The Criminal Finances Bill will create two new corporate offences of failing to prevent the facilitation of tax evasion. Companies will need to put prevention procedures in place and increase compliance.

A new proposed law to give UK authorities more power to prosecute those engaged in money-laundering and terrorist financing is making its way through the British parliament. This week it had a hearing in the House of Lords and the bill will move to report stage on 25 April. The Criminal Finances Bill 2016-17 is likely to become law by the end of this year, depending on delays due to Brexit, and it will affect all corporates with operations in the UK, including an agent or an employee who commits an offence while in the UK.

The bill has three action points: it will give UK authorities enhanced powers to investigate cases where the proceeds of crime and money-laundering have been used, including unexplained wealth orders. It will also extend the powers of authorities/police to investigate and recover assets under the Terrorism Act 2000 (TACT). Crucially for corporate financial professionals, it creates two new corporate offences of failing to prevent the facilitation of tax evasion.

Lisa Navarro's article on Lexology.com sets out the following key changes in the legislation, which affects:

• unexplained wealth orders
• disclosure orders
• suspicious activity reports
• information sharing – public and private
• seizure and forfeiture powers over assets
• enhanced civil recovery powers for the Financial Conduct Authority (FCA) and HMRC

Increased corporate liability

The two new offences of relevance to financial professionals are:

1. failure to prevent facilitation of a UK tax evasion offence by an associated person; and
2. failure to prevent facilitation of a foreign tax evasion offence by an associated person.

The 'associated persons' can include company employees, agents and others who perform services for or on behalf of the company. Companies could be penalised if they fail to take the necessary steps to prevent the illegal situation from arising.

It will therefore be important for companies to put reasonable prevention procedures in place, so they can demonstrate that they took steps to prevent the illegality. This is likely to increase the focus on accountability and compliance for corporates.

Navarro writes: “The introduction of these offences has been the subject of some criticism, particularly (a) their extra-territorial aspects and (b) the feature that a company can commit an offence without intent and without standing to benefit in any way from the commission of the offence. Companies will likely need to look at implementing appropriate control and audit processes to avoid exposure.”

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CTMfile take: Companies should start thinking now about how they need to implement appropriate control and audit processes. This is something that's likely to affect corporate treasurers, from a risk perspective and from the perspective of implementing the prevention procedures.