Tax Advisor

Recognizing unusual transactions

As a tax advisor, you are familiar with the practices within your line of business. Whether a transaction is considered unusual depends largely on your professional judgment. Your judgment is consistent with what is considered unusual within your profession. In addition to your judgment, there are situations that are unusual by nature and should therefore be reported.

If a situation arises as described in the examples below (not exhaustive), this is a reason to further examine whether the transaction could be related to money laundering, terrorist financing, and/or associated predicate offenses. It is not necessary to determine with certainty that the above-mentioned crimes have been committed. You merely need to have an assumption that the transaction can be related to one of these crimes.
If you believe that the transaction could be related to money laundering, terrorist financing, and/or associated predicate offenses, you are required to report this under the subjective indicator.

Red flags – Tax adviser

A transaction involving a client which leads to a result that is clearly higher or lower than can reasonably be expected or which leads to an unusually high result compared to similar companies in the industry in which the client operates, particularly if the revenue for a significant part consists of cash sales
There is an inexplicable discrepancy between money and the flow of goods. A client achieves unusually high revenues and/or profits of which it is not clear to which activities they are related
A transaction involving a client takes place under significantly worse conditions than can reasonably be expected without an acceptable explanation as to why better structuring has not been chosen
The annual financial statements do not correspond with the underlying documents. Unauthorized transactions or incorrectly recorded transactions. Administrative systems which, by design or intentionally, do not provide an adequate method to track transactions or provide sufficient evidence
Payments that appear to be excessively high in relation to the services provided. Commissions and comparable incomes that appear excessively high, payments for unspecified services or loans to advisers, related parties, employees, or government personnel
Non-compliance with any obligation to publish documents or with the legal obligation, if required, to obtain an auditor’s report with the annual financial statement
Atypical prepayments of insurance premiums
Insurance policies with premiums that appear to exceed the buyer’s financial resources
Insurance policies with values that seem inconsistent with the buyer’s needs