7 Compliance Program Needs for the Coming Year

7 Compliance Program Needs for the Coming Year

Compliance seems to be everyone's business, since, for many firms, it involves managing financial crime, money laundering and cyber risks. This means compliance has to be offensive as well as defensive. Given this increased area of responsibility and scope, here are seven ways to have an effective compliance program.

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Sports Gambling Fraud Risks Will Require Creativity to Combat

Sports Gambling Fraud Risks Will Require Creativity to Combat

Following a Supreme Court decision on May 14 that will allow states to determine the legality of sports gambling within their jurisdictions, more questions than answers emerged about the ruling’s implications across the country. As individual states determine whether or how they will accommodate sports gambling, fraud risks related to the industry should be at or near the top of the list of considerations for all involved.

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What You Need to Know About the U.K.’s Criminal Finances Act


Jordan Underhill, J.D.
Research Specialist

On April 27, the U.K. officially passed the Criminal Finances Act 2017. This law represents the most significant development in U.K. corporate criminal liability since the passage of the Bribery Act in 2010. The Act also strengthens the government’s ability to combat money laundering, terrorist financing and tax evasion. The various provisions of the Act are expected to come into force later this year and will affect both U.K.-based firms and foreign firms conducting business in the U.K.

Tax Evasion
One of the most important sections of the Act expands corporate criminal liability for tax evasion. This expansion represents the U.K.’s latest effort to combat domestic and global tax evasion and to increase its coordination with foreign governments. The Act creates two new strict liability criminal offenses:

  1. Failure to prevent the facilitation of U.K. tax evasion offenses
  2. Failure to prevent the facilitation of foreign tax evasion offenses

These new offenses are modeled after Section 7 of the Bribery Act, which created a strict liability offense for the failure of commercial organizations to prevent bribery on their behalf. Like Section 7, these new “failure to prevent” offenses have potentially broad applications because no intent is required. A corporation can be held liable for the actions of employees who, in their professional capacity, encourage or assist the tax evasion of others. This is true regardless of whether upper management had knowledge of or directed the actions of the facilitator.

However, the Act does provide a defense for firms that have reasonable prevention measures in place. To successfully assert this defense, the corporation must show that, at the time of the offense, it had reasonable prevention procedures in place to prevent employees from facilitating tax evasion. Alternatively, the corporation can show that it was not reasonable in all circumstances to expect the corporation to have any prevention procedures in place.

Unexplained Wealth Orders
Chapter 1 of the Act creates the “unexplained wealth order” (UWO), which is a new investigatory tool that authorities can use to expose corruption, tax evasion and other illicit activities. UWOs require individuals to explain the origin of funds that appear disproportionate to their reported income. These orders can be issued by a High Court at the request of an enforcement authority to a “politically exposed person” (e.g. public official) or a respondent that the court has reasonable grounds to suspect is involved in a serious crime or is associated with someone involved in a serious crime.

A UWO can be issued to someone not based in the U.K. and may relate to property outside of the U.K. If an individual makes false or misleading statements in response to a UWO, they can be convicted of a criminal offense that carries a maximum penalty of two years’ imprisonment.

Anti-Money Laundering and Terrorist Financing
The Act also enhances the abilities of law enforcement to investigate suspected money laundering and terrorist financing in three key ways:

  1. The Act empowers law enforcement to issue disclosure orders during money laundering investigations. These orders compel individuals that authorities suspect may have relevant information to answer questions and disclose documents. Individuals who fail to comply with disclosure orders can be fined up to £5,000.
  2. The Act allows for information sharing between various firms when there is suspicion of money laundering. This includes the ability for firms to submit joint suspicious activity reports (rather than a single report for each firm), which combines information from each firm into a single, cohesive document to create a more streamlined investigation for authorities.
  3. The Act gives the National Crime Agency (NCA) more time to investigate suspicious activity reports. Ordinarily, when a business submits a suspicious activity report, it requests consent from the NCA to proceed with the reported transaction or activity. The NCA can deny consent, creating a 31-day moratorium period during which investigators can gather evidence on the reported activity and determine if further action is required. However, this window is often too short for a thorough investigation. The Act allows the NCA to petition a court for up to six 31-day extensions to the moratorium period, providing more time for a careful analysis of the suspicious activity.

The Criminal Finances Act represents another step in the fight against fraud. Affected businesses should conduct risk assessments to ensure that they are in compliance with the Act before it comes into force later this year. In particular, special attention should be paid to procedures designed to prevent employees from facilitating tax evasion. Likewise, employees should be educated about the Act and any changes in internal policies.

Panama Papers Aftershocks: Mossack Fonseca's Offices Raided, Founders Arrested


Martin Kenney
Managing Partner of Martin Kenney & Co., Solicitors

Authorities finally appear to have caught up with Mossack Fonseca’s (MF) founders, Jürgen Mossack and Ramon Fonseca, who were arrested last month in Panama City in connection to the Brazilian “Lava Jato” or “Operation Car Wash” corruption scandal.  Along with the high-profile arrests, the firm’s offices were also raided.

The news is another blow to the company, which was already reeling from the aftershocks of the Panama Papers scandal, in which MF was shown to be the center of countless international shell companies and tax havens.

In a statement, Panama’s Attorney General Kenia Porcell said that recently the firm allegedly worked with contacts in Brazil to "destroy evidence related to those implicated" in the Brazilian scandal. "In short: money from bribes circulate through various places to return laundered to Panama," she said.

Although further details have yet to be released, tying the firm to Operation Car Wash will raise a few eyebrows. The year-long investigation reads like a Who’s Who of South American countries; added to the mix are the U.S. and Switzerland.

Although the Panama Papers scandal has been fading from the public eye, I had mused that silence was not linked to inaction. Most criminal investigations are cloaked in secrecy for obvious reasons. The Panama Papers story was simply too big and too grave for law enforcement to ignore. Public interest was always going to dictate that a full investigation would be required to gauge the depth of the problems being unearthed.

The Operation Car Wash investigation is similarly vast, and the many levels of corruption and the losses incurred by the public purse demand that many stones be overturned.

It remains to be seen if MF’s founders were involved in the events tying the firm to Operation Car Wash, either directly or by turning a blind eye. MF has issued a denial that they were connected to any entity linked to Operation Car Wash.

The underlying problems for the firm are a lack of plausibility and credibility. There have been too many revelations and too many blanket denials. MF handled the initial and subsequent fallout very poorly; issuing denial after denial, or flimsy excuses, is not the way to limit damage when under criticism from the press and the public. Ramon Fonseca argued that his firm can’t be held to account for how the 200,000+ offshore companies it formed behaved – just as GM can’t be blamed for a reckless driver doing harm with one of its vehicles. That’s just not credible, and it ignores his firm’s obligations to know its customers, identify the UBOs of the companies it formed, and to ferret out and report suspicious activities. The use of misdirection and red herrings is unhelpful in this context.

If MF has knowingly facilitated the improper movement of assets away from Brazil, then it deserves all it will get. In this instance, the ordinary citizens of Brazil have suffered the most as billions of dollars appear to have been unlawfully diverted elsewhere.

There is also going to be a lot more fallout from the Panama Papers scandal. The countries affected have lost billions in revenue as a consequence of tax evasion, and will not let matters lie. Add the facilitation of money laundering for criminal gangs and organized crime, plus the potential links to terrorist extremists and their revenue streams, and you have a heady cocktail of reasons why this scandal is anything but dead. Global authorities owe it to their people to right the wrongs and bring those responsible to book.

Martin Kenney is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice based in the BVI and focused on multi-jurisdictional fraud and grand corruption cases www.martinkenney.com |@MKSolicitors . Mr Kenney was recently selected as one of the Top 40 Thought Leaders of the Legal Professionin 2017 by Who's Who Legal International. He is the only fraud and asset recovery lawyer included in this list of Thought Leaders drawn from 16 different practise areas.

The opinions expressed in this blog are not necessarily those of the ACFE.