The Criminal Finances Bill 2016-2017 (the “Bill”) was introduced by the UK Government on 13 October 2016. It is scheduled to be introduced into law this summer.
The aim of the Bill is to tackle money laundering and corruption, recover the proceeds of crime and counter terrorist financing. It seeks to amend current UK legislation such as the Proceeds of Crime Act 2002 and the Terrorism Act 2000 in an effort to prevent criminals from making money from unlawful activities. We set out below a brief summary of some of the changes in the Bill that are most likely to be of interest to the financial services industry.
The Bill encourages information sharing as it enables nominated officers in the regulated sector to share information between themselves if there is suspicion of money laundering. This is similar to provisions in the Terrorism Act which allow for sharing of information on suspicion of terrorist financing. Current data protection legislation allows information sharing for the prevention and detection of crime, but regulated entities need to be aware of the risk of being sued for breach of confidentiality. The Bill seeks to overcome this tension by introducing clearer guidance on the transfer of such information.
The Bill also introduces new powers to confiscate assets and money where there are reasonable grounds to suspect that they relate to the proceeds of crime or intended to finance crime. It also provides new civil recovery powers to the FCA. These powers will allow the FCA to recover property in situations where there has not been a conviction, but where it can be shown on the balance of probabilities that unlawful conduct was used to obtain property. This would also enable the FCA to bring proceedings in the High Court to recover criminal property without the owner of the property having been convicted of a criminal offence.
The Bill amends the Proceeds of Crime Act to enable the High Court to make “Unexplained Wealth Orders” (UWOs). UWOs require an individual suspected of being involved in or associated with serious crime to provide an account of how specified property with a value over £100,000 was obtained and to explain their interest in the property.
Perhaps the most significant of changes for the industry is the proposal of a new corporate offence of failing to prevent of tax evasion. The Bill seeks to criminalise companies for facilitating tax evasion by its employees or agents. This offence is similar to offence in the Bribery Act 2010 of failing to prevent bribery. A company will have an defence to this offence if it can show that it has procedures in place to prevent tax evasion and that these were reasonable in the circumstances.
The proposed changes represent a move by the Government to protect and strengthen the integrity of the UK financial system. This can only be a good thing for the industry generally, but to achieve this, the Bill introduces additional burdens on firms. There are a few more stages before the Bill enters into UK law. By the time it does, those affected by the new rules, will need to be certain that they are fully aware of the additional responsibilities imposed upon them.