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Adam Craggs: Pressure for greater transparency won’t dissipate

In October’s edition of The Lede, we spoke to Adam Craggs, Partner at RPC, about how unfashionable industries attract greater scrutiny, and the importance of doing due diligence.

The importance of doing due diligence in light of the Pandora Papers.

This month’s interview comes from Adam Craggs, Partner at RPC, where he heads up the tax disputes practice. With over 30 years’ experience, Adam advises on a wide range of contentious tax issues, including HMRC enquiries, litigation before the Tax Tribunals, and white collar crime investigations.

Is the environment becoming more hostile to individuals whose wealth comes from ‘unfashionable’ industries?

Adam: Whilst recent Transmission Private research has shown that one quarter of 2,000 respondents would think more negatively of an individual whose wealth was generated from financial services, there is also evidence to show that crypto-billionaires (involved in both finance and mining in a novel sense) may have a sense of social justice, which is appreciated by the public. 

Individuals whose wealth comes from “unfashionable” industries such as oil and non-sustainable energy likely face more hostilities in the coming years.

What risks might this pose?

Adam: The Competition and Markets Authority (CMA) has released guidance on how to avoid green-washing (the making of unjustified green claims) when selling to the public and it is anticipated that it will seek to make an example of companies that fall foul of this guidance over the next year or so. 

The CMA has made it clear that it will scrutinise any green claims which are made in order to influence public perceptions.

Is the safest response to divest and to distance yourself from such sectors?

Adam: It is undoubtedly the case that the public is becoming more eco-conscious. Whilst there is evidence to suggest that certain sectors are increasingly shunned by some investors, alternatives to divesting include actively promoting or investing in ESG initiatives. Instead of moving away entirely from certain industries, businesses can be encouraged to adopt eco-friendly policies. 

For example, mining may be seen by some as an unfavourable industry, but it is necessary to produce the materials required for eco-friendly sustainable car-batteries. Alternatively, precious minerals could be mined in a more environmentally sustainable way.

Is it more difficult to keep business matters private?

Adam: Increasing corporate due diligence and a reduction in the ability to utilise offshore companies and nominees is increasingly leading to greater global transparency. For example, since 2016, UK companies have been required to maintain a public register of persons of significant influence or control (those holding over 25 percent of the company’s shares or voting rights). 

When preparing this information, companies have to follow the chain of corporate ownership, and may be obliged to disclose information about beneficiaries of overseas trusts to remain compliant.

Tax authorities also share large amounts of data on an automatic basis, and many overseas registers can be accessed for a modest fee. Increasingly, documents and information are making their way into the public domain through various leaks that reveal hidden wealth, tax avoidance and in some cases tax evasion. 

Ultimately, businesses and HNW individuals must ensure that they implement an effective due diligence process when carrying out any transaction or investment.

Is secrecy a wise strategy in this day and age?

Adam: There may be legitimate reasons for requiring privacy, for example, to reduce the threat of hacking, or for reasons of personal safety. However, the political pressure for greater transparency is unlikely to dissipate. It is important for society to strike the right balance between the right to privacy and the ever-increasing demand for more transparency.

What’s the best response when private business matters are made public?

Adam: It is important to be proactive and to respond to any queries received from the media. Such an approach will provide an opportunity to correct any inaccuracies and provide any necessary context. Depending on the circumstances, it may be appropriate to engage the services of professional advisers to assist in the management of the business’ reputation and brand. 

They may also be able to assist in generating positive publicity and minimising the impact of any negative publicity.

About Adam Craggs

Adam Craggs is Partner at law firm RPC, where he heads up the tax disputes practice. He has over 30 years' experience in the contentious tax and white collar crime field. An accredited mediator, he advises on a wide range of contentious tax issues (direct and indirect taxes), including HMRC enquiries and litigation before the Tax Tribunals/Higher Courts, and white collar crime investigations.

About The Lede

This article was originally published in The Lede, Transmission Private’s monthly newsletter that tracks the future of reputation management. Featuring interviews with leading private client advisers from the worlds of law, finance, and accountancy, sign up today to receive the newsletter in your inbox every month.

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.