On 27 April 2017, the Criminal Finances Bill received Royal Assent and became enshrined in UK law as the Criminal Finance Act 2017. This new act provides increased powers for the UK’s law enforcement agencies to tackle the issues of tax evasions, money laundering, corruption and terror financing.
With regards the superyacht industry, the two most important developments within the Criminal Finances Act are; the addition of Unexplained Wealth Orders to the UK law agencies arsenal and, secondly, the act increases the criminal liability for businesses who fail to prevent, through negligence or otherwise, the facilitation of tax evasion, money laundering, corruption and the financing of terror.
“With the new legislation in place, the UK tax authority can now ask the courts to issue an unexplained wealth order for any individual in possession of an asset, be it a ring or a superyacht, that has a value of over £50,000, if they believe the asset to have been acquired through nefarious means,” explains John Leonida, partner at Clyde & Co.
Leonida explains that the difficulty arises when individuals, such as career politicians or unknown small business owners, appear to have accrued vast sums of wealth within a small period of time. “It is our responsibility to ask these individuals how they garnered vast sums of wealth and this requires going far beyond minimalist lines of questioning and a green light from their bank,” he says.
While politicians and the like own a small proportion of the total superyacht fleet, there are still a number of vessels, as revealed in the Panama Papers, 11.5 million leaked documents that detailed the financial information of 214,488 offshore structures, that are linked to such individuals.
“The Panama Papers strengthened the populist movement that would have such individuals, who cannot prove their wealth or accrued it through nefarious means, brought to account,” continues Leonida. “The onset of this legislation in the UK will strengthen the UK’s position as a credible destination for superyachting transactions. While the proportion of superyachts owned by questionable politicians and criminals is small, the number should be zero.”
UK businesses, legal, financial and other, will now be liable to financial penalties and, in particularly egregious circumstances, criminal action, should they fail to prevent the facilitation of tax evasion, money laundering, corruption and the financing of terror.
“For professionals in the UK, it is a warning that you have to be diligent and way up the risk of transacting with untoward individuals. I see this as a positive move that may go someway towards countering the negative narrative that has evolved around the superyacht industry. The UK is saying that on our doorstep, thus far and no more,” concludes Leonida.