Failure to prevent the facilitation of tax evasion:

Our solution to help you avoid committing the new offenceOctober 2016

This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered.Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) authorised and regulated by the Solicitors Regulation Authority and the appropriate regulatory body in the other jurisdictions in which it operates. The word ‘partner’, used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm of equivalent standing. A list of the members of the LLP, and of those non-members who are designated as partners, is displayed at the LLP’s registered office: 30 Crown Place, London EC2A 4ES, United Kingdom. We use ‘Pinsent Masons’ to refer to Pinsent Masons LLP, its subsidiaries and any affiliates which it or its partners operate as separate businesses for regulatory or other reasons. Reference to ‘Pinsent Masons’ is to Pinsent Masons LLP and/or one or more of those subsidiaries or affiliates as the context requires. © Pinsent Masons LLP 2016.For a full list of our locations around the globe please visit our websites: www.pinsentmasons.com and www.Out-Law.com.

Our comprehensive FTP compliance solution offers your organisation:

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The failure to prevent the facilitation of tax evasion is modelled on the UK’s existing corporate offence of failure to prevent bribery. Importantly, the defence of having in place ‘reasonable prevention procedures’ is similar to the defence of ‘adequate procedures’ under the Bribery Act 2010. While adequate anti-bribery procedures will not amount to reasonable tax evasion prevention procedures, the principles underpinning both defences are the same:

• Top level leadership• Risk assessment• Due diligence• Proportionate procedures• Training and communication• Monitoring and review.

Pinsent Masons is a leading international law firm with tax and anti-bribery and corruption compliance teams that received Band 1 rankings in the Legal 500 rankings for 2016. Pinsent Masons is also the law firm behind the compliance technology business Cerico which was recognised for ‘best use of technology’ in the FT Innovative Lawyer Awards 2015.

We have brought our tax, bribery and compliance technology specialists together to develop a suite of ‘out of the box’ tools to help our clients meet the reasonable prevention procedures standard.

These solutions have been developed to keep the cost of compliance down, minimise the burden on your compliance function and significantly reduce the risk of your exposure to a facilitation crime. If an issue arises, adoption of our solutions means that you should be in a good place to demonstrate a ‘reasonable prevention’ defence.

Our solutions can be deployed across any business and can be tailored to meet your existing processes.

Our FTP solution to help reduce your risk of exposure to the facilitation crime

Pinsent Masons is a leading international law firm with tax and anti-bribery compliance teams that received Band 1 rankings in the Legal 500 rankings for 2016

Pinsent Masons Failure To Prevent the facilitation of tax evasion

With effect from September 2017, it will be a criminal offence if a business fails to prevent (‘FTP’) any person associated with it from facilitating tax evasion.

The offence will apply to all businesses, wherever located, in respect of the facilitation of UK tax evasion – and to businesses with a UK connection in respect of the facilitation of non-UK tax evasion. It will be a defence to have ‘reasonable prevention procedures’ in place.

The implications of being found guilty of this new offence are confiscation of revenues earned, fines of up to four times the benefit derived, extensive investigation and remediation costs, and brand and reputational damage.

A risk assessment coupled with new processes and procedures will need to be put in place to enable businesses to demonstrate ‘reasonable prevention procedures’. Tax evasion can take many forms, and distinguishing tax evasion from tax avoidance or legitimate tax planning will require a step-up in tax knowledge across your business, commercial and compliance teams.

Businesses need to plan their response now.

Failure to prevent the facilitation of tax evasion

Tax evasion can take many forms,

and distinguishing tax evasion from

tax avoidance or legitimate tax planning will require a

step-up in tax knowledge across

your business, commercial and

compliance teams

1. The ability to minimise your exposure to the new offence and the associated civil penalties regime for enablers of tax evasion

2. A suite of products that are both scalable and customisable to suit businesses of any size and risk profile

3. Staff training, policies and procedures, due diligence and specialist tax and compliance advice in a single offering

4. Advice and support to move from development of policy to embedding policy as business as usual, using the award-winning Cerico platform

5. Comprehensive advice in a legally privileged environment.

Key features: five reasons to buy

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We recommend approaching FTP as an organic procedure meaning your response to it needs to be capable of adapting to the changing environment of tax evasion, anti-bribery and corruption, anti-money laundering and regulatory concerns

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Pinsent Masons Failure To Prevent the facilitation of tax evasion

Our FTP solution

4. Due Diligence

Know-Your-Business-Partner due diligence: your external associated persons, such as suppliers, agents and other business partners, will need to be reviewed for risk and asked to implement standards in order to minimise your exposure to the risk of facilitation of tax evasion which might be carried out by them. We have an ‘out of the box’ due diligence workflow. This can be customised to fit your business.

Enhanced Know-Your-Customer checks: if your business is in the financial, professional and fiduciary services sectors, you are exposed to a unique risk of your services being misused by clients and customers to engage in tax evasion and either an employee or external service provider facilitating this. Based on our experience of tax evasion scenarios, we have an ‘out of the box’ due diligence workflow to assess the risk from the customer side of your business. This can be customised to fit your needs. The workflow provides for higher risk scenarios to be escalated for review, whether by your internal compliance or tax teams. Additionally, we can provide real time support.

Tax Avoidance: We can also extend the service to allow you to manage your risk of exposure to customer and supplier tax avoidance which you consider to be outside the limits you find acceptable, helping to minimise your exposure to potential action against you by HMRC under new proposals to penalise the ‘enablers’ of tax avoidance.

5. Monitoring & Review

Audit Trail & Evidence capture: Faced with a criminal, regulatory, internal investigation or even an internal audit a business may find it difficult to lay its hands quickly on hard evidence to show that procedures were followed. Our cloud-based compliance platform Cerico can help you implement your new procedures, escalate high risk matters, and capture and document the steps taken to reduce risk with a full audit trail and readily accessible management information to keep your compliance team and board informed. It can also identify in real-time instances where procedures have not been adhered to. The system provides automated risk scoring, red flag triggers, a full audit trail and valuable management information. If ever needed, the system ensures records are available to help prove the ‘reasonable procedures’ defence.

Monitor & Review: it is important to learn from experience and to have a feedback loop to help improve your processes. We can help with periodic audits and reviews. We recommend approaching FTP as an organic procedure, meaning your response to it needs to be capable of adapting to the changing environment of tax evasion, anti-bribery and corruption, anti-money laundering and regulatory concerns.

1. Risk Assessment

Risk identification: we work with you to identify which business lines, counterparties, suppliers or customers create third party tax risk. We help you to review your organisational structure to identify your level of international exposure and which ‘associated persons’ fall into the scope of the offence.

Risk Mitigation: we review your existing policies and procedures and how they are applied to identify where existing processes help with FTP risk. This is fundamental and can help save cost as any response needs to take account of your starting position. Many of the procedures you have in place today will already help to minimise third party tax risks. Depending on your business sector, it may be that only small adjustments need to be made.

2. Project management and implementation

Planning: based on the output of the risk assessment we work with you to develop a project plan which will include steps to implement procedures, systems and controls.

Budgeting: we help you to report and present at board level and prepare the necessary business case to ensure that you have adequate resource and budget in place and identify the key stakeholders who need to be involved in making changes.

3. Training & Awareness

Training solution: it will be important to raise awareness within your organisation – do your people understand what constitutes evasion and what the difference is between evasion and planning or avoidance? We have ‘out of the box’ training and written policies which can be customised to fit your business. Cerico delivers eLearning via a cloud-based compliance platform enabling seamless delivery of training across your population of employees and higher risk associated persons. Compliance declarations and self-certification are also delivered through the platform.

Training & Awareness

Project management and implementation

We have ‘out of the box’

training and written policies

which can be customised to

fit your business

Monitoring & ReviewRisk Assessment Due Diligence

Service level Gold Silver Bronze

Interface with HMRC/other bodies on your behalf 3

Due diligence process through Cerico 3

Complete audit trail through Cerico 3

Processes and procedures underpinned by the Cerico platform 3

Bespoke evaluation of your response 3 3

Tailored training modules 3 3

‘Out of the box’ training modules 3 3 3

Tailored policies & procedures 3 3

‘Out of the box’ policies & procedures 3 3 3

Risk assessment 3 3

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Our FTP teamCustomising the FTP Toolbox for your businessWe appreciate that businesses will already use a variety of tools and systems in order to comply with anti-money laundering, anti-bribery, sanctions compliance, and other regulatory requirements. In order to ensure that our solution complements your existing compliance regime, we have created three FTP service levels:

GoldA fully outsourced service designed to maximise the reasonable prevention procedures defence.

SilverA bespoke service where we evaluate, design, and build your reasonable prevention procedures.

BronzeYou can either buy certain aspects of the PM package (eg. training), or use PM on a consultancy basis.

About CericoCerico provides a comprehensive and customisable regulatory compliance solution which can be implemented quickly, easily and on a global basis.

The Cerico platform is the only solution of its type developed and delivered in association with a Global 100 law firm. Cerico’s compliance processes have been written by Pinsent Masons’ specialists with the sole objective of mitigating legal risk. Workflow and process design is then carried out by Cerico personnel who have worked with world-leading IT and business consultancies.

Cerico’s standard tools are tailored to fit with your compliance policies, procedures and objectives. Importantly, the tools help deliver scalable and auditable compliance solutions. Cerico’s tools are currently being utilised in 40 countries and 20 languages. Cerico enables organisations to ensure their employees and business partners undergo thorough, systematic and rigorous compliance checks. The processes can be tailored to your needs in a way that is quick, unobtrusive and auditable. Once implemented the process runs on a pre-programmed basis, so that you know risk assessments, due diligence, self-certification and training are being delivered and completed.

Jason CollinsPartner, Head of TaxT: +44 (0)20 7054 2727E: jason.collins@pinsentmasons.com

Jason is a Partner in the Risk Advisory Services business group, where he leads the Litigation, Regulatory and Tax teams.

Jason is one of the leading tax practitioners in the UK. He specialises in representing corporate and individual clients who are the subject of a tax audit – and resolves complex disputes with HMRC in all aspects of direct tax and VAT, as well as tax treaty and disputes involving other jurisdictions. He represents clients under both civil and criminal investigation, including representation at “dawn raids” and interviews under caution. Jason is a leading expert on Country-by-Country reporting, FATCA and the OECD’s Common Reporting Standard, advising governments, companies, financial institutions and individuals across the world on the application of automatic exchange of information, with a particular focus on trusts, investment companies and funds.

Tori MagillTax DirectorT: +44 (0)20 7490 6419E: tori.magill@pinsentmasons.com

Tori is a Director specialising in criminal investigations, civil fraud, and avoidance investigations.

As a former Group Leader in HMRC’s Specialist Investigations directorate, Tori was responsible for HMRC’s most complex fraud and avoidance investigations and litigation and was HMRC’s policy expert for Criminal Investigations, Civil Fraud Investigations and the interface between criminal and civil work. Tori designed and implemented the Contractual Disclosure Facility for civil fraud investigations under Code of Practice 9, and held the policy portfolio for HMRC’s Offshore Disclosure facilities. Tori is the LexisNexis Litigation and Disputes Expert and writes regularly in Tax Journal and Taxation.

Pinsent Masons Failure To Prevent the facilitation of tax evasion

Cerico enables organisations to ensure their employees and business partners undergo thorough, systematic and rigorous compliance checks

In order to ensure that our solution

complements your existing

compliance regime, we have

created three FTP service levels

Failure To Prevent the facilitation of tax evasion:

Our ‘FTP’ solution to help you avoid committing an offencesOctober 2016

This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered.Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) authorised and regulated by the Solicitors Regulation Authority and the appropriate regulatory body in the other jurisdictions in which it operates. The word ‘partner’, used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm of equivalent standing. A list of the members of the LLP, and of those non-members who are designated as partners, is displayed at the LLP’s registered office: 30 Crown Place, London EC2A 4ES, United Kingdom. We use ‘Pinsent Masons’ to refer to Pinsent Masons LLP, its subsidiaries and any affiliates which it or its partners operate as separate businesses for regulatory or other reasons. Reference to ‘Pinsent Masons’ is to Pinsent Masons LLP and/or one or more of those subsidiaries or affiliates as the context requires. © Pinsent Masons LLP 2016.For a full list of our locations around the globe please visit our websites: www.pinsentmasons.com and www.Out-Law.com.