As the Criminal Finances Act becomes law this month, law firm Hodge Jones & Allen warns that companies will have to consider corporate human rights violations in their compliance procedures to avoid prosecution and financial fines
Under the Criminal Finances Act 2017 companies will be liable for criminal acts committed by employees who encourage or assist tax evasion by other individuals, even if senior management were uninvolved or unware of the acts.
The only defence against being criminally liable is that a business had ‘reasonable procedures’ in place to prevent such matters occurring.
If businesses do not have correct controls in place and fail to meet the new rules they could face criminal prosecution or financial penalties.
The three stages of the offences are:
- Tax evasion by a taxpayer (either UK or non-UK);
- Criminal facilitation of this offence by an associated person of the organisation; and
- The organisation failed to prevent an associated person from ‘facilitating’.
Raj Chada, criminal defence partner at Hodge Jones & Allen, said: ‘Companies that in the past have perhaps benefitted from human rights violations in sectors such as mining will now have to be much more onerous in their compliance procedures.
‘The Act will work as a deterrent by forcing companies to conduct more stringent checks into the nature of the business in which they are engaged prior to signing off projects.’
‘A criminal conviction can be devastating for the reputation of a business. It can lead to direct financial loss vs share price, customer dissatisfaction or even barring a company from public sector contracts. Far better to ensure compliance becomes a matter of course and that no infringements of the Act take place.’
