Financial Crime Time - Your update from RPC: 2025 Q1

A Public Accounts Committee (PAC) report warns that HMRC is likely to have underestimated the scale of tax evasion in the UK. HMRC had estimated that the UK's tax gap - the difference between taxes collected by HMRC and what in theory should be collected - for 2022/23 was £5.5 billion. However, the PAC report states that this may be significantly understated. The report criticises HMRC’s lack of strategy and its failure to appreciate the true level of evasion.

The PAC highlights systemic fraud issues, including online VAT underpayment and company registration loopholes. It notes that fraudulent companies make up 5-20% of UK-registered businesses, yet enforcement remains weak. Despite new powers contained in the Economic Crime and Corporate Transparency Act 2023, Companies House still does not verify company addresses.

In addition, HMRC’s criminal prosecutions for tax evasion have halved since 2018, and only seven directors have been disqualified for 'phoenixism'. The PAC urges HMRC to take action and Sir Geoffrey Clifton-Brown MP, Chairperson of the PAC, calls for urgent reforms to prevent further losses to the Exchequer.

Over 40 UK MPs and peers have urged the government and HMRC to investigate claims that companies associated with Roman Abramovich may owe up to £1 billion in unpaid taxes.

An investigation by The Guardian, the Bureau of Investigative Journalism, and the BBC suggests that Mr Abramovich utilised complex offshore structures, involving Cyprus and the British Virgin Islands, to invest in over 200 hedge funds. According to the investigation, these arrangements may have bypassed UK corporation tax rules, including relating to corporate residency.

The MPs' have written to HMRC emphasising the importance of recovering any unpaid taxes, especially given current public service funding needs.

The Court of Appeal has ruled that the Serious Fraud Office (SFO) can proceed with enforcement action against Guralp Systems Ltd (Guralp) for allegedly breaching a 2019 deferred prosecution agreement (DPA). This is the first time the SFO has sought to enforce a DPA through the courts.

Mr Justice William Davis rejected Guralp’s argument that the DPA had expired due to the SFO missing the relevant deadline to apply to the court to enforce the DPA. He held that the DPA contained an implied term that the SFO had a ‘reasonable time’ to take enforcement action. Guralp had failed to pay any of the £2.1 million settlement, citing financial struggles caused by COVID-19 and Brexit.

The SFO can now ask the court to determine whether Guralp is in breach of the DPA and if confirmed, the SFO can decide whether to prosecute the company in relation to the original bribery offence or renegotiate the DPA.

The SFO has obtained from the High Court an Unexplained Wealth Order (UWO) in connection with its efforts to recover a property valued at approximately £1.5 million (see press release here). The property is owned by Claire Schools, former wife of Timothy Schools, a solicitor, sentenced to 14 years in prison in 2022 for his involvement in the £100 million Axiom Legal Financing Fund fraud. The SFO suspects the property was purchased using proceeds from that fraud.

The High Court's order freezes the property, ensuring that any sale proceeds are secured. Additionally, the order requires Ms Schools to provide information detailing how the property was acquired. Failure to demonstrate legitimate funding could lead to the SFO seizing the asset.

This case marks the SFO's first use of an UWO since their introduction in 2017, making it the second UK law enforcement agency to obtain an UWO (after the National Crime Agency). UWOs are used to assist law enforcement agencies to ascertain the origins of assets that are suspected of being acquired through criminal means. If recipients cannot prove legitimate acquisition, the authority may seek forfeiture of the relevant asset.

The Financial Conduct Authority (FCA) has published a Discussion Paper entitled "Regulating cryptoassets: Admissions & Disclosures and Market Abuse Regime for Cryptoassets", inviting feedback on proposed regulations for cryptoassets.

The proposals aim to enhance confidence and trust within the UK cryptoasset market. They include improving regulatory clarity so that there are clear and consistent rules for firms and consumers, requiring controls and processes to bring about fair-trading conditions, and reducing risks of money laundering and fraud.

The discussion paper is part of a series designed to shape the UK's regulatory framework for cryptoassets and follows the government's confirmation (in November 2024) that it intends for certain cryptoasset activities to be regulated by the FCA.

The FCA has announced that it is abandoning its plans to publicise details of ongoing investigations. The FCA's proposals, widely referred to as 'name and shame' proposals, had been heavily criticised by the House of Lords Financial Services Regulation Committee in February 2025. The FCA will continue to apply its existing public interest test when considering whether the target of an investigation should be publicly announced.

Seven individuals connected to the construction industry have been sentenced for their involvement in a £22 million tax fraud case (see press release here).

The defendants established a construction company that invoiced clients for labour, including VAT. They failed to remit the VAT and Construction Industry Scheme contributions to HMRC, diverting the funds to their personal bank accounts.

The defendants' sentences varied from two to nine years imprisonment for cheating the public revenue, money laundering related offences, acquiring criminal property and organised criminal gang activities.

Mohammad Zina, a former Goldman Sachs analyst, has been found guilty of six offences of insider dealing and three offences of fraud (see press release here).

Mr Zina worked for Goldman Sachs between 2014 and 2017, and came into possession of inside information relating to companies involved in potential mergers and acquisitions that his employer was advising on. He used this information to trade stocks in these companies and made profits of £1.1 million.

A confiscation order was made against Mr Zina by the Southwark Crown Court, which requires him to pay £586,711. Failure to pay within three months could result in a prison sentence of five years.

The SFO has charged five individuals with various offences including fraud, forgery, and the destruction of documents, following the collapse of law firm Axiom Ince and alleged improper use of over £60 million of client money (see press release here).

Axiom Ince was closed down by the Solicitors Regulation Authority on 3 October 2023.