By Chris Dorrell
The government’s legislation designed to tackle economic crime received royal assent today after months of back and forth between the House of Commons and the House of Lords.
The bill introduces a range of new policies which the government hopes will enable it to clamp down on corporate crime.
For example, new rules will be introduced to force Companies House to require identity verification for new and existing company directors. Law enforcement will also be provided with additional powers to seize and recover crypto assets connected to money laundering.
During the passage of the bill, a new failure to prevent fraud offences was introduced as well. This made organisations liable for fraud committed by an agent if there were no “reasonable fraud prevention procedures” in place.
Corporate criminal liability reforms will mean corporations will be held liable in their own right for economic crime. This will make it easier to hold large complex structures to account.
“I am committed to ensuring criminals do not profit from their offending and this landmark act will help law enforcement clamp down on the tactics they use. It will have a big impact on our ability to fight organised crime, including terrorist funding, fraud and money laundering, and that will ultimately help keep us all safe,” Home Secretary Suella Braverman said.
However, a number of experts raised concerns that the bill did not go far enough to clamp down on the UK’s economic crime epidemic, which is estimated to cost the UK £350bn a year.
In a protracted period of parliamentary ping-pong, legislators in the Lords attempted to expand the failure to prevent offence to include a much greater range of businesses, particularly small businesses. The current rules will exclude over 99 per cent of business, the Fair Business Banking APPG estimated.
This was rejected by MPs in the Commons, and a number of politicians expressed concern that the final bill was too narrow to tackle the scale of economic crime.
Jane Larner, Counsel, Litigation, Arbitration and Investigations at Linklaters said: “The refusal to extend the corporate failure to prevent fraud offence to SMEs may mean the Act’s impact is weakened from the start.”
Furthermore, Bob Neil MP, chair of the Justice Committee, also commented on fraud and illicit activities in the UK. He said:“Fraud and other illicit activity are often channelled through smaller companies, and the people in those companies are precisely the people over whom we do need to have a degree of control.”
“Law enforcement is not… needless bureaucracy; it is fundamental to good business, and I think that that point is regrettably being missed,” he continued.
Robert Buckland MP, a former Lord Chancellor, believes that “unscrupulous operators in the field will exploit these threshold definitions” and will “find clever ways around the law”.
“We know what that means. We will see shell companies and people of straw,” he added.
