‘Ending the Shell Game: Cracking Down on the Professionals Who Enable Tax and White Collar Crimes,’ which was prepared by the OECD Task Force on Tax Crimes and Other Crimes, outlines the various strategies of professional enablers, while calling on countries to establish capabilities in order to target those that actively participate in ﬁnancial crimes.
Grace Perez-Navarro, deputy director of the OECD’s Centre for Tax Policy and Administration tells Asian Legal Business that while the vast majority of lawyers do comply with the law and do not facilitate tax crimes, “there is a small minority of lawyers and other professionals who enable these crimes by using their specialised knowledge to help criminals evade taxes.”
Many financial crimes, Perez-Navarro says, involve the use of complex structures and legal arrangements in order to “hide their true intent,” and these structures may be facilitated by lawyers, “sometimes unwittingly, particularly if appropriate due diligence is not conducted.”
“Law firms are responsible for ensuring that their lawyers carry out their duties professionally and legally, and promote a culture of ethical behaviour in their staff. Law ﬁrms and other professional advisory ﬁrms are, therefore, often the ﬁrst line of defence in ﬁghting tax crime and detecting and reporting illegal behaviour, particularly as regards the activities of other professional enablers. In addition to good internal governance, law ﬁrms that are known to undertake a high-level of due diligence and know your customer checks are less likely to be approached and utilised by those seeking to undertake or facilitate ﬁnancial crimes,” Perez-Navarro says.
While countries can act to stamp out avenues for exploitation, law ﬁrms can also take a proactive approach to ensuring they don’t fall into the “professional enablers” category.
“Firms should ensure that they promote and champion strong ethical standards within their organisation. There should be appropriate internal training and support in place to ensure that all staff understand and adhere to the professional codes of conduct within their profession and jurisdiction and are well equipped to recognise the signs of criminal activity or the enabling of criminal activity,” Perez-Navarro says.
Additionally, ﬁrms have something of a unique perspective often, alongside their staff members, being the ﬁrst to become aware of potential misbehaviour by their direct colleagues or fellow practitioners in the wider industry.
It is therefore important, that ﬁrms make their staff aware of the internal and external procedures, such as informing a supervisor, utilising whistle-blowing facilities for example, should they detect or suspect malpractice, Perez-Navarro adds.
“It is, of course, possible for junior staff to be unaware of the activities of professional enablers within and outside of their ﬁrm, for example where they have not been given the resources or training to recognise this behaviour. This is why it is vital that law ﬁrms provide sufﬁcient training and support regarding professional standards of ethics and codes of conduct, have strong and well-communicated governance arrangements, including internal procedures for reporting their suspicions or concerns,” she says.
“Reputable and well-managed law ﬁrms” will already be equipped with mechanisms for staff to raise concerns within their organisation in a conﬁdential way, says Perez-Navarro, but for lawyers concerned, in many countries there are whistle-blowing and disclosure mechanisms that allow staff to raise systemic concerns, including to law enforcement agencies and professional supervisory bodies.
After all, the legal and reputational ramiﬁcations for ﬁrms and individuals that are “professional enablers” can be harsh. “Severe consequences and sanctions can be applied to professional enablers under the respective criminal laws of each country. For individuals, this can include ﬁnancial penalties, imprisonment, and disbarment, and for ﬁrms, this can include signiﬁcant monetary sanctions and prohibitions from conducting business,” Perez-Navarro says.