New crime agency is armed to the teeth

The government made a big show of the launch of the Serious Organised Crime
Agency last week. The move, said the government, would mean a new crime-busting
FBI- style agency to take on drugs smugglers, terrorists and the mafia.

Much of the show was largely a matter of puff, according to some. SOCA
officers will be able to strike deals with criminals to get valuable evidence,
it was boasted, though others say that is nothing new for serious crime

One new set of powers, the Act implementing the agency has introduced, has
attracted rather less attention – those relating to disclosure.

The measures mean HM Revenue & Customs and SOCA can force third parties
(accountants, IFAs and bankers) to answer questions where they believe that a
fraud of more than £5,000 has been committed. Advisers have always helped out in
some respects with such investigations, but never in the way that is proposed.
They could not, for instance, have been forced.

The powers also give what has been described as an ‘unprecedented’ amount of
power to the HMRC Prosecution Office. Disclosure notices, which can be delegated
to HMRC officers, will mean third parties can effectively be ‘doorstepped’.

It is something that James Bullock, tax litigation partner at McGrigors and
Jonathan Fisher QC, has been highlighting for some time, however. ‘Targeting
serious organised crime is a laudable intention, but the Act also contains a
sweeping extension to the information-gathering powers of the tax authorities
with minimal scrutiny and draconian penalties for non-compliance,’ Bullock says.

Bullock and Fisher have written about the effects of the new rules in
technical journals. One point they suggest should be borne in mind is the
government’s own interpretation of these matters. ‘Organised crime is big
business. Trafficking in drugs and people, fraud against the Exchequer,
counterfeiting and financial crime have a UK turnover of many billions of pounds
annually,’ the government’s white paper says.

So the government sees fraud against the Exchequer (defined in the rules as
anything over £5,000) as ‘serious organised crime’.

The broad sweep of the provisions have not surprised everyone. Shadow
attorney general Dominic Grieve MP said at the committee stage: ‘These are
fascist provisions, the provisions of a totalitarian state.’

But the Act passed into law without too much consideration in the rush to get
legislation through before the general election. It was not opposed on second
and third readings, and there were only eight sittings of the standing committee
scrutinising the bill. Part 3 was discussed for just two and a quarter hours.

The Lords select committee commented on SOCPA (Serious Organised Crime and
Police Act 2005) that it was ‘another example of legislative proposals that
command broad political consensus… being used as the vehicle for legislating on
more contentious matters that should be the subject of separate legislation’.

Hartley Foster at DLA Piper Rudnick, the law firm, says: ‘Tax evasion where
the amount is £5,000 does not seem to me to be serious organised crime. It is a
crime and people need to be caught, people need to be deterred, but do you need
powers designed for cracking down on the mafia and drug gangs and terrorists to
deal with tax evasion? I’m not sure that you do.’

In response, the HMRCPO argues that the powers will only take effect pending
the outcome of the HMRC Review of Powers.

The Home Office said at the time the Act was passed that the director of the
HMRCPO should draw up ‘strict guidance’ on the use of notices. But, as Bullock
says: ‘We are still awaiting guidance as to the circumstances in which these
powers will be exercised.’

One area Bullock and Fisher have speculated could be targeted is offshore
fraud, especially through the offshore fraud project group.

The group has landed some big hits, notably in its successful attempt to get
offshore bank details relating to 75,000 customers of one high street bank, and
will be keen to maintain the momentum.

Should the profession be worried? Time will tell.

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