As a forensic accountant with the Metropolitan Police, Joanna Bliault can spot the tell-tale signs that a business may not be all that it seems just by looking at the books. Thanks to a grounding in audit with Top 20 firm Wilkins Kennedy, together with seven years’ experience with the Met Police, she has developed an eye for criminal indicators in accounts.
Bearing in mind that most crime is committed to generate money, accountants may find themselves unwittingly in a situation where the proceeds of crime are under their nose.
“Accountancy is a regulated sector and accountants have a responsibility to report suspicious activity,” Bliault says. But despite anti-money laundering training, she is also acutely aware that suspicious activity isn’t always on an accountant’s radar, not least because of the expectation gap between the reality of crime and the version people are presented with on the big and small screen.
Bliault has compiled a list of common crime indicators for accountants based on the cases she has worked on, conscious of the essential role that accountants can play in exercising their professional scepticism and helping crime prevention organisations build up an intelligence picture that could help prevent, detect and disrupt crime.
“It’s easier to spot things if you know what you're looking for,” she says. “I am aware that accountants don't always have this knowledge and wanted to do something to bridge that gap.”
Whether that’s preparing a set of accounts, doing an audit or compiling tax returns, there's an understanding gap between what might concern accountants and what might be of interest to law enforcement. “Because of the job I do, I'm in a position to translate that into what crime can look like when it comes across their desk,” Bliault adds.
Lack of sales records
Under the Companies Act 2006, directors have a legal obligation to keep accounting records: a failure to do so could result in a maximum two-year prison sentence. “Accounting records must show not just money paid or received but the matters to which those funds relate. A collection of invoices and bank statements can't do that,” Bliault says. Directors should be able to disclose at any one time, what the financial position of their company is and you can't do that with a pile of documents.
“I would encourage accountants to ask clients for their records. Most businesses need to keep track of their income and who owes them money in my opinion, and they may have more records than they’ve provided you with.”
Income received at odd times of day
The receipt of money at odd times of day – typically between midnight and 6am – for a business that’s not part of the night-time economy should ring alarm bells. This can be an indicator of money laundering from prostitution.
This information is readily available on statements from your clients’ card payment processors. “Take a look at the column that says the time and if it looks a bit odd, go back and have a look again. If it's a significant proportion of transactions maybe that's the time to put in a Suspicious Activity Report,” Bliault says.
Lack of assets or supplies
This is easy to spot where there is a lack of assets necessary to carry out the core activity of the business – for example, a car hire firm with no cars. Similarly, if the business does not appear to have purchased enough goods to generate its reported sales or they don't have the assets to support the trade they claim to be carrying out, this could suggest that the company is a front for criminality or be an indicator of false accounting.
If your client runs a business in a service industry with little or no staff or contractor costs but has reported an income higher than would be possible for the owners of the business to generate themselves, you should be suspicious. Similarly, Bliault flags up multiple wages received from different companies on the same day or in the same period for someone claiming to be a sole trader, and a prevalence of receipts from agencies or umbrella companies, which could be indicators of modern slavery and human trafficking.
Simple checks can be effective. “The ONS produces figures for average rates of pay in different sectors. Dividing business income for a year by the relevant average to estimate the number of hours worked, for example, can indicate whether the business owner could have earned the money themselves or would have needed help.”
Loans and bridging loans
Loans recorded as owed to clients but where there is no evidence that loans were paid out should warrant further investigation. Similarly, loans secured on residential properties with interest rates in excess of 100% could be indicators of extortion as could properties acquired by clients for significantly less than the market value when the “customer” defaults on the loan.
“Extortion is less common but because of the levels of threat involved, it’s worth bringing to peoples’ attention. What might seem like an odd financial transaction could indicate that someone is in severe danger,” Bliault warns.
By submitting a SAR, accountants help law enforcement agencies build up an intelligence picture that may help prevent, detect, and disrupt crime. Bliault doesn’t want to add to accountants’ already hefty workloads but she hopes by highlighting these indicators, they will be more inclined to put in a SAR when something feels not quite right. “I’m not asking accountants to investigate or prove offences. I'm saying, let's start to question things. And when you think something's a bit odd, tell us.”
- To make a Suspicious Activity Report, use the free, secure and 24/7 SAR Online reporting service
- To report a crime or a fraud you should contact your local police service on 101 or Action Fraud on 0300 123 2040.
ICAEW’s economic crime series explores the latest trends and perspectives from around the world and looks at how chartered accountants can help prevent it from happening.