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Failure to Prevent

crime

In recent years the government has taken a growing interest not only in what businesses do, but also what they may have failed to do.

So far it has already introduced legislation that allow businesses to be prosecuted for failing to prevent bribery (Bribery Act 2010) and another for failing to prevent tax evasion (Criminal Finances Bill 2016-17).

It has also consulted on introducing legislation that could see businesses targeted if they fail to prevent fraud or money laundering. This was last discussed by Parliament in October 2016 and measures are expected in the near future.

The offences introduced for bribery and tax evasion are important to companies in a range of sectors, in particular the financial sector and professional services firms, while the majority of businesses are likely to be affected by the other proposals that are yet to be enshrined in law.

Tax Evasion

Two new offences were introduced under the Criminal Finances Bill 2016-17:

  • failure to prevent the facilitation of UK tax evasion
  • failure to prevent facilitation of foreign tax evasion

In both instances, a body corporate or a partnership whether established for business or non-business purposes, may be prosecuted for failing to prevent the facilitation of tax evasion if:

  • a person evades tax;
  • an associate of the relevant body criminally facilitates that evasion while acting in the capacity of an associate of the relevant body; and
  • the relevant body is unable to show they had in place “reasonable prevention procedures” (or that it wasn’t reasonable for prevention procedures to be in place).

Liability can also arise whether or not the relevant body had knowledge of, or the intention to commit, any offence.

This means that numerous business, subsidiaries and individuals could be affected, regardless of whether they knew the offences were being committed.

It is also not necessary for the person to have been prosecuted for evasion, or an associate to have been prosecuted for criminal facilitation.

Both may in fact have made a disclosure of the evasion or criminal facilitation in order to secure immunity from prosecution, but this could still lead to a prosecution for failing to prevent tax evasion.

A person is an “associate” of the relevant body if the person “performs services for or on behalf of” that body such as an employee or agent.

A relevant body will not, however, commit the offence if the associate commits the offence of facilitation on their own, outside their capacity as an associate of the relevant body.

For example, if an employee assists a family member to evade tax independently outside of work, the relevant body who is the employer will not be liable for the offence.

These new rules contain both a domestic and foreign element, which means that businesses across multiple jurisdictions may be affected.

Failing to prevent the facilitation of foreign tax evasion can only be committed, where:

  • the relevant body is established in the UK, or carries on any part of their business in the UK (for example, through a branch); or
  • any part of the criminal facilitation took place in the UK.

At Mackrell Turner Garrett we benefit from being founding member of Mackrell International – a leading global network with more than 5,000 lawyers from 94 member firms in more than 60 countries – which grants us quick access to advice and support almost anywhere in the world.

Bribery

The Bribery Act 2010 was introduced to update and enhance UK law on bribery including foreign bribery in order to meet the requirements of the OECD anti-bribery Convention.

If relies on strict guidelines, considered to be some of the most stringent internationally, to prevent bribery from taking place, most notably creating an offence for companies and partnerships of failing to prevent bribery.

Unlike previous legislation, this places a strict liability upon companies for failure to prevent bribes being given (active bribery) and a limited defence for companies that have adequate procedures in place that are designed to prevent persons associated with it from undertaking bribery.

The Bribery Act is legislation of great significance for companies incorporated in or carrying on business in the UK.

To avoid corporate liability for bribery, companies must make sure that they have strong, up-to-date and effective anti-bribery policies and systems.

There are a number of precautions that businesses can take to ensure they aren’t caught out by ‘Failure to Prevent’ offence, which our experienced team can assist with.

We can help with:

  • Risk Assessments
  • Risk-based prevention procedures
  • Due diligence
  • Training
  • Monitoring and review
  • Representation if a prosecution is launched.

The Government seems very keen on introducing more measures in future, so seeking professional advice ahead of any changes to the law may be the best course of action for businesses in the UK or those looking to establish themselves here.

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