The Criminal Finances Act received Royal Assent last week. The Act introduces a number of new measures putting businesses at risk of committing criminal offences and giving the State powers to probe into the finances of individuals. Of particular note to businesses are a new strict liability corporate offence of Failing to Prevent Tax Evasion, changes to the Suspicious Activity Report regime and the creation of Unexplained Wealth Orders.
Failure to Prevent Tax Evasion
The new Act makes it an offence for a 'relevant body' (corporation) to fail to prevent tax evasion. The provision is expected to be strict liability and have extra-territorial effect, so will extend to offences that take place both within and outside the UK. A company will be liable if a person associated with them commits the offence.
Commentators have drawn parallels with the 'failure to prevent' provisions in the Bribery Act, however it is expected that the legislation in the Criminal Finances Act will be wider because there will be no need for the corporate body to have benefited from the tax evasion. The Act is expected to contain a statutory defence of having 'reasonable prevention procedures' in place. Companies will be seeking advice to design and implement these procedures ahead of September 2017 when it is expected the new law will come in to force.
Changes to the Suspicious Activity Reports (SARs) Regime
When a SAR is made there is a 31 day timeframe for the authorities to investigate before consent to a proposed transaction can be deemed to have been given. The Bill proposed that this be extended by Court Order up to a further 186 days. Many will view a six month delay as being impractical with the reality being that this will lead to disputes with clients and delays derailing transactions and business deals.
Unexplained Wealth Orders (UWO)
The Act is expected to introduce UWOs where the High Court will be able to make an Order which will require individuals to provide a statement explaining the extent of their interest in property, how they obtained the property and how any costs were met. The UWOs can be made where an individual holds property worth more than £100,000. UWOs will have retrospective effect applying to property regardless of when it was purchased. Non-compliance with an Order will result in the property becoming subject to recovery and seizure provisions under the Proceeds of Crime Act 2002 and false statements made in a response can be punished by imprisonment.
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