Author: Azizur Rahman
22 December 2016
3 min read
2016 has been, it’s fair to say, fairly eventful.
The Mossack Fonseca scandal put financial crime high on the authorities’ agenda and that has prompted a desire in government to see money laundering and tax evasion tackled more firmly.
The year saw then Prime Minister David Cameron ushering in a register of beneficial ownership for all UK incorporated companies, HM Revenue and Customs (HMRC) taking a closer look at the use of offshore companies to facilitate tax avoidance or evasion and the Criminal Finances Bill planning to make companies criminally liable if they fail to stop employees facilitating tax evasion. The only defence against that part of the Bill will be that a company had in place “reasonable procedures’’ to prevent it happening.
All three issues have put business in a position where a lack of compliance is not just risky, it’s asking for trouble.
The authorities are looking to come down hard on any company that could be regarded as besmirching the trading reputation of the UK. Loopholes are being closed and business interests more closely monitored.
This can only mean that more individuals and corporations are going to need legal expertise to help them negotiate with the authorities and, if necessary, mount a strong, proactive defence case. That is if they haven’t heeded the warning about the need for compliance.
In the case of tax affairs, the issue of a Code of Practice 9 (COP9) is a tactic that HMRC has at its disposal. While used sparingly since its introduction, the COP9 is a procedure that could become increasingly common as tax fraud comes under closer scrutiny. As tax evasion becomes a high priority, there is every chance that 2017 will see more COP9 agreements. This, however, will create a demand for legal advice as companies and individuals will require guidance on accepting and negotiating their way through a COP9.
While the Criminal Finances Bill has not yet passed into law, it is set to change the legal landscape for financial crime. There is very reason to believe that 2017 will see responsible companies looking at their operations in order to make sure they do not fall foul of it once it becomes law.
The Bill’s strengthening of the asset recovery powers of the Proceeds of Crime Act 2002 (POCA) – particularly the imposition of unexplained wealth orders (UWO’s) on people who cannot provide proof they legally obtained their assets -, its fine tuning of the Suspicious Activity Reports (SAR’s) system, the plans to improve information sharing between regulated companies and the aforementioned criminal liability for employees are all major steps.
Many corporations will have to take advice on how to meet their obligations regarding greater transparency in their dealings.
The Financial Conduct Authority (FCA) is also looking to focus more closely on money laundering, not to mention insider dealing and market manipulation. The case of Sonali Bank indicated that the FCA wants corporates to, at the very least, have strong systems in place to reduce the financial crime risk.
The fact that the bank’s former money laundering reporting officer was also fined indicates the importance of personal liability as well as adequate systems. Firms and individuals that are not up to speed legally are more likely than ever before to encounter problems. It seems as if 2016 saw the firing of a warning shot to anyone at risk of money laundering. Maybe 2017 will be the year where we see the warnings converted into prosecutions.
The FCA’s business plan for 2016-17 states that financial crime and anti-money laundering are at the top of its to do list. It has made it clear that there is no excuse for failing to heed any of the advice available. It is even planning random company investigations to weed out money laundering – a clear indicator of the need for all in business to have appropriate procedures in place.
2016 saw the first conviction under Section 7 of the Bribery Act and the Serious Fraud Office (SFO) gaining extra funding to tackle bribery. It is likely that more bribery investigations and prosecutions will be initiated in 2017 than have been in previous years. And as bribery investigations can be lengthy and complex, we may see many investigations that have been initiated in previous years being concluded with a decision on whether to prosecute.
Similarly, 2016 saw only the second deferred prosecution agreement (DPA) since they were introduced to the UK in 2014. That figure can only rise as the SFO becomes more adept at using them and defence solicitors come to acknowledge their value in helping a client do what they can to avoid prosecution.
When it comes to prosecution, Libor, Tesco, BHS and Google are just a clutch of high profile indicators that the authorities are looking ever closer for signs of financial wrongdoing. While it is hard to make clear-cut predictions about any of these investigations they must be viewed as one almighty sign that 2017, like 2016, will see business coming under greater legal scrutiny than it ever has before.
And that means that expert legal advice will be of even greater value.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.