Charities and internal investigations
On 27 April 2017, the Criminal Finances Bill received Royal Assent. The Criminal Finances Act 2017 (“the Act”) makes provision for a number of important changes to the law governing money laundering, civil recovery and enforcement powers concerning terrorist property. The Act also introduces a new corporate offence of failure to prevent the facilitation of tax evasion. In the rush to make sure the Act received Royal Assent before the prorogation and dissolution of Parliament in advance of the (until relatively recently unanticipated general election), the Government was forced to accept a number of amendments to the Criminal Finances Bill. This blog provides some detail about the Act.
The Act is in 4 parts:
The following are of particular note:
Part 1, ss 1-9, of the Act create “Unexplained Wealth Orders” (“UWO”). These will require a person who is suspected of involvement in or association with serious criminality to explain the origin of assets that appear to be disproportionate to their known income. A failure to provide a response would give rise to a presumption that the property was recoverable, in order to assist any subsequent civil recovery action. A person could also be convicted of a criminal offence, if they make false or misleading statements in response to a UWO.
In the original version of the Bill, a UWO could only be made where, amongst other things, the value of the property under examination was greater than £100,000. In order to make sure that the Criminal Finances Bill received Royal Assent before dissolution, the Government was forced to accept a Lords amendment reducing this amount to £50,000. The Government was also forced to accept a Lords amendment relating to the provision of a compensation scheme in relation to the interim freezing orders that can accompany an UWO.
Disclosure orders authorise a law enforcement officer to require anyone that they believe has relevant information to an investigation, to answer questions, provide information or to produce documents.
Disclosure orders are already used in confiscation investigations and by the Serious Fraud Office (“SFO”) in fraud investigations. The Act extends (see s 7) their use to money laundering investigations by amending section 357 of POCA.
The Act provides (see s 36) for greater information sharing between entities within the regulated sector (for example banks), in order to encourage better use of public and private sector resources to combat money laundering.
The Act will also enable the submission of so-called “super SARs”, which bring together information from multiple reporters into a single SAR that provides a holistic picture to law enforcement agencies.
POCA contains “civil recovery powers” for the recovery of property in cases where there has not been a conviction, but where it can be shown on the balance of probabilities that that property has been obtained through unlawful conduct. The Act extends the use of these powers to the Financial Conduct Authority and HMRC, which may now bring proceedings in the High Court to recover criminal property, without the need for the owner of the property to be convicted of a criminal offence.
Part 3, ss 45-46, of the Act create two new "failure to prevent" offences, based on the section 7 Bribery Act 2010 offence:
Both are corporate offences and cannot be committed by individuals; they can only be committed by “relevant bodies”, that is, legal persons. Moreover, they are only committed in circumstances where a person acting for or on behalf of that body, acting in that capacity, criminally facilitates a tax evasion offence committed by another person.
The Act provides for a defence: where the relevant body has in force reasonable prevention procedures, that is, procedures designed to prevent persons associated with it from committing tax evasion facilitation offences.
Guidance will be published to assist relevant bodies to devise reasonable prevention procedures.
The foreign revenue offence will require the consent of the Director of Public Prosecutions or the Director of the SFO.
The above provisions will come into force by commencement regulations made by, inter alia, the Treasury (in relation to Part 3) and the Secretary of State (in relation to all other provisions).
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