David Cameron has announced his intention to criminalise companies whose employees aid tax evasion.
At AAT we invest much in ensuring that our members comply with their ethical obligations, and that those in practice are conversant and compliant with Anti Money Laundering legislation, which specifically requires tax evasion to be reported by those in regulated sectors. Arguably, if you’re required to report money laundering if you come across it, it’s not a best use of resources to be facilitating it – particularly as this would put you right in the territory of a section 327 “arrangement” offence under the Proceeds of Crime Act 2002. Your Money Laundering Reporting Officer will not thank you for your criminality, as they face a conviction on indictment of up to five years, whilst you are potentially packing for a 14 year holiday at Her Majesty’s pleasure.
So what is unclear from this fanfare announcement is whether this legislative proposal is anything more than rhetoric in an age where professional services companies are required to invest in AML, ABC, CFT, and the costs of not doing enough can be business breaking, with the Court of Public opinion adjudicating through the mainstream media. The resultant impact is that your once profitable and highly regarded reputation flails in tatters – along with your profits – as your competitors capitalise on your downfall, taking the opportunity to distinguish your poor behaviour from their virtue.
So what more will this bring than we already have?
AML compliance requirements do not apply to all businesses as they are currently drafted. This means that a Finance Director for big business outside the regulated sector who suspects wrongdoing is under no legal obligation to report it. They are, however, under an ethical obligation to act with integrity and to not be associated with false or misleading information. This is underpinned by a duty to act in the public interest, which should preclude the commission of tax evasion by professional accountants bound by their ethical code.
This moves us into the territory of how feasible is it to prosecute a company for an employee’s behaviour? Back in January 2016 Serious Fraud Office head, David Green, lamented the challenges the SFO face in prosecuting companies because of the “controlling mind test”, with an evidence trail within larger firms tending to dry up at middle management level. This arguably results in a disproportionate number of smaller firms being prosecuted and the big material evasion therefore not being addressed.
Perhaps the devil will be in the detail on this one, but on the basis of what we already have, I advise you:
1. Don’t support your organisation, or your clients, in evading tax as this is still as illegal and unethical now as it always has been.
2. If you are suspicious that your organisation is involved in tax evasion, speak out and disassociate yourself from involvement. Your ethical requirements prohibit you from being associated with false or misleading information.
3. If you work in professional practice and become suspicious of tax evasion, report this to your MLRO, or the NCA if you are the MLRO.
Tania Hayes is AAT's Head of Professional Standards & Strategy.