Examining Tax Evasion and Money Laundering
| DOI | https://doi.org/10.1108/eb027199 |
| Date | 01 February 1999 |
| Published date | 01 February 1999 |
| Pages | 326-330 |
| Author | Aileen Barry |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 2 No. 4
Examining Tax Evasion and Money Laundering
Aileen Barry
Sections
29-33,
35 and 77 of the Criminal Justice Act
(CJA) 1993 amended CJA 1988 and came into force
1st April, 1994. The Money Laundering Regulations
(SI 1993/1933) likewise came into effect 1st April,
1994.
During the debate on the 1993 legislation,
which extended money-laundering offences to all
crimes and thereby tax crimes, views were expressed
that while tax crimes were technically within the
scope of the legislation, disclosures of tax crimes
were not likely to occur, due to the difficulty of
identification.
However, just a couple of years later there was
a mood shift, evidenced in the then Chancellor
Kenneth Clarke's speech to the Commonwealth
members in October 1995:
'We must recognise that money laundering is
associated with all types of crime — from fraud
to extortion, arms smuggling to kidnapping. It is
quite artificial to draw a distinction between
drug-related crimes and other crimes. In Britain
we have responded to the shifting threat by passing
legislation to cover the proceeds of all indictable
offences. There is no moral difference between
drug trafficking and other serious offences and
the risks from both arc great and this applies as
much to fiscal offences as any other crime. All
crimes should mean all crimes. Who the victim is
is irrelevant. Tax crimes make the law abiding
suffer. It is they who make up the shortfall
caused by those who cheat.'
Gordon Brown reaffirmed his government's inten-
tions in his 1997 Budget speech:
'The tax burden avoided by the few, falls on the
many. A government committed to the proper
funding of public services will not tolerate the
avoidance of taxation and will be relentless in its
war against tax avoidance.'
It is now even less politically acceptable and certainly
unacceptable for CJA purposes to offer tax evasion as
the explanation for growing wealth or otherwise sus-
picious transfers of
funds.
The intermediary, whether
bank, broker, agent or adviser, must therefore under-
stand what may constitute tax evasion in order to
determine whether he is likely to be committing an
offence under ss. 93A, 93B, 93C, 93D CJA 1988.
This would be: if he is party to any arrangement to
assist another in retaining control or in benefiting
from the proceeds of tax evasion; or whether he
may be acquiring, possessing or using the proceeds
himself;
or whether he conceals or transfers the pro-
ceeds;
or whether he 'tips off' or alerts the suspected
money launderer.
Tax evasion is another expression for tax fraud. It
relies upon some form of falsehood or concealment.
The concept of dishonesty is essential to the notion
of fraud. In deciding whether or not a person was
acting dishonestly regard must be had both to what
the ordinary standards of reasonable and honest
people would consider dishonest and whether the
person knew that what he was doing was by those
standards dishonest.
Surprisingly there is no indictable offence of tax
evasion, or even fraud. Most Inland Revenue prose-
cutions are indicted under the common law offence
of cheating. Cheating can include any form of frau-
dulent conduct which results in diverting money
from the Revenue and in depriving the Revenue of
money to which it is entitled.
False accounting can also be used as the indictment.
False accounting is defined in s. 17 of the Theft Act
1968 as where
'a person dishonestly, with a view to gain for him-
self or another, or with intent to cause loss to
another:
(a) destroys, defaces, conceals or falsifies any
account or any record or document made or
required for any accounting purpose; or
(b) in furnishing information for any purpose,
produces or makes use of any account or
any such record or document as aforesaid,
which to his knowledge is or may be mis-
leading, false or deceptive, in a material
particular.'
Tax evasion may also constitute an offence of evading
liability by deception and contrary to the Theft Act
1978.
Section 2 provides:
Page 326
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