The impact of a new corporate money laundering offence
In a month that has seen the mammoth ‘Panama Papers’ leak, the Anti-Corruption Summit held in London and a Queen’s speech focussing on criminal finances, financial crime is very much back in the public and political consciousness.
David Cameron has taken this timely opportunity to announce his plans to extend the criminal offence of corporate ‘failure to prevent’ fraud and money laundering, “so that firms are properly held to account for the criminal activity that takes place within them.” Plans to introduce such an offence were quietly abandoned by the MoJ in September 2015, despite being strongly advocated by SFO director David Green QC.
Companies can currently only be liable for such offences where the commission of the offence can be attributed to someone who was at the time the ‘directing mind’ of the company. Identifying a directing mind can be particularly difficult in an age of devolved decision making, which may go some way to explaining the gulf in the number of convictions in the UK and across the Atlantic, where organisations in the US can be held liable for the actions of their employees for similar offences.
Although no further details were announced, it seems likely that any proposed legislation would follow section 7 of the Bribery Act 2010. Under section 7, a commercial organisation can be guilty of the offence if a person associated with it bribes another, for the benefit of the business. The organisation has a defence if it can show on the balance of probabilities that it had adequate procedures in place to prevent bribery.
The reach of section 7 is broad, as it applies to all commercial organisations which have businesses in the UK. Despite this, the first conviction under the section was only achieved in February 2016.
Any such change in legislation would allow the UK authorities to move one step closer to their much emulated and more draconian US counterparts, as prosecution of corporations for these offences would be far easier to achieve. This would be good news for David Green, as the increased threat of prosecution might provide that much needed incentive for corporations to start seriously considering entering DPAs.
Tom is a trainee solicitor at Byrne and Partners, working in the criminal litigation team. He has worked in the team since 2012, assisting with defence of complex and high-value fraud prosecutions brought by the SFO and the FCA.