With the revelations of the Panama Papers still fresh in the memory and concerns expressed by Rachel Davis of Transparency International in May that the UK remains a “prime location for stashing away illicitly gained wealth”, the UK Government has shown in recent months that one of its key legislative priorities will be to crack down on;

• corruption,
• corporate tax evasion and
• use of the proceeds of crime.

The Criminal Finances Bill;

1. Was introduced to the House of Commons on Thursday 13 October 2016. The Bill heralds the enactment of the long-anticipated corporate offence of failure to prevent tax evasion.
2. Will also bring major changes to the way law enforcement agencies both north and south of the border deal with persons they suspect of harbouring funds gained from criminal activity.
3. Will have a significant practical impact on the financial services sector, which deals directly with suspected customers at the coal face.

What is new?

The Key changes are:

The new corporate offence of failure to prevent tax evasion:

1. The new provisions will see a company commit an offence where it fails to prevent its staff facilitating tax evasion.
2. The defence will be available to the company if it can show it had in place prevention procedures, which would be reasonable in all the circumstances for that corporation to have had in place.

Major reform of the Suspicious Activity Report (“SARs”) regime:

1. The powers of the National Crime Agency will be enhanced, with the moratorium period the police have to investigate suspicious transactions before they can proceed now capable of extension from 31 days to up to 186 days, on application to the courts.

Unexplained Wealth Orders: where the authorities suspect either

1. a politically exposed person; or
2. Someone suspected of involvement in serious crime, a new Unexplained Wealth Order can be obtained in respect of property worth over £100,000, requiring the suspect to explain how they came to obtain it.
3. The authorities may, depending upon the explanation received, also seek further orders to freeze and / or seize the property in question.

New Proceeds of Crime powers:

1. The authorities will be able to seize new classes of assets under the existing Proceeds of Crime regime.
2. The new assets capable of seizure include precious metals and stones, watches, arts, vouchers and postage stamps, meaning that criminals will no longer be able to hide cash in assets incapable of being caught under the current regime.

Information sharing:

1. new provisions will allow the sharing of data between regulated bodies, intended to create a more joined-up approach to combating money laundering.

The UK Government is ambitions;

1. In bringing the Bill, the UK Government wants to ensure that the UK retains its reputation as one of the best places in the world to conduct business.  Maintaining the integrity of the eco-system in which business is conducted, including the financial services sector, is essential to achieving that ambition.
2. Also, with fears growing that the UK’s property market is becoming a conduit for criminals, corrupt politicians and tax evaders to weave their unlawfully obtained income into the economy, the Government is committed to ensuring that the country does not become a safe haven for laundering ill-gotten funds or supporting terrorist activity.
3. The scale of the potential task enforcement authorities and the courts will have when the Bill becomes law is reflected by TI’s recent study, which found that in 2015 there were more than 36,000 properties in the UK which were owned by off-shore entities whose source of funds was unknown or unverified.
4. The UK Government also wants to ensure that the highest standards of corporate governance are maintained in business, with board executives no longer able to hide behind the company, when their employees engage in tax offences.

Much to digest and dissect;

1. The Bill proposes substantial reform in an area which throws competing interests into sharp contrast: national security and the prevention of criminal finance, on the one hand, individual privacy and customer confidentiality on the other.
2. The Act sets out a series of clear checks and balances aimed at addressing these interests, with judicial oversight required at each step of the process.  The information sharing provisions may nevertheless attract challenges from a privacy perspective, with the Bill already due to be scrutinised by the Joint Select Committee on Human Rights.
3. The financial services sector is also likely to feel acutely the ramifications of the extension of the moratorium period in the SARs regime. Banks already face difficulties if their customers’ transactions are delayed under the existing period of 31 days.

MORE TO COME;

1. Standing at 150 pages, the Bill is detailed and dense There are, however, a few notable omissions from it:

1. first, no scrapping of, or broader change to, the SAR consent regime and The UK Government intends to consult further about it in due course.
2. Secondly, the planned extension of the offence of failing to prevent bribery to all economic crime is not included in the Bill.  Recent statements from government spokespeople suggest that this further change will follow after a period of consultation.

In the meantime;

WE SHOULD ALL watch with interest as the Criminal Finances Bill progresses through Parliament.