Aziz Rahman, of award-winning solicitors Rahman Ravelli, explains some of the precautions companies must take if they trade abroad.
Trading abroad can bring a number of rewards. But it can bring challenges that, if not recognised and managed appropriately, can become problems. Issues such as bribery, money laundering and tax evasion may seem like remote concepts to many corporates and individuals who do business abroad or who are thinking of doing so.
But these are not irrelevant theories and ideas. Many, if not all, countries are now more alert to the signs of illegal behaviour. Their investigating authorities are now quicker to recognise it, they act faster and they are more likely to work with counterparts in other countries to tackle it if it crosses borders.
Anyone trading abroad has to show the same awareness of and willingness to prevent such wrongdoing. As a firm that provides companies with “health checks’’ – to assess the risks to their business – and internal investigations when problems are suspected, we speak with experience when it comes to the need to reduce the danger of legal problems.
Companies that are the subject of bribery allegations can see their finances, reputation and ability to function properly all damaged. In the UK, a conviction under the Bribery Act, for bribery anywhere in the world, can lead to unlimited fines, up to ten years in prison and assets being confiscated.
For this reason alone, companies trading abroad must prevent bribery. This involves assessing risks to it and then devising and introducing well-researched and properly-enforced measures designed to reduce the risk of bribery and increase the chances of being able to identify it.
Such measures include efforts to be fully aware of the corruption risks in the countries where the company trades, proactive measures to check on those who work for or with it and appropriate whistle blowing procedures. The authorities are likely to be more lenient if a company that is investigated can demonstrate that it took genuine steps to be legally compliant.
Money laundering is another area where companies trading abroad must adopt a careful, methodical stance in order to avoid any risks. They need to know what it is and be able to recognise the signs of it.
Money laundering is the disguising of the origins of money that is the proceeds of crime. In the UK, money laundering carries a maximum sentence of 14 years, under the Proceeds of Crime Act 2002.
Preventing money laundering involves recognising the risk of it and creating procedures for:
The past two years have seen revelations of large-scale non-payment of tax involving offshore companies. Leaked information in the Panama Papers and then the Paradise Papers has seen many high-profile individuals and organisations placed under the spotlight.
While it is unlikely many companies trading abroad will face such allegations, they have to take the right legal advice to ensure they are complying with the tax laws where they are based and where they trade.
Tax is like many other issues that companies face when trading abroad: it is challenging but can be managed. The problems start when the management falls short.
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