Criminal Finances Act – is your organisation ready?

Checklist of “reasonable procedures” to comply with the Act

After receiving royal assent on 27th April, on 30th September the Criminal Finances Act came into full force. The Act creates a new corporate criminal offence for failing to prevent the facilitation of tax evasion, placing the responsibility on business to have “reasonable procedures” in place to ensure none of their employees are involved in helping someone evade their taxes.

Guidance from HMRC states that procedures which successfully detect and disclose wrongdoing would likely be found to be reasonable. Timely self-reporting is also an indicator that reasonable procedures are in place.

Reasonable procedures should be guided by the following principles:

1. Risk assessment

Oversight of risk assessment by senior management and appropriate allocation of resources to detect and monitor risk.

2. Proportionality of risk-based prevention procedures

A clear pathway for reporting wrongdoing and whistle-blowing procedures, reviewing existing procedures and refining them.

3. Top level commitment

Communicating a top level commitment to preventing criminal facilitation of tax evasion.

4. Due diligence

Tax evasion-focused due diligence assessments of subcontractors and consultants.

5. Communication and training

Regular training for all staff in the organisation and strong external communication as a deterrent to those seeking to evade tax.

6. Monitoring and review

Internal feedback procedures for staff to engage in financial crime prevention and working with other organisations to monitor and review risks faced.

“Reasonable procedures” – tax evasion checklist

What action is your business taking to prevent corporate facilitation of tax evasion? Organisations should consider the following points to help establish whether or not they are following “reasonable procedures” in preventing the facilitation of tax evasion:

  • Assess the nature and extent of the risk of tax evasion. What do existing procedures cover and do they mitigate the potential risk?
  • Communicate and discuss with others on institutional obligations for checking for tax evasion.
  • Deliver training to frontline staff on how to spot potential tax evasion.
  • Ensure financial teams understand tax evasion, how to spot and investigate it, and they are empowered to question frontline staff.
  • Adapt IT and secure internal communication systems to support staff in identifying and managing risk.
  • Check that procedures cover not just staff, but other associated persons.
  • Ensure corporate governance takes account of the risks and senior managers are aware of their responsibilities.

VinciWorks’ e-learning course on tax evasion

Guide to tax from online tax evasion course

The above guidance was taken from VinciWorks’ interactive and fully customisable e-learning course on tax evasion. The course will teach employees how to spot tax evaders and the reporting procedures required of them. The course also educates users on how to comply with all aspects of the Criminal Finances Act. You can try the course for free by clicking on the button below.

Demo course