The warning comes from network Sesame which held a financial crime seminar for its appointed representatives earlier this week.
David Redgrave, head of business standards at Sesame, said: “If an adviser knows, or suspects, that his client has evaded tax (ie because he has said his income is greater than that declared to HMRC), then the adviser is obliged to make a suspicion report to his MLRO.
“If the adviser does not report his suspicions, and arranges a policy for the client, then the adviser may also be committing the "arranging" offence under the money laundering regulations (as well as the failure to report the offence).”
Self-employed people often have income tax efficient accounts that do not often represent true affordability, which could also pose problems when it comes to selling life insurance.
One high profile protection broker, who asked not to be named, said: “That person isn’t evading tax, they’re avoiding it which isn’t the same, but I’m now frightened that selling them a life policy that they really need would expose me to being found guilty of criminal complicity.”
Kevin Carr, chief executive of the Protection Review, said: "The average protection policy sold in the UK costs around £30 per month and if someone is going to launder money it is highly unlikely they would consider doing so through a relatively low-cost insurance policy.
"What is substantially more important is that people get the protection they need, especially when borrowing large sums of money."
Redgrave added: “This is essential to establish affordability, but in doing so advisers may also discover that their client has "undeclared" sources of income – it is not uncommon for a client to declare one income to HMRC, but then tell their adviser that their actual income is a lot higher in order to secure the mortgage they want.”
John Malone, chairman of Sesame-owned mortgage club PMS, said: “There needs to be much more of a realisation with intermediaries about the fraud situation we’re in. I’ll tell you what’s not fair – we pay taxes and they don’t.”
