The U.K.’s Economic Crime and Corporate Transparency Bill made its way through the House of Commons and, more recently, the House of Lords. As the bill approaches becoming law and faces only a few final steps before being law, an analysis of details and slated changes is timely.
According to the U.K., the bill is supposed to deliver reforms to Companies House (the British executive agency that maintains the register of companies), reforms to prevent the abuse of limited partnerships, additional powers for law enforcement agencies, reforms to give businesses more confidence to share information in order to tackle money laundering and other economic crime and new intelligence gathering powers for law enforcement and removal of nugatory burdens on business.
For fraud examiners, the bill is host to potentially significant changes to certain operations and functions. Specifically, the bill would:
Introduce provisions that could hold corporations criminally liable if they fail to prevent employees or associated persons from committing economic crimes (such as fraud, money laundering or bribery)
Improve the sharing of Suspicious Activity Reports (SARs) between financial institutions and law enforcement agencies, ostensibly to enhance detection and prevent money laundering and terrorist financing
Require additional identity verification for all new and existing registered company directors, people with significant control and individuals who deliver documents to the government.
Grant additional powers to U.K. law enforcement agencies to seize and recover digital assets that are associated with illicit activity (money laundering, fraud and ransomware are specifically mentioned). The House of Lords made changes to include seizing crypto in terrorism cases.
Perhaps the most interesting of the changes, and potentially the most controversial, is the new “failure to prevent fraud” offence. Organizations will be held liable where a specified fraud offence is committed by an employee or agent, for the organization’s benefit and the organization did not have reasonable fraud prevent procedures in place. The U.K. Factsheet on this offense specifically states that “it does not need to be demonstrated that company bosses ordered or knew about the fraud.”
This stands in contrast to the United States promotion of corporate compliance programs and fraud prevention through the U.S. Federal Sentencing Guidelines for Organizations, which allows for the government to reduce or eliminate punishments for organizations if they follow the guidelines.
Regarding digital assets, the provision relating to the seizure of crypto appears to be just one part of a larger regulatory push by various U.K. agencies that have produced reports concerning the future of crypto and how the U.K. should move forward in creating new, or implementing existing, regulations to combat illicit use. The U.K., however, still wants to be a “global hub for cryptoasset technology.”
The new Economic Crime bill builds on a series of other U.K. laws that have been introduced in the past decade. Mentioned specifically by the U.K. Factsheet, this bill follows on the heels of the Economic Crime (Transparency and Enforcement) 2022 Act (ECTE). The ECTE focused on sanctions and overseas entities and was a reaction to the global economic results of the Russian invasion of Ukraine. Prior to that, the Sanctions and Anti-Money Laundering Act, designed to allow the U.K. to issue its own economic sanctions and implement FATF standards, was passed in 2018.
While the full impact of this new law will only be known once law enforcement and prosecutors get the new tools in their hands, the Economic Crime bill could see a significant upheaval in the anti-fraud landscape in the U.K.
SOURCE: ACFE Insights – A Publication of the Association of Certified Fraud Examiners