From time to time an accountant’s relationship with one of his or her clients will come to an end. This may be because the accountant has encouraged the client to leave because he or she no longer wishes to act for the client, or feels the client would be better served by another firm. Or it may be because the client wishes to engage a new accountant who would be less costly, or is expected to be able to offer a better or more appropriate service.
The change may come about by mutual consent – or there may be an acrimonious falling out!
But whatever the reason, there needs to be clarity about the detail around the ending of the relationship.
Disengagement letter
In most cases this can best be handled by the accountant sending the departing client a disengagement letter. The key areas this letter needs to cover are
- Details of any work which the accountant is still to complete for the client (with an indication of any important deadlines and action required by the client);
- Details of work needing to be completed for the client which the accountant is not planning to undertake (and which the client therefore will need to complete himself or instruct his or her new accountant to complete) and any important deadlines for the completion of that work;
- A request that the client authorise the accountant to pass relevant information to a new accountant instructed by the client;
- Details of any outstanding fees for work already completed (and an invoice for any currently unbilled work) and any further fees which will be incurred in finalising all outstanding matters (where the client is paying monthly contributions to the accountant especial care will be needed to clearly explain the calculation of the sum now outstanding to the accountant – or the refund due to the client). If the accountant requires further payment before dealing with any work then this should be made clear in the disengagement letter;
- If, exceptionally, the accountant is intending to exercise a lien, in consequence of unpaid fees, over any of the client’s documents which he or she holds, then the client should be made aware of the details;
- It is convenient also in the disengagement letter to set out the accountant’s policy in relation to the retention of data and copy documents for a period after the termination of the relationship (bearing in mind the relevant provisions of the Money Laundering Regulations 2017, especially regulations 40 and 41, and the Data Protection Act 2018) and to seek confirmation of any necessary consents from the client for that retention.
It may be necessary in the disengagement letter to refer back to terms in an earlier client letter of engagement.
Do check the guidance from your own professional body and ensure that your letter of disengagement complies with that – sometimes the disengagement can turn sour and result in a complaint from the ex-client and in those circumstances you may face criticism if your disengagement letter is inadequate.
Suspicions of money laundering
Sometimes an accountant will disengage a client where he has a suspicion of tax evasion, or other criminality, leading to money laundering. The position under the Proceeds of Crime Act 2002 and Money Laundering Regulations 2017 is that resignation is not an alternative to the submission of a Suspicious Activity Report (SAR). A SAR is required where the accountant has a suspicion of money laundering (by anyone) in consequence of information which has come to the accountant in the course of his or her professional work. It is irrelevant whether that suspicion is of money laundering by a client, an ex-client or someone who was never a client of the accountant.
Where the accountant has made a Suspicious Activity Report and is asked by a new accountant for professional clearance it is perfectly proper for the resigning accountant to supply to the new accountant information concerning the facts and issues which have arisen with the client which have led to the suspicion, however the normal practice is not to inform the new accountant that a SAR has been submitted. Instead the resigning accountant may simply say that he has complied with his legal responsibilities. Passing this information to the new accountant does not amount to ‘tipping off’.
If you are concerned that your firm’s AML compliance is inadequate, out of date, or even non-existent, get in touch now using the link below and we can work together to fix this. The hardest part is getting started.
