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.

Vote for the Future Leaders of the ACFE


Jim Oakes, CFE, CFCI, ACFE Regent, ACFE UK Chapter President
Managing Director, Financial Crime Risk, Ltd.

As 2014 approaches and my term in office as chair of the Board of Regents sadly draws to an end, I would like to reflect on what seems like an all too brief, but extremely fulfilling, experience. I first became aware of the ACFE when I left law enforcement to join Citibank as an investigator in the mid-90s. Recognition of the ACFE here in the UK at this time was restricted mainly to U.S.-based international corporations, but that was about to change following the establishment of the ACFE UK Chapter in 1996. Since that time our chapter membership has grown to more than 900 members. 

Although I have served on the board of the UK Chapter initially serving as vice president in 2004 for nine years and serving as Chapter president since 2013, the internal workings of the ACFE, so far away in Austin, were much of a mystery to me. In 2011 I was shortlisted as a proposed candidate for election to serve on the 2012-2013 Board of Regents. This was the highlight of my professional career. I did not expect to be elected against such worthy and highly qualified fellow candidates, and I was extremely proud just to have been shortlisted. Needless to say I was delighted upon being elected by my peers to serve on the ACFE Board of Regents.

On arrival at the Gregor Building, ACFE’s headquarters in Austin, Texas, in February 2012 to be installed on the Board, I was surprised to discover behind the historic former private dwelling, which forms the key offices of the executives of the Association, a large complex of several modern office buildings housing more than 75 permanent staff, the powerhouse of the ACFE. On meeting the staff, one can only be impressed by their enthusiasm and professionalism, which are keys to the ongoing success of our organisation.

As a member of the Board of Regents I have performed several integral functions. Under the current bylaws, the Board of Regents has sole authority over the admission of members, including but not limited to, examination standards. The Board is responsible for establishing, modifying and enforcing the CFE Code of Professional Ethics and all other matters necessary to maintain the high standards of the ACFE around the world. Acting as the final decision makers on disciplinary matters and upholding the principles and standards of the Association can be a challenging aspect and is not taken lightly.

Give a fellow CFE the opportunity to represent you on the Board of Regents by voting right now for the two representatives of your choice. Act now to help a colleague begin their role as a future leader in the premier anti-fraud organization in the world. You won't regret it, and those elected to represent you will always remember your grassroots support just like I have done over the years.