What is the Criminal Finance Act 2017?
Launched in 2017, the Criminal Finance Act was established to allow law enforcement agencies further capabilities to tackle money laundering, tax evasion and corruption to ultimately recover the proceeds of crime. Prior to the Act, corporations faced no liability if their employees or agents facilitated tax evasion; only the individuals involved could be prosecuted.
What offences are created by the UK Criminal Finances Act?
In 2017, the Criminal Finance Act introduced two new tax offences that hold corporations accountable for failing to prevent the facilitation of tax evasion.
Corporations can now be prosecuted should they commit a corporate criminal offence by:
- Failing to prevent the facilitation of UK tax evasion
- Failing to prevent the facilitation of foreign tax evasion
Corporations and businesses must demonstrate that they have implemented reasonable measures to prevent their associated persons from facilitating tax evasion or justify why such procedures are not feasible. Failing to prevent the facilitation of tax evasion, whether in the UK or abroad, constitutes a strict liability offence, and unless firms can prove they had adequate procedures in place, they are deemed guilty of committing a tax evasion crime.
How much can a business be fined under a corporate criminal offence?
The cost of tax evasion can be enormous for businesses found guilty of committing a corporate criminal offence under the Criminal Finance Act.
Successful prosecutions could lead to:
- Unlimited fines, similar to that of the UK Bribery Act 2010
- Criminal prosecution
- Asset seizure
- Increased scrutiny and regulation
- Reputational damage and negative impacts on the businesses’ ability to participate in public tenders and regulated markets
- Ancillary orders such as confiscation orders and serious crime prevention orders
How to avoid tax evasion
Six guiding principles of the Criminal Finance Act
The Criminal Finance Act requires businesses to implement the following measures to curb such non-compliant activities and avoid tax evasion:
- Risk assessments - Conduct regular risk assessments to identify tax evasion risks within your business and among associates.
- Risk-based prevention - Implement prevention procedures that are proportional to the specific risks your organisation faces. Ensure these measures are tailored to the size, complexity, and nature of your business.
- Top-level commitment - Ensure senior management's commitment to preventing tax evasion by fostering a culture of compliance and zero tolerance.
- Communication - Ensure prevention policies and procedures are communicated and understood throughout the organisation.
- Due diligence - Conduct ongoing Supply chain due diligence procedures on clients, suppliers, and other business associates to ensure they are not involved in tax evasion
- Monitoring and review - Regularly monitor and review your prevention procedures to ensure they are effective and up-to-date. Make necessary adjustments based on feedback and changes in the risk environment.
Our free infographic details useful tips and tricks on how to implement the above measures in your business:
We exhaustively vet our supply chain to eliminate tax evasion penalty risk.
FAQs
Under the Criminal Finances Act 2017, an ‘associated person’ refers to anyone who performs services for or on behalf of a company or partnership. This includes employees, agents, contractors, service providers and subsidiaries.
The Criminal Finance Act applies to and targets; corporations and partnerships, financial institutions, professional advisors, individuals with unexplained wealth and law enforcement agencies.
Penalties for violating the Criminal Finance Act 2017 include; criminal prosecution, unlimited fines, imprisonment, asset seizure, reputational damage and increased scrutiny and regulation, to name a few.