Criminal finance crackdown

HMRC ‘will be looking for unsuspecting scalps’ now the landmark Criminal Finances Act is in force, lawyers have warned.

The Act, which came into force on 30 September, creates a corporate criminal offence of failure to prevent the facilitation of tax evasion in the UK and abroad by an ‘associated person’ (employees, agents or persons acting on the company’s behalf) unless ‘reasonable’ prevention procedures were in place.

David Sleight, partner at Kingsley Napley, said the Act was ‘extremely wide-ranging’, with ‘global reach’, and warned that HMRC ‘will be desperate to demonstrate that the new legislation has teeth’.

‘Failure to adopt appropriate safeguards could render the company liable to a criminal conviction, unlimited fines and confiscation of its assets,’ he said. ‘In the past, HMRC has encountered difficulties in prosecuting corporates for facilitating tax evasion due to the problem of attributing criminal liability to a company. The new legislation has dispensed with the need to prove that the “controlling mind” of a company (ie senior management) were aware that tax evasion had been facilitated.

‘Companies and partnerships should be urgently considering HMRC guidelines and critically assessing the adequacy of their existing systems and controls now.’

Individual suspects may also find themselves subject to an Unexplained Wealth Order from the High Court, now the Act is in force.

Peter Vaines, NLJ author and barrister at Field Court Tax Chambers, said: ‘This applies where there are reasonable grounds to suspect that a “Politically Exposed Person” (PEP), or a person who has been involved in serious crime (which includes money laundering), has property of more than £50,000 which cannot be explained by known sources. This includes having control over the property as a trustee, a beneficiary or potential beneficiary of a trust, plus a wide class of connected person. The recipient has 60 days to explain, or HMRC can seek to “recover” it—in addition to other penalties such as a spell behind bars.’

However, Vaines questioned what would happen where the PEP has diplomatic immunity, or there was a difference of opinion regarding the explanation: ‘Penalty first – trial later?’