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Elliot Letts

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On 21 October 2020, Her Majesty’s Revenue and Customs (HMRC) – the UK’s tax authority – released updated figures regarding the number of investigations that it has open into potential offences under Part 3 of the Criminal Finances Act 2017 (the Act). Part 3 of the Act makes it a criminal offence for businesses to fail to put in place reasonable procedures to prevent their employees and associated persons – i.e. those who act for or on behalf of them – from criminally facilitating tax evasion.

According to the information released by HMRC, as at 13 October 2020, HMRC had 13 investigations into potential offences under the Act and a further 18 cases currently under review. HMRC also report that its investigations span 10 different business sectors, including financial services, oils, construction, labour provision and software development, and that those investigations span all HMRC customer groups from small business through to some of the UK’s largest businesses.

The number and range of investigations appear to show that HMRC is actively enforcing the Act across businesses of all shapes and sizes, even despite the pressures on workload and resources caused by the COVID-19 pandemic. This reach, together with potentially unlimited fines for businesses found guilty of the offences, is a salutary reminder that businesses must take their responsibilities seriously and put in place reasonable procedures to stop the facilitation of tax evasion.…

Continue Reading The Future of the Facilitation of Tax Evasion Offences in the UK

In May 2020, the U.K. Financial Conduct Authority, the authority charged with regulating financial firms and maintaining the integrity of the financial markets in the United Kingdom, reported that whistleblowing reports to the Financial Conduct Authority on workplace culture issues in 2019 had increased by 35%. There is also evidence of an increase in whistleblowing reports made during the COVID-19 lockdown, with WhistleB, the Swedish-European provider of whistleblowing solutions, reporting an increase of 40% in the number of concerns raised by whistleblowers in Europe from January to May 2020. Similarly, in the United States, the Securities and Exchange Commission (SEC) reported a 35% increase in the number of whistleblower tips, complaints and referrals between mid-March and mid-May 2020. And although the filing of whistleblower complaints (also known as “qui tam” complaints) are reported to be down compared to the same time last year, the recent distribution of billions of dollars in federal money to companies (discussed further below) is sure to reverse that trend.

In addition, there have been a number of high-profile press reports of investigations and enforcement actions which were prompted by whistleblower reports, with perhaps the most significant recent example being that of Wirecard AG, the German payment processor and financial services provider at the center of a financial scandal in Germany. In June 2020, the company reported €1.9 billion in missing cash. It is reported that Germany’s financial watchdog (BaFin) received a tip-off from a whistleblower about alleged irregularities at Wirecard.

In the wake of the COVID-19 pandemic, a wave of whistleblower reports alleging misconduct in key areas is likely to be inevitable. Whether they come via a regulator, a government authority, the media or directly to the company, companies must be prepared properly to tackle these cases as and when they arise, as a failure to do so could prove fatal to companies that are already fighting to recover from the detrimental economic impact caused by COVID-19. This will undoubtedly be made more difficult as those who usually investigate the reports are not in the office physically to gather all of the facts and evidence using established procedures. Perhaps more than ever, companies should understand the risks posed to their businesses and be ready for the inevitable emergence of whistleblower reports.

We consider below some of the main areas where whistleblowing reports are predicted to increase, as well as how companies can prepare to ensure that they are in the best position to handle any future claims.…

Continue Reading Whistleblowing and Internal Investigations