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Mitigating Risk: How the Criminal Finances Act Impacts Your Agency

Mitigating Risk: How the Criminal Finances Act Impacts Your Agency

by on December 21, 2023

The Criminal Finances Act (CFA) gained Royal Assent on 27 April 2017 and was designed to enable law enforcement bodies to tackle money laundering, tax evasion and corruption. Here we look at its importance in the recruitment industry and how recruitment agencies can ensure they operate in a risk-free manner.

What is the Criminal Finances Act?

The Criminal Finances Act 2017 is a piece of legislation which was introduced to give, “law enforcement agencies and partners, further capabilities and powers to recover the proceeds of crime, tackle money laundering, tax evasion and corruption, and combat the financing of terrorism”. It applies to all UK businesses and includes increased powers to investigate the proceeds of crime, a reform of the Suspicious Activity Reports regime, improved power to recover proceeds of crime, measures to combat terrorist financing, and, most importantly for recruitment agencies, new corporate tax offences to prevent the facilitation of tax evasion.

The Act has been in place for seven years now and despite there being no Corporate Criminal Offences (CCOs) since then (as of 2022), there are 9 live CCO investigations as of June this year. The government believes that businesses have had ample time to assimilate the guidance contained within the Act and to put reasonable preventative measures in place. 

Recruitment agencies’ responsibilities

To comply with the law recruitment agencies must: 

  • Demonstrate proportionality – any measures that a business takes must be in proportion to its size, nature, and how complex its activities are 

  • Implement a full risk assessment – to assess if your business is at risk from either the behaviour of your employees or from suppliers or contractors – this must be an ongoing task

  • Apply due diligence – to mitigate any risks you have identified, recruitment businesses must apply risk-based due diligence 

  • Ensure top-down commitment – management must be committed to preventing tax evasion and other unlawful activity throughout the supply chain and they are expected to create a company culture that condemns such behaviour

  • Audit Preferred Supplier Lists (PSLs) – your PSLs should be thoroughly vetted and audited to ensure that any suppliers your partner with are fully compliant and that you minimise your own risk

  • Staff training – the government requires recruiters to document their staff training to use as evidence that they understand the risks within your policies and procedures. Payme can provide extensive training for recruitment specialists on every aspect of liability and risk – call us on 0333 200 0845 for more details. 

Falling foul of the Act

If your recruitment agency fails to implement any/most/all of the above responsibilities there is the possibility that you will face prosecution for facilitating tax avoidance and/or tax evasion. For a prosecution to take place the Government will have to demonstrate:

  1. That your candidates failed to pay the correct amount of Income Tax and/or National Insurance Contributions

  2. You took the advice of a ‘facilitator’ which enabled the illegal action to take place

  3. That a member of staff at your agency recommended a non-compliant umbrella company to your contractors

If you or any members of your staff are found to have breached the law you could expect an unlimited fine for the agency, and possibly a prison sentence for those people responsible. 

What can you do?

With the onus on recruitment agencies to both comply with the law and protect themselves there are some important measures you can take:

  • Ensure that you’re up-to-date with the law and any new legislation that the government brings in – remember that ignorance is no defence

  • Review your PSLs to guarantee that any organisation, especially umbrella companies, you partner with are compliant – here at Payme we’re proud members of the FCSA which means we’re held to the highest possible standard and which also means you have one less thing to worry about

  • Undertake a comprehensive risk assessment, conduct due diligence checks and audit your internal procedures to seek out any areas of risk which could leave your agency vulnerable

  • Make sure that any referral fees are signed off by your company directors and that your recruitment consultants are fully aware of the repercussions of their actions.

Remember that your recruitment agency, and thereby your livelihood, is only at risk if you contravene any of the stipulations contained in the legislation. If you’re fully compliant and follow all the Government’s guidance you will remain within the law and allow your agency and your contractors to flourish.

If you’re concerned about any of the rules contained in the CFA and feel that you need help understanding or interpreting the rules and regulations you can contact us for a free, no-obligation chat. We also, as mentioned above, provide comprehensive training to recruiters to enable them to remain compliant in their dealings with both umbrella companies and the contractors they represent. If you’d like more information you can call us confidentially on 0333 200 0845, email us at or simply fill in the contact form here.