The Criminal Finances Act 2017 took effect on 30 September 2017. It makes companies and partnerships, a 'relevant body', criminally liable if they fail to prevent the facilitation of tax evasion being carried out by an employee, anyone acting on their behalf or someone acting as an agent. If found guilty, the business could face unlimited fines and potentially further consequential sanctions within their industry or profession.
This Act has the effect of creating an offence at corporate and partnership level which does not require the directors/partners to have had any knowledge of the offence in question. Broadly, the offence is the failure to prevent the crimes of those who act for or on behalf of the corporate body or partnership instead of the need to attribute criminal acts to that body.
For a firm to be criminally liable under the new Act, there are three elements of the offence:
- There must be the execution of a criminal act of tax evasion.
- The crime must have been facilitated or carried out by a person associated with a relevant body.
- The relevant body failed to initiate adequate prevention procedures in relation to the act carried out by the associated person.
A defence is available when it can be shown that 'reasonable prevention procedures' were in place to prevent the associated person from committing or facilitating the crime; or that it would have been unreasonable or disproportionate to expect such procedures to be in place.
The government advises that any reasonable prevention procedures should be based on six guiding principles:
- Risk assessment - the relevant body should assess the nature and extent of its exposure to the risk of an associated person committing a criminal act;
- Proportionality - the procedures should take into account the nature, scale and complexity of the relevant body's activities;
- Top level commitment - the management of the relevant body should be committed to preventing illegal acts and should foster a culture that tax evasion and its facilitation is never acceptable;
- Due Diligence - with appropriate procedures put in place with respect to all people who perform services for the relevant body;
- Communication - training staff and ensuring the message effectively gets across to all employees and agents;
- Monitoring and reviewing - ensuring that whatever procedures are put into place are regularly reviewed and updated and amended where necessary.
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