Are you ready for the Criminal Finances Act 2017?

Are you ready for the Criminal Finances Act 2017?

It’s just two days until the Criminal Finance Act 2017 (CFA) comes into effect, do you know what it means for your firm?

The CFA received Royal Assent on 27th April 2017 was the UK Government’s response to the “Panama Papers” scandal – an unprecedented leak of 11.5 million files from the database of the world’s fourth biggest offshore law firm – and part 3 of the CFA bring about two new offences of failure to prevent facilitation of tax evasion in the UK and abroad.

For the UK offence, under Section 45, there must be:

  1. Criminal evasion of UK tax;
  2. Criminal facilitation of the offence by an associated person (defined under Section 44);
  3. The firm must have failed to prevent the associated person from committing the facilitation.

For the foreign offence, under Section 46, there must be:

  1. Criminal evasion of foreign tax;
  2. Criminal facilitation of the offence by an associated person (as defined above);
  3. The firm most have failed to prevent the associated person from committing the facilitation.

However, in addition there are two further requirements to be met.

Firstly, in addition to steps 1 and 2 above being criminal offences in the foreign jurisdiction, they must also be criminal offences in UK law if they were to be committed in the UK.  This is known as the “dual criminality” requirement.

Secondly, and known as the “UK nexus” requirement, one of the following factors must apply:

  • The firm is incorporated in the UK;
  • The firm carries on business or part of its business in the UK; or
  • Part of the facilitation was performed in the UK.

The offences impose strict liability and it is for the firm to show that they had “reasonable prevention procedures” in place to prevent the offence or to demonstrate that it was not reasonable to expect them to have any prevention procedures in place.

Both of offences come into effect on 30th September this year.

As with the Bribery Act 2010 and to assist firms in understanding what is meant by “reasonable prevention procedures” there are 6 guiding principles, as follows:

  • Principle 1 – Risk Assessment;
  • Principle 2 – Proportionality of risk-based prevention procedures;
  • Principle 3 – Top level commitment;
  • Principle 4 – Due Diligence;
  • Principle 5 – Communication (including training);
  • Principle 6 – Monitoring and review.

HMRC produced draft guidance in October 2016 to assist firms in demonstrating that they have reasonable prevention procedures in place.  The guidance is generic to all firms who could be liable for the failure to prevent the facilitation of tax evasion offence.

More recently – on 1st September this year – HMRC updated the draft guidance and the following link takes you to the final HMRC guidance: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/642714/Tackling-tax-evasion-corporate-offences.pdf

The Law Society also released a Practice Note covering the CFA 2017 on 8th September 2017 – see link https://www.lawsociety.org.uk/Support-services/Advice/Practice-notes/criminal-finances-act-2017/  This Practice Note is specific to law firms.

HMRC have stated that they do not expect all reasonable prevention procedures to be in place by 30th September 2017, but that there are certain steps that they do expect to be in place on that date. They have stated that they expect “… rapid implementation, focusing on the major risks and priorities with a clear timeframe and implementation plan on entry into force” whilst recognising that reasonable prevention procedures will change and evolve so what may be appropriate on day one, may not be appropriate a few years down the line.

Breaches are punishable by unlimited fines and any firm would almost certainly suffer reputationally and financially – as well as being exposed to a regulatory investigation.

For help in navigating your way through the myriad of reasonable prevention procedures required, call Legal Eye on 0203 0512049 or e mail info@legal-eye.co.uk

This article was submitted to be published by Legal Eye as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.

Legal Eye

https://www.legal-eye.co.uk/

Legal Eye works with law firms to ensure compliance and optimise performance. Their extensive and thorough knowledge of the law and regulations will ensure your law firm is compliant and your processes sound. Files are audited to ensure you are not only complying with the service level agreements you have in place, but very importantly, also the code of conduct. They provide a documented audit trail which is firstly, a requirement of the code of conduct and secondly, essential for PI Insurance purposes and very often for CQS, Lexcel and other quality accreditations. This provides documented evidence of a proactive approach towards risk management. The advice they offer is clear and practical, and they pride themselves on exceptional customer service and unbeatable work quality.

Services include:

  • Specialist expertise across the full range of regulatory, risk and compliance issues to inform your internal decision making.
  • Additional qualified resource where you simply do not have the time to review your regulatory position or to carry out essential ongoing tasks such as file reviews.
  • An online risk hub –  an online resource centre for law firms. The hub provides a comprehensive bank of resources to help COLPs, COFAs, partners, directors and managers to manage risk. It includes precedent policy and procedure documents and templates, access to online training on a range of risk and compliance topics, and a range of useful materials such as ‘how to’ guides, short videos and articles.
  • Drafting and review of key policies and procedures including the supply of ‘document packs’ to save you time researching and writing documentation.
  • Expert advice on how to comply with up-to-date regulation including the very latest requirements complete with a written set of recommendations.
  • Specialist outsourced complaints  handling service provided by former SRA and LeO officers.
  • Gap analysis of your firm’s policies, processes and procedures as they relate to the Solicitors Accounts Rules (SAR) including the production of a written report summarising the strengths and weaknesses of the current arrangements and detailing recommended next steps and actions to put your firm in an even stronger position.
  • Training on SAR and on anti money laundering (AML) as well as other finance-related training which can be delivered virtually for your firm, face-to-face (subject to government guidance) or online via Legal Eye’s Training Academy.
  • A Standard Procedures Manual to provide a practical and comprehensive roadmap for firms to follow when looking to double check whether the current operating procedures are fit for purpose, setting up a new firm – or arm of a firm – or starting a new finance function from scratch.
  • Experienced advice and support for one-off projects such as achieving quality accreditations or switching regulators.
  • Proven high quality training for fee earners and staff held at your office/s covering essential risk topics such as  Anti Money Laundering, data  protection, cybercrime, conflict of  interest and more.
  • Online training from The Legal Eye Academy – core modules available to all staff at their convenience. Includes built-in auto reminder functionality so that you no longer have to chase staff indi-vidually to complete important training. Your package includes free updates to ensure knowledge is always up to date.
  • Added value updates by email to all your key people covering all the latest updates on risk and compliance.
  • The Legal Eye team includes former solicitors, partners and directors in law firms; former case handlers at regulators such as the Solicitors Regulation Authority and the Legal Ombudsman and experienced risk and compliance professionals.
Contact: Paul Saunder Tel: 0203 0512 049 Email:  bestpractice@legal-eye.co.uk Address The Old Grammar School Church Road Thame Oxfordshire OX9 3AJ

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