The Criminal Finances Act 2017

 

The Criminal Finances Act has now been enacted. This places a significant onus on companies, and other business structures to effectively police the activities of its employees, agents and service providers.

New criminal conduct involves holding a company or partnership, etc. liable for the acts of employees (amongst others) who commit offences whereby the company or partnership has failed to prevent the facilitation of domestic tax evasion, as well as an offence when they have failed to prevent facilitation of foreign tax evasion.

It is draconian legislation. Where a person who is associated with the relevant company or business commits an offence either by facilitating UK tax evasion or foreign tax evasion, the organisation will be vicariously liable, regardless of knowledge. The associated person does not just have to be an employee, but can include an agent or any person performing services on behalf of the relevant body.

There are three stages to the offences, which are as follows:

  1. There is an act of tax evasion by a tax-payer, whether UK based or abroad; (It must be proven that there is dishonest intent in the facilitation. Dishonest intent for the underlying offence as well as dishonest facilitation must be proven, which might be evidenced by concealment, misrepresentation, non-disclosure or recklessness).
  2. There is a criminal facilitation of this offence by a person who is associated with the organisation;
  3. The organisation has failed to prevent the associated person from the act of facilitating.

The only defence is that the organisation had reasonable procedures in place to prevent such acts occurring.

The penalties are unlimited fines. Prosecution can only be commenced with the consent of the DPP or the SFO.

There are also new seizure powers relating to assets and cash.

Furthermore, there are new ‘unexplained wealth orders’. One group of people affected by this are those deemed to be ‘politically exposed persons (PEPs) or those involved or associated with serious crime. Regarding a politically exposed person, there doesn’t have to be any proven connection to criminal behaviour. An order can be made for disclosure of both the nature and extent of an interest in property, as well as an explanation as to how they have come into possession of it. This arises when there are reasonable grounds for suspecting that a person is holding assets that are disproportionate to their known income. It is an offence to give false information.

There are other provisions relating to making reports of suspicious activities to appropriate bodies (not unfamiliar territory for those familiar with the money-laundering duties to report).

This legislation is going to have significant impact upon financial institutions, including banking, pensions and financial services providers and advisors, property providers, and the legal profession. The need to have a stated procedure to address these issues is paramount. For solicitors, it is time to update the office manual!

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