Commons Library Analysis of the Criminal Finances Bill (Bill 75 of 2016-17)

The Criminal Finances Bill was introduced on 13 October 2016, together with Explanatory Notes.  Its second reading is on 25 October 2016.

The Bill would provide for a number of measures aimed at improving the Government’s ability to target the revenue generated by organised crime, focusing in particular on money-laundering and terrorist finance.

What does the Bill do?

The main measures contained in the Bill are:

1. Unexplained Wealth Orders. The Bill will enable a court to make an Unexplained Wealth Order to require an individual or organisation who is suspected of direct involvement in or association with serious criminality to explain the origin of assets, where their assets appear to be disproportionate to their known income. A failure to provide a response would give rise to a presumption that the property was recoverable, in order to assist any subsequent civil recovery action. The Bill would also allow for this power to be applied to foreign politicians or officials or those associated to them, known as Politically Exposed Persons (“PEPs”), helping to tackle the issue of the proceeds of grand corruption overseas being laundered in the UK.
2. Improved seizure and forfeiture powers. Current legislation allows law enforcement agencies to take action against criminal cash, but they are unable to do so if criminals store the proceeds of crime in bank accounts or other means, such as precious metals and jewels. There is evidence that these moveable items are being used to move value, both domestically and across international borders. The Bill will create new civil powers, similar to the existing cash seizure and forfeiture schemes in current legislation, which would close this gap. The powers will be exercisable where there is reasonable suspicion that the property is the proceeds of crime, or that it will be used in unlawful conduct in a manner similar to cash.
3. Reform to the SARs regime. The SARs regime provides a critical intelligence resource direct to the NCA from regulated companies, allowing the NCA the opportunity to approve or refuse consent to transactions that may involve the proceeds of crime. Where the NCA refuses consent, the Bill will extend the current 31 day moratorium period granted by a court, for up to six months so as to allow investigators sufficient time to gather evidence to determine whether further action, such as restraint of the funds, should take place. It will also create a power for the NCA to request further information following receipt of a SAR; or where they have received a request from a Financial Investigation Unit in another country.
4. Information Sharing. The Bill will provide for a legal gateway for the sharing of information between entities within the regulated sector (e.g. banks). This has already been happening under the Joint Money Laundering Intelligence Taskforce (JMLIT) pilot, helping the banks to build the intelligence case for suspected money laundering before they submit a report to the NCA.
5. Corporate failure to prevent tax evasion. At present, if an individual evades tax and this is facilitated by the advice or actions of those in a corporation, although the individual will have committed a crime and those directly facilitating it could be prosecuted, the corporate entity does not hold any liability. The Bill would create two new offences so that a corporation in this situation could be prosecuted – one to catch companies facilitating the evasion of UK taxes; another to cover evasion of foreign taxes facilitated by an entity that has some nexus with the UK (such as a UK-based office), and where there is dual criminality with the UK.
6. Disclosure Orders. The Bill would authorise a law enforcement officer by way of a Disclosure Order, to require someone who has relevant information in a money laundering investigation to answer questions and provide information or documents. Disclosure Orders are already used in confiscation investigations and by the Serious Fraud Office (SFO) in fraud investigations, and the Bill would extend their use to money laundering investigations.
7. Combatting Terrorist Finance. The Bill would also make complementary changes to the law enforcement and intelligence agency response to the threat of terrorist finance, by mirroring many of the provisions in the Bill on Disclosure Orders, and Seizure and Confiscation powers, so that they also apply for investigations into offences under the Terrorism Act 2000 (TACT).

Where does the Bill extend to?

The Bill covers the whole of the United Kingdom but some clauses apply to selected parts only. Annex C to the Explanatory Notes sets out the application of clauses to different parts of the United Kingdom and includes a note on subject matter and legislative competence of devolved administrations.

Background

The Bill follows a number of consultations and announcements.

Within the last two years there has been a major review of Anti-Money Laundering strategy in the UK. The review has produced three documents which have in varying degrees informed the current proposed legislation.

The first is the High End Money Laundering Strategy and Action Plan published by the National Crime Agency in December 2014.

The second is a follow-on Report published jointly between the Treasury and the Home Office in October 2015 – UK national risk assessment of money laundering and terrorist financing

These were supplemented in April 2016 by a further Treasury/ Home Office document Action Plan for anti-money laundering and counter-terrorist finance.

With respect to tax evasion, the Coalition Government announced in its March 2015 Budget that it would consult on several measures to reduce offshore tax evasion, including the new corporate offence.

In July 2015 the HM Revenue & Customs published Tackling offshore tax evasion: a new corporate criminal offence of failure to prevent the facilitation of evasion – consultation document which sought views on the corporate criminal offence.  

Subsequently in April 2016 the then Prime Minister David Cameron made a commitment that the Government would introduce legislation to this effect later this year. This was one of a series of initiatives Mr Cameron announced following the publication of the ‘Panama Papers’.

HM Revenue & Customs published draft legislation for the new corporate offence along with draft guidance on 17 April 2016. This second consultation closed on 10 July 2016, and on 13 October 2106 the Government published a summary of the responses it had had, with a revised version of its draft guidance, alongside the Bill.