At a glance
- Economic abuse has huge financial and emotional impacts on small business owners.
- The cost-of-living crisis is increasing the likelihood of abuse.
- Accountants are an important line of defence for SME clients.
A study commissioned by Aviva revealed that two in five (40%) of adults in the UK have experienced economic abuse, with 14% reporting it came from an employer or colleague.
Three in five (61%) indicated that their situation had worsened because of the cost-of-living crisis.
Tina Chander, Head of Employment Law at Wright Hassall, says that while financial abuse is a serious issue, it remains widely misunderstood and can often slip under the radar.
“As an employment lawyer, I come across all types of financial abuse situations – from a controlling partner stealing funds to coercing someone into debt… It typically manifests through restriction, exploitation or sabotage – all of which are coercive and controlling behaviours.”
In 2021, the Domestic Abuse Act officially recognised financial abuse as a form of coercive control. For small business owners and partners, this could appear as misuse of business funds, exploitation of vulnerable individuals, or controlling all financial decisions.
What does financial abuse look like for small businesses?
The IFA recently ran a webinar, Recognising the Signs of Client Financial Abuse, featuring Ann Kayis-Kumar, Associate Professor, School of Taxation and Business Law at UNSW, and Jasmine Opdam, Senior Policy and Advocacy Officer at Redfern Legal Centre.
During the webinar, Opdam explored some of the warning signs of financial abuse that accountants are well-placed to identify during routine financial management, tax planning, or annual reviews. She noted that clients not being able to answer basic questions about their finances may be a red flag for financial abuse.
“Sometimes, we see victim survivors who weren’t even aware that they were the listed director or office holder of a company,” she says. “Often they have no visibility over their financial situation, or they might have signed personal guarantees or business loans for a company that they are not actually controlling themselves.”
“A client who has never lodged their own tax returns before, and has little visibility of them, might be an indicator of their partner holding a lot of control over the finances in the relationship.”
| Financial abuse red flags |
|---|
| Controlling access: Limiting your access to money, bank accounts, or tax information |
| Blocking information: Setting up business or financial systems that stop you from accessing money |
| Hiding money: Keeping income, assets, or accounts secret |
| Taking control: Making financial decisions without you or stopping you from using money |
| Shifting debt: Putting their debts in your name or making you take out loans for them |
The impacts can be severe, with the government’s Economic Abuse Toolkit revealing that 60% of financial abuse victims will be coerced into debt.
It can also take emotional and ethical tolls. Losing control of finances to business partners can result in loss of confidence and self-esteem, and in severe cases depression and other mental health issues.
Kayis-Kumar says: “Supporting victim-survivors is a really profoundly important role for the profession to play.”
How accountants can respond to suspected abuse
“Through their unique position, accountants often find themselves among the first to spot signs of financial abuse in a relationship – whether it’s a client who seems afraid to speak, is being directed by their partner, or displays anxiety about their personal safety or privacy,” says Chander. “As a regulated profession, accountancy has a responsibility to report suspicious activity and help prevent crime.”
Chander notes that accountants who suspect a client is being coerced into financial decisions must consider filing a Suspicious Activity Report (SAR) with the National Crime Agency (NCA).
“Through their unique position, accountants often find themselves among the first to spot signs of financial abuse in a relationship – whether it’s a client who seems afraid to speak, is being directed by their partner or displays anxiety about their personal safety or privacy.”
Tina Chander, Head of Employment Law, Wright Hassall
She adds: “If you believe that there is foul play related to financial crime that falls under the Proceeds of Crime Act 2002 or the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, you must report any suspicions of criminal conduct.”
“This is especially important where financial abuse may indicate wider financial crime or coercive control. Failing to make such reports can carry serious consequences, including potential fines and in extreme cases, imprisonment.”
Before it gets to this point, accountancy practices must train all staff on recognising economic abuse, implement internal policies to guide their response, and ensure clear processes are in place to support clients if a disclosure is made. “Raising awareness and being prepared can make a vital difference.”
The balance between confidentiality and duty of care
Opdam encourages accountants to focus on spotting the telltale signs. The term ‘financial abuse’ can feel confronting, so it’s often more effective to gently explore what clients know, what they can access, and how their partner behaves around financial matters.
Accountants aren’t expected to become an expert in dealing with financial abuse, but there are existing support services they can rely on.
“I wouldn’t suggest that you have concerns and ask a client outright, ‘are you experiencing financial abuse’? Chances are it won’t be safe for them to disclose that to you, and you might actually put them at greater risk. My first suggestion would be to always offer appropriate referrals.”
Government advice on tackling financial abuse recommends contacting the Financial Support Line and Casework Service for Victims of Domestic Abuse if you suspect clients of being victims.
More information on IFA’s Ethics Short Course here.
