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Criminal Finances Act 2017: where are we now?

24 May 2019
Tall white concrete buildings juxtaposed against a sky view
Introduced at the end of 2017, the Criminal Finances Act created two new strict liability corporate criminal offences, both targeted at the prevention of the criminal faclilitation of tax evasion. After somewhat of a 'soft landing' in terms of enforcement we ask: where are we now? What should businesses be doing to protect themselves? What comes next?

The Criminal Finances Act ("CFA") came into force on 30 September 2017, and with it, the introduction of two new corporate criminal offences relating to the failure to prevent the criminal facilitation of tax evasion ("Facilitation Offences").  

It may have taken some nineteen months to gain traction, but distant rumblings of enforcement action have grown into confirmed action by the authorities.  The Government recently confirmed, via their response to a parliamentary question, that several investigations have now been launched into compliance under the CFA: a first attack in a 'pipeline' of cases.

Many businesses do not consider that the CFA is relevant to them and as a result have not undertaken risk assessment exercises or considered whether any changes to their operations require to be made in response to the legislation. However, such failure to take action in relation to the Facilitation Offences is very dangerous territory for any business. 

As we have reported previously, every business needs to evaluate and assess their own responsibilities under the legislation and take appropriate action. There is no "one-size-fits-all" method and each business must examine their wider relationships and the businesses with whom they contract. In effect, the entire supply chain should be analysed, reviewed and risk-managed to ensure that your business is in the best position to put forward a "reasonable procedures" defence in the event of any compliance action.

The regulatory landscape is shifting, placing the burden of compliance squarely on the shoulders of the 'responsible business', regardless of size. The Facilitation Offences are strict liability, meaning that lack of knowledge or intent by the business is irrelevant. Being able to demonstrate implementation of reasonable controls and preventative procedures is the only means of defence. Now is the time for every business, regardless of turnover, size or sector, to act.  

Small businesses represent the overwhelming majority of businesses operating in the UK and these businesses, along with their mid-sized counterparts, are a key and vital part of the UK economy. However, as we have seen with cases coming through the courts in relation to anti-bribery and corruption, SMEs offer HMRC the perfect vehicles to force compliance throughout the wider commercial supply chain. 

Penalties for failure to comply are high, including an unlimited fine, ancillary orders (confiscation orders, serious crime prevention orders etc.) and, as a result, an effective prohibition on bidding for public sector contracts. There is also the inevitable potential for reputational impact. Any one of those consequences alone could be very damaging to a business. With the authorities starting to flex the considerable muscle given to them under the CFA, don't let your business become the cautionary tale for CFA compliance.

To find out more, you may be interested in attending our upcoming Business Interruption seminar. If you would like to discuss the implications of the Facilitation Offences for your business please contact Caroline Colliston or Freya Gibb. 

Further Reading

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