Corporate Criminal Offence
The corporate criminal offence (CCO) of the failure to prevent the facilitation of tax evasion legislation has been effective since September 2017. At EY we have helped organisations across all sectors build their response to the legislation as they seek to prevent those who act for them from criminally facilitating tax evasion.
What EY can do for you
The CCO legislation is exceedingly broad and has a wide-ranging extraterritorial effect. By leveraging our experience and insights, our teams work with you to understand the facilitation risks that you could face, assess the effectiveness of the control framework, and assist in a range of ways to ensure that the response is both effective and proportionate.
Our team includes the following capabilities;
- Individuals with experience of working as fraud investigators within HM Revenue & Customs and an awareness of the many ways in which tax evasion can materialise.
- Experience of supporting businesses respond to other regulatory and compliance obligations, for example the Bribery Act on which the CCO is modelled.
- Criminal tax lawyers who can support with the protection of legal privilege to embed reasonable procedures, review ‘red flag’ transactions, and support with any investigations.
To respond to the legislation, HMRC recommends that businesses should put procedures in place that are proportionate to the risks they face, using the following six principles as a guide:
- Risk assessment
- Proportionality of risk-based prevention procedures
- Top level commitment
- Due diligence
- Monitoring and review
Our guide to securing compliance
Securing long-term compliance with the requirements of the Criminal Finances Act 2017 means embedding the processes into business as usual. Our guide gathers input from professionals across EY and considers the minimum standards along with evolving compliance activities for all organisations.
How can EY help
Our team has helped numerous businesses through their CCO journey and can deliver a wide range of services tailored to support your needs including;
- A risk assessment toolkit to gain clarity on where inherent risks can arise.
- EY technology to provide a real-time diagnostic tool evidencing the appropriateness of your current framework.
- Assistance with policies and communication, including online training.
- Review of ‘red flag’ transactions with the protection of legal privilege.
- A policy governing the response were the business to be criminally investigated.
- A framework to ensure that the response remains reasonable and proportionate as the risk environment evolves.
The UK Government introduced the CCO, effective from 30 September 2017, as part of the Criminal Finances Act 2017. Organisations which fail to prevent those acting for or on their behalf from facilitating tax evasion face becoming criminally liable themselves.
This legislation must be considered by every organisation doing business in, with, or through the UK. Aside from the reputational risk of failing to put ‘reasonable procedures’ in place, the corporate criminal offence may result in a criminal prosecution leading to an unlimited financial penalty, a public record of the conviction and potential implications for the ability to trade.
Our experience is that tax, compliance and legal will all have a role in delivering the project, with key business functions also involved in helping perform the risk assessment. Tax in particular has a key role at the outset in identifying the areas of facilitation of tax evasion risk that could arise across the organisation.
The scope of the legislation is significant, potentially impacting a number of international transactions. It is important at an early stage to assess whether a global response is appropriate when scoping the project, and in many cases businesses have determined that this is the most effective way of responding to the legislation.
The legislation is similar in approach to the Bribery Act, and businesses should therefore be familiar with HMRC’s guiding principles. Whilst it is necessary to undertake an assessment to understand the risks that need to be addressed, it should then be possible to build on the existing ABC framework to address them.
It may be the case that a proportionate response to the risk assessment is to simply amend policies and contractual terms if you have concluded that this amounts to reasonable procedures. However, it is important to first perform the risk assessment, as this will enable you to determine whether policies and contracts need to be amended at all and, if they do, the risk the amendments are seeking to address.
Whilst the financial services sector is one of the industries at higher risk, the legislation applies to all industries and there are a number of risks that permeate across many. If a business appears to be low risk, it will be important to document why, and the risk assessment need not be an onerous exercise.
Next steps for CCO compliance
Helping financial services institutions respond to the UK’s new corporate criminal offence.
The UK’s new corporate criminal offence
How adopting a robust risk-based approach could open the pathway for future global compliance.
|Webcast: Impact of the new UK CCO and lessons learned||Watch|
|Webcast: Could you be failing to prevent the facilitation of tax evasion, bribery or a wider range of economic crimes?||Watch|
Contact us to find out more.