13th July 2016

Supporting the fight against tax evasion and financial crime

Written by David Wren, Tax Policy Director, BBA

HMRC is currently consulting on the introduction of a new corporate criminal offence. The new legislation will create a new criminal offence for companies who fail to prevent their representatives from facilitating tax evasion. The offence will apply to actions of employees, contractors and many other third parties who provide services on behalf of the company.

Banks have extensive controls in place to monitor and prevent money laundering and financial crime, and have been actively working with the Government for many years to deliver a safe and secure financial system. No bank wants to deal with the proceeds of financial crimes, which also includes those customers who engage in tax evasion.

Banks have been at the forefront of commitments to bolster tax transparency, implementing both their own proactive initiatives as well as unprecedented programmes to implement the US Foreign Account Tax Compliance Act programme and the OECD Common Reporting Standard. Both regimes impose new standards on banks in the identification of customers and greater transparency in reporting to tax authorities.

Nevertheless, we recognise that there is a desire to go further.

As the Government’s recent consultation on the Anti-Money Laundering (AML) Action Plan acknowledges, there is an estimated £5 billion compliance cost to banks alone in the UK. The reform of AML is rightly a priority for Government and for banks, and the introduction of this offence should seek to enhance those developments rather than run in parallel.

It is therefore critical that these new rules complement existing regimes. Without this approach, there is a risk that existing and future compliance rules create a fragmented approach to compliance and parallel processes, rather than a holistic and consistent approach to preventing financial crime. Unnecessary and redundant compliance activity will help no-one, and could frustrate and conflict with the aims of the new rules.

Next steps

We welcome the recognition of the value of industry guidance in primary legislation and the ability of the Chancellor, through HMRC, to approve such guidance. As far as possible, that guidance should be mapped to the existing controls under anti-money laundering rules, and we would propose that the guidance issued by the Joint Money Laundering Steering Group (JMLSG) is the ideal template for such an approach.

The BBA is committed to producing this guidance, and we look forward to continuing to work with HMRC and the wider industry to ensure a successful implementation of these rules.

There is also a need to fundamentally review and reform the role of guidance across the financial crime, anti-corruption and tax evasion landscape. The current approach is too fragmented, and different pieces of guidance can seemingly conflict, whilst in other areas the absence of regulatory guidance can increase uncertainty and lead to unnecessary compliance activity or banks withdrawing from accounts because of the cost of compliance and the fear of possible penalty.

We believe working in partnership with regulators to develop more complementary guidance with more detail on how to manage the tension between competing objectives, such as supporting access to banking and AML, will help create a stronger overall approach.

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