Routinely and aggressively pursuing money-laundering investigations: the verdict on the UK’s AML regime
At the end of 2018 the Government published its “ 1 Year Update” of the Anti-Corruption Strategy 2017-20 (“the Update”). This report set out that “corruption and economic crime undermines our economy, damages our international reputation and communities.” It concludes that the Government’s “commitment and effectiveness” in this area is demonstrated by “the UK’s strong performance” in the independent review of money laundering and terrorist financing undertaken by the Financial Action Task Force and its top tier ranking in Transparency International’s Corruption Perceptions Index.
Key successes marked include:
The Update states that in the build-up to the UK’s departure from the European Union the government will “prioritise strengthening international cooperation and continue to work with partners to bolster global efforts to tackle corruption”. The Government’s objective is to maintain its global leadership position in this area and transmit the message that post-Brexit the UK – as an international financial centre - is not going soft on economic crime or illicit finance.
One of the measures that continues to resonate is the reform of corporate criminal liability in relation to economic crimes. Currently, the favoured option appears to be to extend the corporate “failure to prevent” model, which has already been introduced for bribery in the s7 offence in the Bribery Act 2010 [see our related blog Reform of corporate liability – renewed calls for change] and to evasion of tax in the Criminal Finances Act 2017 [see our related blog Criminal Finances Act 2017] to a broader range of offences such as fraud and money laundering.
This debate is not new and has most recently been on the agenda of the Ministry of Justice (MoJ) with its 2017 call for evidence. Former SFO Director David Green QC had repeatedly called for this during his tenure (2012 to 2018). The Update confirms that the MoJ is analysing the evidence and considering future options (as set out in the original Anti-Corruption Strategy) but we now have confirmation that the Government response to this call for evidence will be published in 2019.
There is no indication yet as to what the response might be, but this may go some way to satisfy the calls for reform raised during the House of Lords post-legislative Inquiry into the Bribery Act last Autumn (see our related blog Reform of corporate liability – renewed calls for change). This Inquiry formed a call for evidence and published written submissions together with oral evidence sessions conducted in 2018.
During the Inquiry the recently appointed SFO Director Lisa Osofsky underlined her frustration “when we can’t get corporates in the dock” and went on to confirm that while her preferred option would be the introduction of vicarious liability as a basis for corporate liability, she would also be “very happy” to get section 7 “failure to prevent” type measures extended to other economic offences.
She continued in this vein when appearing before the Justice Committee at the end of last year where she confirmed her ambition to extend this model stating: “It is absolutely critical that we hold the rest of the corporate world to account in the same way, not just on the corruption side but on the fraud side.” She highlighted that “we do not quite have the tools we would like in the fraud arena” and repeated her predecessor’s complaint that “we are hamstrung right now by the identification principle: if we do not have the top two, three or four controlling minds in the dock, we cannot hold the corporate liable for fraud and other sorts of economic crime.”
Lamenting that law enforcement is not suitably tooled up to go after “Wall Street” only “Main Street” she stated that that “it is not fair that only they get held accountable for crime in this area and not the big boys.” This is clearly top on her agenda to address.
Regarding options to tackle economic crime she referenced Deferred Prosecution Agreements and recognised that these can “raise the bar for long-term sustainable corporate culture” and confirmed that when exploring this avenue as a sanction to hold companies to account “ I am also very interested in whether the company is co-operating with me. I am not interested in a company telling me to go away, and that they are not going to give me anything, and then thinking that they will get a DPA. That is not going to happen on my watch.”
Again this resonates with SFO rhetoric to date about the prime importance of genuine co-operation.
As we await the Ministry of Justice’s response to the call for evidence it is apparent that for the SFO reform in this area is a key priority and the recent Inquiry and parliamentary focus on this issue may serve as a catalyst to bring about change.
What is clear is that the SFO’s ambitions remain to focus on corporate offending together with senior individuals in organisations. Therefore companies and their senior executives need to be vigilant to risk assess their exposure to economic crime and identify vulnerabilities not just to bribery and corruption but fraud more generally. Kingsley Napley remains at the forefront of this area of law – if you require any assistance in reviewing specific issues or practices and procedures more generally, please contact our corporate crime team.
Louise is partner and Head of the criminal litigation team specialising in regulatory and/or criminal investigations. Louise is experienced in advising companies and individuals with regard to internal investigations and is part of the Kingsley Napley Corporate Investigations Group. Louise frequently represents witnesses being interviewed either by employers or by investigating authorities, including those being compelled to attend interviews.
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