Criminal Finance Act

On 30th September 2017 the Criminal Finances Act 2017 (the ‘Act’) came into force. The Act introduced a new corporate offence of failure to prevent the facilitation of tax evasion. The Act is made up of four parts:

• Part 1 – The proceeds of crime, money laundering, civil recovery, enforcement powers and related offences
• Part 2 – Money laundering and asset recovery powers will be extended to apply to investigations under the TACT (Terrorism Act 2000) and POCA (Proceeds of Crime Act 2002)
• Part 3 – Created two new corporate offences for failure to prevent facilitation of tax evasion
• Part 4 – Minor and consequential amendments to POCA and other Acts

Reasonable procedures to prevent the facilitation of tax evasion must be in place in order to establish a defence for ‘failure to prevent’. With an unlimited fine and criminal record for corporations if convicted, the whole supply chain is under scrutiny, irrespective of sector and size.
Like the Bribery Act 2010, the aim of the new offence is the make it much easier to convict corporations for the facilitation of tax evasion by their associated persons or employees.

The following example demonstrates how a corporation will fall failure of the new offence if all three steps are established:
1. A tax payer commits tax evasion (contractor or payroll company)
2. A third party commissions and criminally facilitates (the facilitator) the offence (recruitment consultant)
3. The facilitator associated with the corporation (recruitment consultant’s employer)

The criminal intent on the part of the tax evader and the facilitator must be established however the corporate can be convicted even if they did not benefit from the offence.
The offence is a very strict liability offence. If stages one and two are commented then the relevant body will have committed the offence, unless it can demonstrate it has put into place robust preventative procedures and can be liable for an unlimited fine. There are six principles within the guide to prevent:
1. Risk assessment
2. Risk based prevention procedures
3. Top level commitment
4. Due diligence
5. Training and communication
6. Monitoring and review

In short, if you are engaging with a company who willingly offer and process ‘kickbacks’, think again as you can and probably will fall fail of the new legislation.