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State of Financial Crime 2023 Report

New Amendments Proposed to the UK Economic Crime and Corporate Transparency Bill

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On January 26, 2023, the UK government signaled it would introduce amendments related to corporate criminal liability reform in the Economic Crime and Corporate Transparency Bill. During a debate in the House of Commons, numerous new clauses were considered for inclusion in the draft legislation. Most notably, an amendment was introduced that would create an offense of “failure to prevent” fraud, false accounting, or money laundering for commercial organizations.

Following the Economic Crime (Transparency and Enforcement) Act passed in March 2022, the Bill is designed to tackle the growing problem of dirty money flowing into the UK. It is currently progressing through its second reading in the House of Lords and its next sitting is on February 8, 2023. 

“Failure to prevent”

The “failure to prevent” measures are largely aimed at commercial organizations and their senior managers that do not currently have reasonable measures in place to prevent money laundering, fraud, and false accounting. 

Under current law, corporate criminal liability is generally determined according to the “identification doctrine,” meaning prosecutors must prove the most senior officers of the company had the requisite criminal intent. However, during the debate, Sir Robert Buckland MP said, “These new offenses, which I have recommended, will make it easier to prosecute organizations for crimes because prosecutors will only need to prove that the organization lacked ‘reasonable’ or ‘adequate’ controls to prevent the crime.”

Security Minister Tom Tugendhat confirmed to the House that the government will “address the need for a ‘failure to prevent’ offense” when the Bill goes to the House of Lords.

Part 4 and part 5 amendments 

Additional amendments have been agreed relating to parts four and five of the Bill. While the first three parts deal with Companies House reforms, part four covers the seizure of cryptoassets, and the fifth deals with money laundering and other economic crime. As of January 30, the following amendments have been approved regarding the seizure of cryptoassets:

  • Removing the requirement in the Proceeds of Crime Act 2002 (POCA) for a suspect to have been arrested before powers are used to search for and seize property concerning cryptoassets
  • Creating new powers in POCA to search for and seize or freeze cryptoassets suspected of having been obtained through unlawful conduct 
  • Amending the Anti-Terrorism Crime and Security Act 2001 (ATCSA) to insert powers to seize or freeze cryptoassets suspected to be used for terrorism

Additionally, the government has highlighted the following revisions to part five of the Bill:

  • New exemptions will be created from key money laundering offenses, so firms subject to anti-money laundering (AML) duties can carry out certain acts on behalf of their customers without seeking consent in advance from the National Crime Agency (NCA)
  • Law enforcement powers in POCA and the Terrorism Act 2000 (TACT) will be expanded to seek information from the regulated sector to tackle money laundering or terrorist financing
  • Certain businesses will be enabled to share information to tackle economic crime, without incurring civil liability – including for breach of confidence
  • Pre-investigation powers of the Serious Fraud Office will be expanded by removing a restriction in the Criminal Justice Act 1987 that applies certain powers only to cases of international bribery and corruption

Key takeaways 

While the Bill has been introduced to Parliament, compliance teams should note that its content remains subject to change in parliamentary debates and committee reviews. As a result, firms should be aware of possible changes to the Bill over the coming months and ensure they take note of upcoming readings and their outcomes. 

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Originally published 02 February 2023, updated 03 February 2023

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