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Criminal Finances Act: The one that got away for recruiters?

Introduced in September 2017, the Criminal Finances Act means organisations are now criminally liable if they facilitate or fail to prevent tax evasion by a member of staff, external agent or supplier. Despite carrying potential punishments including unlimited fines, reputational damage, the withdrawal of licenses by regulators and even prison sentences, few businesses have put processes in place to protect their business against potential tax evasion practices.

Whether this lack of action is down to the media spotlight being firmly fixed on the General Data Protection Regulation (GDPR) and gender pay gap reporting in recent months, or a failure to understand how the legislation affects them, it’s clear that the Criminal Finances Act has slipped through the net.

How does it affect the recruitment industry?

With the government and HMRC clamping down on tax evasion wherever they can, the introduction of the Criminal Finances Act shows their commitment to tackling the problem, with the spotlight on recruitment businesses shining brighter than ever before.

There are two ways in which the recruitment industry is exposed to breaching the Criminal Finances Act. The first is via candidates using or being referred to third-party providers who promise high levels of take-home pay achieved through tax avoidance schemes.

The second is through recruitment consultants who refer candidates to third-party providers for personal gain. Some consultants may have agreements in place that company directors are unaware of, and yet these agreements put a business directly in the line of fire if exposed.

How you can protect your recruitment business

There’s no doubt that recruitment businesses need to act fast to ensure the right processes are in place to make sure employees and providers are operating legally at all times. Recruiters should pay particular attention to the following key areas:

Supply chain

While you may have worked with some of the providers on your PSL for a long time, it’s still vital you complete a thorough audit to ensure total compliant in all areas. It’s best practice to agree on any commercial terms or referral fees upfront and ensure they’re approved and signed by both your directors and those of the service provider. Once you’ve put the measures in place to ensure your supply chain is compliant, you need to make sure these are the only providers your consultants are working with. Remember, if you can prove you’ve implemented robust measures that ensure compliance, you can avoid criminal liability under the Criminal Finances Act.

Risk assessment

A risk assessment can help you to identify any specific risks that expose your business under the Criminal Finances Act enabling you to put procedures in place to manage these risks. This assessment should include existing tax evasion risks internally and externally, geographical scope and tax strategy as a starting point.

Your people

Those in a position of responsibility have to remain committed to zero tolerance when it comes to breaches of the facilitation of tax evasion. Due diligence should be carried out on your employees, and regular checks should be made to monitor adherence to your agreed PSL. It’s important to speak to all staff to make them aware of the Criminal Finances Act and what non-compliance could mean for the broader business. Regular staff training and reviews of procedures should be carried out, especially as potential risks can change over time.

Find out more about us and our compliant services by visiting our website.


Tim Hunt - Director, Mango Pay

0151 363 733