions would risk widespread loss of employment for the staff and seriously prejudice the interests of legitimate creditors. 

Defence on appointment

Common scenarios where a DAML may be needed to take the appointment include suspected tax fraud cases where HMRC is a creditor, or where a bank or financial institution believes they may have been defrauded. 

The practitioner would apply for a DAML to take control of the assets and protect the interests of legitimate creditors. However, the seven-day timescale often conflicts with the urgency required in such cases.

Under the new agreement, the NCA has set up a fast-track process whereby insolvency practitioners can contact the crime bureau with a message that will allow for escalation and priority of their case.

Urgent payment complications

In cases where an insolvency practitioner can salvage a business but needs to continue the trading activities pending a sale, there is a practical challenge of obtaining a DAML given the speed at which payments to suppliers or customers have to be made. 

Often, suppliers will only accept “payment on delivery” terms, which causes problems for the practitioner where they suspect criminal activity has taken place. 

Under the new fast-track process, it may be possible to obtain a DAML within 48 hours, allowing the payments to be made without delay.

Multiple requests

In complex cases where multiple requests for money laundering defences are required, the NCA has said it will allow a blanket DAML request. This would cover all assets, expenses and liabilities of an entity and therefore allow the IP to make any payments or distributions that were required during the insolvency period.

The request would also need to specify that it is only in respect of parties who do not appear to be connected to the wrongdoing which gave rise to the proceeds of crime. Under the new agreement, practitioners requiring multiple DAMLs may be granted a 12-month window to work through the case and identity and quantify all parties who require payment. 

Goodwill agreement

The fast-track lane was introduced as a goodwill gesture by the NCA, negotiated by the ICAEW, and does not change the statutory timescales for dealing with Defence Against Money Laundering requests in general.

As such, it must only be utilised in the most severe and urgent cases, ICAEW experts said.

“The new fast track processes detailed in this guidance represent a real step forward for urgent insolvency appointments where there are concerns of money laundering,” said Sophie Wales, Director, Technical Strategy, Tax, Ethics & Law Group at ICAEW. “We are grateful to the National Crime Agency and the Home Office for their collaboration in developing this new guidance.”

The new guidance detailing the fast track process and blanket requests is available here.

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