Corporate Crime update – March 2018

Welcome to the March 2018 edition of our corporate crime update – our round up of developments in relation to corruption, money laundering, fraud, sanctions and related matters. Our update now covers a number of jurisdictions. For the full update on each jurisdiction, please click on the name of the jurisdiction below.  Continue reading

Criminal Finances Bill 2016-17 passed by Parliament

The Criminal Finances Bill 2016-17 received royal assent on Thursday 27 April. The Criminal Finances Act 2017 (the “Act”) (for the text of the Act, click here) is intended to “tackle money laundering and corruption, recover the proceeds of crime and counter terrorist financing”. The Act, which has not yet come into force in its entirety, will introduce two new corporate offences of “failure to prevent facilitation of tax evasion” and amend the Proceeds of Crime Act 2002 (“PoCA”), and anti-terrorism legislation.

It is not yet confirmed when the key provisions of the Act will come into force.

Failure to prevent facilitation of tax evasion offences

The Act will introduce two new offences: an offence of failure to prevent the facilitation of UK tax evasion (the “Domestic Offence”), and an offence of failure to prevent the facilitation of foreign tax evasion (the “Foreign Offence”) (together, the “New Offences”). The New Offences are modelled on the so-called “corporate offence” of “failure to prevent bribery” in the Bribery Act 2010.

In relation to the New Offences, a body corporate or a partnership (referred to as a “relevant body”), whether established for business or non-business purposes, may be prosecuted for failure to prevent the facilitation of tax evasion if:

  • a person (“T”) evades tax;
  • an associate of the relevant body (“A”), eg. an employee, agent or subcontractor, criminally facilitates that evasion while acting in their capacity of an associate of the relevant body; and
  • the relevant body is unable to show they had in place “reasonable prevention procedures” (or that it wasn’t reasonable for prevention procedures to be in place).

Liability can arise whether or not the relevant body had knowledge of the evasion or facilitation, and whether or not A intended to benefit the relevant body. It is not necessary for T to have been prosecuted for evasion, or for A to have been prosecuted for criminal facilitation. T (or A) may in fact have made a disclosure of the evasion (or criminal facilitation) in order to secure immunity from prosecution.

The Domestic Offence can be committed by a relevant body irrespective of where they are established or carry on business. The Foreign Offence can only be committed where the relevant body is established, or carries on part of their business, in the UK, or if any part of the criminal facilitation took place in the UK.

Given that the only defence to strict liability is for the relevant body to demonstrate reasonable prevention procedures, as was the case in relation to the “failure to prevent bribery” offence, it is essential that relevant bodies conduct a risk assessment and plan and implement policies/procedures ahead of time if the risk of liability is to be minimised.

It should be noted that, alongside the New Offences, a new civil penalty regime came into force at the start of the year, imposing tax geared penalties on (and the potential for “naming and shaming” of) those who enable others to commit tax evasion.  In addition, there were plans for a new penalty regime for enablers of “defeated avoidance”, but the introduction of that regime has been (at the least) delayed as a result of the general election.

For more information, click here.

Key amendments to PoCA and anti-terrorism legislation

Under the Act the moratorium period following a request for consent to deal with criminal property may be extended by application to the Court. Currently, PoCA provides for a 31 day period following a refusal to grant consent during which the authorities may take steps to recover criminal property. After this period expires, the party seeking consent is free to proceed. Under the Act, the Court will be able to extend this moratorium period where it is necessary and reasonable to do so, and where an investigation is being conducted diligently and expeditiously. Such extensions may be made up to a maximum of 186 days following the initial 31 days, allowing a maximum moratorium period of 217 days.

The National Crime Agency (the “NCA”) will be granted new powers under the Act to serve a “further information notice” on persons in the regulated sector, following the filing of a suspicious activity report (“SAR”) or in certain circumstances where the NCA is assisting in an overseas investigation. If a regulated person provides the NCA with information in response to such a notice, it will not breach any restrictions on the disclosure of information (for example in relation to client confidentiality). If a regulated person fails to comply with a further information notice, the NCA can apply to a Magistrates’ Court for a Further Information Order which would compel the production of the specified information.

Nominated officers in the regulated sector will be able to share information in the event that this will help to determine any matters relating to a suspicion of money laundering, the information sharing has been requested by the NCA or by another regulated firm, and notification has been made to the NCA. Similar provisions are introduced into the Terrorism Act 2000 in order to facilitate the sharing of information to assist in the determination of matters relating to suspicions of terrorist financing. The Act also provides for the submission of so-called “Super SARs” which can be submitted jointly by two or more regulated firms.

The Act will enable the High Court to make unexplained wealth orders (“UWOs”), which are intended to target cases where a person holds assets which appear disproportionate to their income. UWOs will be available in respect of respondents who hold property of over £50,000 in value (the financial threshold for granting a UWO was decreased from £100,000 during the Act’s passage through Parliament). A UWO will be granted where the Court is satisfied that the known sources of the respondent’s lawfully obtained income would have been insufficient to enable them to obtain the property and that the respondent is either a politically exposed person or that there are reasonable grounds for suspecting that the respondent (or a person connected with them) has been involved in serious crime (whether in the UK or overseas). If granted, a UWO will require the respondent to explain the nature and extent of their interest in specified property and how it was obtained. If the UWO is not complied with, the property will be presumed to be “recoverable property” for the purposes of the civil recovery provisions of Part V of PoCA. The UWO provisions are also supported by powers relating to the making of interim freezing orders and contain a specific offence of knowingly or recklessly making a false or misleading statement in response to a UWO.