Procedures and controls to comply with bribery and tax evasion legislation

Procedures and controls to comply with bribery and tax evasion legislation

John Clarke, Money Laundering Reporting Officer and Head of Financial Crime Compliance, Standard Advisory London Ltd

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I am the Money Laundering Reporting Officer and Head of Financial Crime Compliance for the Standard Bank Group’s London based Investment Banking division where I have worked since March 2015. I am also co-chair of the Association for Financial Markets in Europe Financial Crime Working Group and have recently taken over as the chair of the JMLSG Editorial Panel.

I have over twenty years’ compliance experience across investment banking and asset management having previously held financial crime related compliance roles with both JPMorgan Asset Management and Bank of New York Mellon”.

What, for you, are the benefits of attending a conference like the Fraud and Financial Crime Europe Summit and what can attendees expect to learn from your session?

Conferences such as this bring together a high-level audience to engage with leading industry experts and discuss key issues shaping the legal and compliance functions in the European financial sector. The benefits of such a conference are the ability to listen to industry experts on issues that impact the industry on a day-to-day basis whilst also benefitting from foresight and comment around legislative or regulative changes that are “around the corner”.

My specific session will provide a quick reminder of the “Corporate Criminal Offence” of the failure to prevent tax evasion, where we are now 18 months post implementation, what adequate procedures do or do not look like, areas of regulatory focus and the main risk drivers across the various sectors subject to the legislation.

How can institutions ensure that adequate procedures and controls are in place?

Both the UK Bribery Act and the Criminal Finances Act identify six key principles that organisations wishing to prevent bribery and corruption or the criminal facilitating tax evasion by associated persons should consider when establishing reasonable/ adequate procedures, as follows:

  • Risk assessment –
  • Proportionality of risk-based prevention procedures –
  • Top level commitment –
  • Due diligence –
  • Communication (including training) –
  • Monitoring and review

The six principles are necessarily flexible to allow each organisation to tailor its policies and procedures so they are proportionate to the risks of associated persons either facilitating bribery and corruption or criminally facilitating tax evasion faced by the financial institution, and to recognise that existing controls and policies may already address many of these risks.

Although commercial organisations with entirely domestic operations may require bribery prevention procedures, these will normally face lower risks of bribery on their behalf by associated persons than the risks that attach to organisations that operate in foreign markets.

Could you provide brief insights into UK bribery act and the criminal finance act, what are the Implications and how can financial institutions best follow these legislation?

The UK Bribery Act 2010 (the “Bribery Act”) was introduced to update and enhance UK Legislation on bribery and introduced a new strict liability offence for companies of ‘failing to prevent bribery’. The Bribery Act places a burden of proof on corporates to show they have adequate procedures in place to prevent bribery from being committed by Associated Persons.

Similarly, the UK Criminal Finances Act 2017 (the “Criminal Finances Act”) introduced the corporate offence of the failure to prevent the criminal facilitation of tax evasion by an organisation’s Associated Persons. The Criminal Finances Act places a burden of proof on corporates to show they have reasonable procedures in place to prevent the facilitation of tax evasion from being committed by Associated Persons.

It is therefore important that corporates have adequate procedures in place to address the risk of Associated Persons exposing them to corporate liability through their activity when acting on a corporate’s behalf. Adequate procedures should be designed to ensure that:

  • A corporate’s reputation is protected by ensuring its Associated Persons do not expose it to any regulatory breaches, or involvement in criminal activities, including bribery and corruption or the facilitation of tax evasion.
  • A strong compliance culture is maintained.
How do you see the impact of Fraud and Financial Crime evolving over the next 6-12 months?

From a financial crime perspective, it is clear at the time of writing that irrespective of how the final “Brexit” looks there will be considerable change over the next 18-24 months.

5 and 6 MLD will obviously have an impact across the EU whilst in the UK it will be interesting to see (assuming full transposition of 5MLD) what action will be taken to ensure that full third country equivalence is obtained. Accordingly, once “Brexit” is finally done and dusted it will also be interesting to see if the previously mooted “Failure to Prevent Economic Crime” Legislation will re-emerge.

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