Two recent reports indicate that UK authorities have been notably reluctant to prosecute individuals involved in financial crimes. These findings draw attention to systemic weaknesses in the country's enforcement mechanisms and question the efficacy of the rule of law in financial matters.
The first report, based on a decade of government data and analyzed by moneylaundering.com, found that only 23 cases were opened against financial industry insiders for not reporting suspicious transactions between 2012 and 2021. Margaret Hodge, a UK Labour Party lawmaker who focuses on anti-corruption issues, labeled these statistics as "appalling" and called for a "complete overhaul of the system." This comes on the heels of the 2020 FinCEN Files investigation, which revealed that British banks like HSBC and Barclays were linked to billions of dollars in suspicious transactions.
The second report, produced by The Bureau of Investigative Journalism and TaxWatch, revealed that last year only 11 "wealthy" individuals were charged with tax fraud. Although approximately 800,000 British taxpayers are considered "wealthy," fewer than 100 have faced prosecution for tax crimes since 2017. Tax policy expert Dan Neidle points out that the UK tax authority prefers low-risk civil actions over more costly criminal prosecutions, even though the latter would serve as a stronger deterrent.
These reports suggest a significant gap in the enforcement of financial laws, not just among wealthy individuals but also among professionals in top financial institutions. White-collar professionals who neglect their duty to flag suspicious transactions are seldom held accountable, thus undermining the rule of law and enabling a climate of financial impunity. The findings of these reports are in line with ongoing research conducted by the Corporate Crime Observatory in the areas of corruption and tax abuse. They echo discussions in the Observatory's international roundtables that delve into the complex roles professionals play in financial misdeeds, specifically tax abuses. The most recent roundtables engaged in a comprehensive examination of the ambiguous realm known as the "gray area" in taxation, where actions oscillate between legality and illegality. These discussions have raised critical questions about the ethical dimensions and loyalties of tax professionals. It has been argued that their commitment to clients sometimes conflicts with their societal and legal responsibilities, thereby posing risks to democratic values and the rule of law. Additionally, the roundtables are probing into the organizational structures and profit motives shaping the tax profession, aiming to unravel the ethical conflicts and dilemmas inherent in the industry. The roundtables also touch upon the educational and ethical responsibilities that should be shouldered by professionals in law, business, and taxation. For those interested in these complex dynamics, video recordings of the sessions are available on the Corporate Crime Observatory website (www.corporatecrime.co.uk/professionals-tax-compliance-and-abuse).
Suggested Read: Ring D. and Grasso C., Beyond Bribery: Exploring the Intimate Interconnections Between Corruption and Tax Crimes, Law and Contemporary Problems, Volume 85, Issue 4, 2023, pp. 1-47, available at: https://scholarship.law.duke.edu/lcp/vol85/iss4/2/ See Matei Rosca, UK authorities criticized for failing to prosecute financial crime enablers and rich tax cheats, ICIJ, October 17, 2023 https://www.icij.org/inside-icij/2023/10/uk-authorities-criticized-for-failing-to-prosecute-financial-crime-enablers-and-rich-tax-cheats
See Koos Couvée, Money Laundering Reporting Failures Rarely Prosecuted in Britain, ACAMS Moneylaundering.com, September 28, 2023 https://www.moneylaundering.com/news/money-laundering-reporting-failures-rarely-prosecuted-in-britain/ (https://perma.cc/FBM7-WA2H)
See Ed Siddons and Lucy Nash, Just 11 ‘wealthy’ people prosecuted for tax fraud last year, The Bureau of Investigative Journalism, September 30, 2023 https://www.thebureauinvestigates.com/stories/2023-09-30/just-11-wealthy-people-prosecuted-for-tax-fraud-last-year (https://perma.cc/9ZBQ-W837) #anticorruption #banking #CCO #corporatecrimeobservatory #corporations #corruption #crime #economiccrime #enablers #enforcement #executives #finance #financialcrimes #justice #moneylaundering #professionals #tax #taxabuse #taxcrime #taxevasion #taxfraud #taxpolicy #whitecollarcrime