HMRC presented a seminar on the Criminal Finance Bill and the criminal facilitation of tax evasion
On 25 April Morgan Lewis hosted a Law Society City Money Laundering Reporting Officers (MLRO) networking event, which included a presentation by HMRC on the new corporate offence of failure to prevent the criminal facilitation of tax evasion.
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The key messages from the presentation were:
- The Criminal Finances Bill will be passed before parliament is dissolved ahead of the general election. The bill is expected to receive royal assent on 27 April, with the new corporate offence to commence in September.
- The new offence is intended to address difficulties in attributing criminal liability to corporate bodies for criminal acts of employees, agents and others providing services on their behalf (an ‘associated person’). It is directed at the failure to prevent criminal facilitation of tax evasion, not negligence or non-compliance with the tax code.
- Under the new offence, corporate bodies (including law firms) will be liable if they fail to prevent an 'associated person' criminally facilitating tax evasion. Referrals to other professionals would not be caught by this definition unless they are performing services for or on behalf of the relevant body.
- Corporate bodies will have a defence to the new offence if they have reasonable prevention procedures in place to identify and mitigate the risk of an associated person facilitating tax evasion. The focus will be on the reasonableness of the prevention procedures.
- HMRC presenters stressed that prevention procedures should be proportionate and do not have to be foolproof or have a zero failure rate. The nature and extent of prevention procedures will depend, in part, on the proximity of an associated person and on the degree of control that the corporate body has over that person.
- It is crucial that corporate bodies conduct a thorough risk assessment and regularly review and update their risk assessment to ensure they have reasonable prevention procedures in place to protect themselves from liability under the new offence.
- Corporate bodies will not be liable for failing to prevent criminal facilitation of tax evasion prior to the commencement of the new offence. However, if corporate bodies discover legacy cases, this should inform their risk assessments.
- HMRC has published draft guidance on the new offence, which will be finalised ahead of the new offence coming into effect. The Law Society has formed a working group to develop legal-sector-specific guidance and will seek HMRC approval of that guidance.
The event also provided the usual update on AML policy developments, including an overview of the draft Money Laundering Regulations and the Law Society's response, as well as the government's plans for a new Office for Professional Body Anti-Money Laundering Supervisors.