The Criminal Finances Act 2017

On the 27th April, The Criminal Finances Act 2017 (CFA) received royal assent. The Act is a radical overhaul and modernisation of the Proceeds of Crime Act 2002’s anti-money laundering scheme.

Why has the Criminal Finances Act 2017 been brought in?

The Criminal Finances Act 2017 has been brought in as the government’s response to the infamous “Panama Papers” scandal. The scandal occurred when 11.5 million files from the world’s fourth largest offshore law firm were leaked to the public – exposing tax evasion from across the globe.

What are the requirements for a crime to have been committed?

Part three of the CFA has brought two new offences regarding the failure to prevent facilitation of tax evasion, both in the UK and overseas. Both of these offences came into effect on 30th September 2017.

For a crime to have been committed under section 45 (UK offence), the following must have occurred:

  • The illegal evasion of UK tax
  • The known facilitation of the offence by an associated person
  • The firm must have failed to prevent the associated person from committing the crime

For a crime to have been committed under section 46 (foreign offence), the following must have occurred:

  • The illegal evasion of foreign tax
  • The known facilitation of the offence by an associated person
  • The firm must have failed to prevent the associated person from committing the crime
  • The criminal offences in foreign jurisdiction must also be criminal offences in UK law. This is called the ‘dual criminality’ requirement.

The UK Nexus requirement

For the firm in question to be convicted under sections 45 or 46 of the CFA, at least one of the following must apply:

  • The firm is UK-based
  • The firm carries out business or some of its business in the UK
  • Part of the facilitation was carried out on UK soil

HMRC guidance

On the 1st September 2017, HMRC drafted a guidance document to assist firms in ensuring they have the right procedures in place to help prevent the facilitation of a tax evasion offence. To view the full document, click here.

On the 8th September, The Law Society released a document of guidance especially for law firms, you can view the document here.

For more information on the CFA, please don’t hesitate to contact DPP Law today.

Posted on: Wed, 11 October 2017
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