On 12 July 2019, Her Majesty’s Treasury (“HM Treasury”) published its new Economic Crime Plan 2019-2022 (“ECP”) revealing its priorities for the next three years for fighting economic crime in the UK and other jurisdictions.
The ECP was commissioned by the Economic Crime Strategic Board, formed in January 2019, and follows the Serious and Organised Crime Strategy (“SOC Strategy”) published in November 2018. Whilst the SOC Strategy considered all serious and organised crime, the ECP recognises the need to specifically address serious and organised crimes of an economic nature.
Accordingly, £48m of funding was allocated to the new National Economic Crime Centre (“NECC”), which opened in October 2018. The NECC includes officers from various law enforcement and government bodies including, amongst others, the National Crime Agency, the Serious Fraud Office (“SFO”), and the Financial Conduct Authority (“FCA”).
Information sharing
The NECC seeks to achieve better information sharing and coordination, to maximise new powers including Unexplained Wealth Orders and Account Freezing Orders across all agencies, and to increase cooperation with the private sector. The Joint Money Laundering Intelligence Taskforce is part of the NECC and works with financial institutions to “enable the private sector to act as a more effective first line of defence against economic crime”.[1]
Suspicious Activity Reporting
The Suspicious Activity Reporting (“SAR”) regime is subject to reform under the ECP following recent scrutiny. On 18 June 2019, the Law Commission published a report evaluating the SAR regime and the Anti Money Laundering (“AML”) regime in the UK, highlighting problems with the current legislation and proposing recommendations.
Major banking institutions in the UK have agreed collectively to invest £6.5m, whilst the Home Office has committed £3.5m for a SAR transformation program. In 2018, the SOC Strategy highlighted that a more sophisticated IT system behind the SAR regime was required, with the ECP seeking to complete the first tranche of this transformation by December 2020.
Upgrades include improving the IT portal and platform, tailoring the submission process, upgrading law enforcement tools to access and analyse the reports, and improving the system workflow of the UK Financial Intelligence Unit in managing SARs. By the end of 2020 a longer term “target operating model” for the SAR regime is expected.
Other proposals
The ECP also seeks to transpose the Fifth Money Laundering Directive into UK law by January 2020. This would include crypoasset providers and other entities as “obliged entities” under the money laundering regime, expand the UK’s trusts register and introduce a national register of bank account ownership in the UK. As part of this, a cryptoassets regime would be established with the FCA.
Other action points within the ECP include a new Asset Recovery Action Plan to enhance measures to recover the proceeds of crime by July 2022, and consideration of legislative changes to the Proceeds of Crime Act 2002 based on the Law Commission’s review of Parts 2 and 7, which is expected by 2020.
By July 2022, HM Treasury will also clarify whether new sanctions supervision powers or guidance will be necessary, and to investigate whether a power to block listings on national security grounds would be appropriate following a review of the Sanctions and Anti Money Laundering Act 2018. HM Revenue and Customs will also adopt an enhanced risk-based approach to AML and Counter Terrorist Financing (“CTF”) supervision by March 2021, and conduct a full review of its AML/CTF Supervision Operating model by April 2020.
All of the action points identified above fall within the 7 priority areas as stated in the ECP, and which are set out below:
- to develop a better understanding of the threat posed by economic crime and its performance in combatting economic crime;
- to pursue better sharing and usage of information to combat economic crime within and between the public and private sectors across all participants;
- to ensure the powers, procedures and tools of law enforcement, the justice system and the private sector are as effective as possible;
- to strengthen the capabilities of law enforcement, the justice system, and the private sector so as to detect, deter, and disrupt economic crime;
- to build greater resilience to economic crime by enhancing the management of economic crime risk in the private sector and to adopt a risk-based approach to supervision;
- to improve our systems for transparency of ownership of legal entities and legal arrangements; and
- to deliver an ambitious international strategy to enhance security, prosperity, and the UK’s global influence.
Corporate criminal liability
Perhaps most notable is that the ECP does not encompass any specific proposals to acheive a uniform approach to corporate criminal liability and the identification principle, despite recent discussions of its reform.
On 13 November 2018, Sir Brian Leveson, President of the Queen’s Bench Division, and Ms. Lisa Osofsky, Director of the SFO, submitted evidence before the House of Lords Bribery Act 2010 Committee (“Committee”) in favour of introducing a failure to prevent economic crime offence, similar to the regime under the Bribery Act 2010 and the Criminal Finances Act 2017.[2]
Sir Leveson commended Section 7 of the Bribery Act 2010, and stated that: “The ability to say, “You’ve not taken steps to prevent”, is, to my mind, absolutely critical. If the Committee were to look at the wider position, extending it to other offences of fraud, I personally think that that would be in the public interest”.[3] Sir Levenson also mentioned the US position concerning vicarious liability, albeit that he did not express an opinion as to whether this should be adopted in the UK.
Ms. Osofsky’s position was that the US principle of vicarious liability should be adopted in the UK, and, if not, then a failure to prevent offence applicable to all economic crimes would suffice. Ms. Osofsky stated that: “One area where we have had a huge impact is in bribery because of the failure to prevent offence. That has been not just from a prosecuting standpoint, but from that of incentivising corporates to do the right thing and get the right procedures in place…. if I could not get vicarious liability across the board, I would certainly be happy having a failure to prevent offence that I could use throughout the economic crime arena”. [4]
On 14 March 2019, the Committee published its final report in which it discussed the various responses to the introduction of a general failure to prevent offence, urging the Government in “reaching a conclusion on whether to extend the “failure to prevent” offence to other economic crimes…”[5] On 13 May 2019, the Government stated that it would provide its response in due course.[6]
The ECP does not outline any specific support for such an offence, however, it does make reference to the 2017 Ministry of Justice’s Call for Evidence on Corporate Criminal Liability which, alongside other areas of reform, examined the possibility of a new failure to prevent offence. The consultation closed on 31 March 2017 with a response expected to be published ‘shortly’.
The ECP will be the first comprehensive plan to target specifically UK economic crime and whilst the proposed timescales in the ECP may be viewed as ambitious, alongside the newly formed strategic board and national centre mandated to address the UK’s response to such crimes, greater activity and effort is expected in the coming years from both public and private sectors within this area.
[1] National Crime Centre, 2019, ‘National Economic Crime Centre-Improving the UK’s response to economic crime’, https://nationalcrimeagency.gov.uk/what-we-do/national-economic-crime-centre
[2] UK Parliament, 13 November 2018, ‘Sir Brian Leveson gives evidence on the Bribery Act 2010’, https://www.parliament.uk/business/committees/committees-a-z/lords-select/bribery-act-2010/news-parliament-2017/leveson-dpp-evidence-session-bribery/
[3] House of Lords, 2018, ‘Oral evidence volume: The Bribery Act 2010: post-legislative scrutiny’, https://www.parliament.uk/documents/lords-committees/Bribery-Act-2010/BA-Oral-evidence-volume.pdf, p. 299.
[4] Ibid, p. 311.
[5] House of Lords, 14 March 2019, ‘Report – The Bribery Act 2010: post legislative scrutiny’, https://publications.parliament.uk/pa/ld201719/ldselect/ldbribact/303/303.pdf, p. 67.
[6] Ministry of Justice, 13 May 2019, ‘Government response to the House of Lords Select Committee on the Bribery Act 2010’, https://www.parliament.uk/documents/lords-committees/Bribery-Act-2010/govt-response-hol-select-committee-bribery-act-2010.pdf, p. 16.
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