Wolfsberg Group Publishes Guidance on Customer Tax Evasion

Financial institutions should be able to leverage existing financial crime compliance, conduct and tax (including tax transparency regimes) procedures and controls, to address the risks of customer tax evasion.

The Wolfsberg Group has published new guidance on customer tax evasion, designed to help financial institutions in developing, implementing and maintaining effective anti-tax evasion programmes.

Tackling tax evasion is a key G20 objective and a United Nations sustainability goal. Tax evasion is one of the top priorities of the IMF (International Monetary Fund), and has been recognised by the FATF (Financial Action Task Force) as a predicate offence to money laundering.

“The overall objective of the Guidance is to promote a culture of ethical business practices and compliance with legal and regulatory requirements related to the prevention of tax evasion, including the facilitation thereof, and to help FIs prevent the use of their operations for criminal purposes,” a Wolfsberg statement said.

An effective compliance programme should address the risks of customer tax evasion and prevent its facilitation by leveraging existing financial crime compliance, conduct and tax procedures and controls, including tax transparency regimes, it added.

In bringing together the guidance, the Wolfsberg Group noted commonalities in the design an execution of tax evasion related controls and procedures across its member banks. This, it said, is “encouraging” as it suggests that core practices already exist in the industry.

The Wolfsberg Group also noted that while tax evasion facilitation risk is distinct from the underlying predicate offense, and is therefore not governed by money laundering regulations, AML controls and procedures play an important role in the identification of tax evasion facilitation.

“It may, therefore, be fitting to consider both in tandem,” it said. “An effective anti-tax evasion compliance programme generally involves modifying and augmenting already existing financial crime compliance, conduct and tax related procedures and controls.”

Under the guidance, financial institutions should adopt a risk-based approach to customer tax evasion related risks that enable focus on higher risk customers, products and jurisdictions, as well as associated tax evasion facilitation risks.

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Other key takeaways from the guidance include having documented risk based tax evasion procedures, ensuring targeted training for staff in high risk areas, and a clear organisational strategy that allows for cross-functional collaboration and leverages existing financial crime compliance, conduct and tax related procedures and controls.

The guidance is available here.

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