With the recent-ish changes to the Money Laundering regulations, the game of hokey-cokey played with the requirement to hold on to employers’ liability insurance certificates and some brave pioneers moving into the realm of the paperless office, an area which we’re occasionally asked to advise on is that relating to the retention of various types of case papers.
So, leaving aside the thorny issue of the client’s accounting records, just how long do you need to clog up physical or cyber-space with the various components of your files, and exactly when can you look forward to dancing free and wild around a roaring fire of copy passports, painstakingly prepared time records and proud, purposeful IP records? The primary requirements are summarised below:
1. The IP record: Regulation 20 of the IP Regulations 1990 dictates that for cases commenced prior to 1 April 2005 you must keep the Regulation 17 IP record for a period of 10 years from the date of your release/discharge or (if later) the date on which any security or caution maintained in respect of that estate expired/ceased to have effect (essentially the date on which you notify your release to your bond provider).
For cases commenced on or after 1 April 2005, Regulation 13(5) of the IP Regulations 2005 dictates that both your IP record and your time records on the case are kept for a period of 6 years from the date of your release/discharge or (if later) the date on which you notify your release to your bond provider.
2. Specific penalty bond cover schedule/bordereau: For all case types you need to keep a copy of this document for 2 years after the date of release or discharge as office holder as per Schedule 2, paragraph 11(2) of the IP Regulations 2005 and regulation 14(2) of the IP Regulations 1990.
3. Money Laundering ID and associated records: Regulation 19 of the Money Laundering Regulations 2007 applies in respect of all appointments held as at 15 December 2007, and thereafter, and deals with the retention of records. This is a little more complex, but essentially under this provision you need to retain copies of identification records obtained (or the references to such evidence) and also the supporting records (originals or copies) of any business relationship or occasional transaction which is the subject to customer due diligence measures, or ongoing monitoring, for a period of five years.
The five year period begins with the date on which the occasional transaction is completed or the business relationship ends, which in most cases will mean the date of your release/discharge. However, if another party relies on your identification for Money Laundering purposes then you must retain copies of identification records for a period of five years from the date on which that person relies upon you.
There is no specific guidance on what constitutes the “supporting records” of the business relationship, and a risk averse approach would be to retain the case papers in their entirety, especially as this is a more general provision than that dictated by the Money Laundering Regulations 2003, which make specific reference to a record of transactions carried out – implying that the later regulation expects more than simply financial schedules.
The earlier provisions came into force on 1 March 2004 and, again, apply to all appointments held at that date. They contains similar provisions at Regulation 6, specifying a five year period for the retention of identification records (where obtained) but as noted above, specifically requiring a record containing details of all transactions carried out in the course of the relevant business.
In actuality, the five year limit imposed by the Money Laundering Regulations is more stringent that the current insolvency legislation when it comes to retention of records in respect of appointments in Members’ Voluntary Liquidations, Administrative Receiverships, Administrations and Voluntary Arrangements and this could present a significant change to any pre-existing destruction policy.
4. Financial Records: Regulations 13 and 27 of the Insolvency Regulations 1994 stipulate that financial records in compulsory liquidations, creditors’ voluntary liquidations and bankruptcies must be kept for a period of six years from the date that office is vacated, unless there is a successive liquidator/trustee to whom the records are passed. This includes a separate and distinct account of trading if the insolvent business is continued during the course of proceedings. As noted above, this provision does not extend to members’ voluntary liquidations, administrative receiverships, administrations or voluntary arrangements so the primary consideration in those cases is the impact of the Money Laundering Regulations.
5. General case papers: The insolvency legislation is similarly silent on the subject of how long general case papers ought to be retained, and this will be a matter of individual policy based upon your risk appetite. The starting point should flow from the fact that the statute of limitations is 6 years for actions on a contract, which is in line with the IP Regulations 2005 referred to above.
The Official Receiver, however, takes a more pragmatic approach which is best summarised as follows:
a) Cases with no investigation – later of 5 years from order or 2 years from completion of administration.
b) Protracted realisations – Annual review after 3 years if asset not realised.
c) Prosecution cases – the later of 7 years from completion or 6 months after the end of the sentence imposed.
d) Disqualification and bankruptcy restriction cases – the later of 7 years from the date of commencement of the disqualification/restriction or the end of the longest period of disqualification/restriction.
e) Public interest cases – subject to review in consultation with the National Archives with possible permanent retention. A public interest case may be one involving a long established company, famous/infamous individuals, prolonged media interest, novel or unusual circumstances, or one which may be the subject of future research.
Although the legislative provisions are clearly tighter for IP’s due to the separate requirement to maintain financial records, it is worth considering the retention of case papers for a longer period where you are aware that there is ongoing disqualification or prosecution action, particularly if those proceedings become protracted through the use of the appeal system.
One final point is to check your Professional Indemnity Insurance to ensure that there is no separate provision within that policy in respect of retention of files. Provided that it contains no hidden stipulations, then a policy of keeping all case files for 6 years from notification of release to the bond provider is the simplest and safest approach, setting up a separate system – either electronic or manual – to enable you to produce an IP Record for all cases still caught under the IP Regulations 1990 for which such information must be held for 10 years from release, and setting up a system prompt to ensure that you pick up on any odd cases where a third party relies upon your ID evidence and retain that evidence separately for a 5 year period thereafter.
