Companies should prepare for more regulatory investigations

Friday 14 December 2018

Regulatory investigations were the topic at recent regulatory seminars organised by Carey Olsen in Guernsey and Jersey, which attracted more than 300 people.

According to experts from the regulatory, fraud and tax investigations teams of Carey Olsen and Pinsent Masons, an increasingly determined approach by the likes of HM Revenue & Customs (HMRC) to conduct regulatory investigations into large corporations, trusts and high net worth individuals will inevitably place greater scrutiny and pressure on Channel Islands service providers.

Carey Olsen Partners Mark Dunster, William Grace and Marcus Pallot and Counsel Simon Florance were joined by Pinsent Masons Partners Jason Collins and Alan Sheeley to discuss best practice principles that should be followed when responding to enquiries from the tax authorities.
 
Using a fictional case study involving a Channel Islands trust company being sent a letter from HMRC stating that the settlor of one of its trusts was under investigation for underpaid taxes and potential corruption, the speakers put forward the options available to local service providers to assist, resist or limit responses to such an enquiry, particularly in light of the new corporate offences of failing to prevent facilitation of tax evasion now in force under the Criminal Finances Act 2017.
 
With recent research by accountancy group UHY Hacker Young reporting that HMRC had increased its yield from criminal investigations by 31% over the past five years, Mr Dunster said there should be no expectation that Channel Islands financial services businesses would escape scrutiny. This is particularly the case, he said, given the investment made by HMRC into its tax investigation teams and the passing of new legislation, such as the Criminal Finance Act 2017, seeking to have extra-territorial effect.

Pictured: Marcus Pallot

"The increased frequency of these types of enquiries, in large part, is politically driven from off-island and we have no control over that," said Mr Dunster.
 
"Those of us involved in the financial services industry in the Channel Islands know that we operate to the highest global regulatory standards and that the suspicions levelled at Jersey and Guernsey from onshore are unmeritorious. We can't stop them doing it. We simply have to be professional and follow appropriate policies and procedures when responding."

Throughout the events, speakers stressed the importance of identifying duties owed to clients, respecting client confidentiality and understanding data protection requirements when responding to an investigative enquiry from HMRC or other investigative bodies.
 
Mr Pallot said: "The legal and regulatory landscape has moved quickly in recent years and it is really important that all regulated businesses keep right on top of the developments.  There have been very significant recent changes in the scope of legal privilege, but it remains the case that the aim should be proper cooperation with the authorities provided no client duties are breached."
 
Pictured top: Mark Dunster.