Publication of the Criminal Finances Bill 2016-17
The Criminal Finances Bill 2016-17 (the "Bill") was presented to Parliament and had its first reading in the House of Commons on Thursday 13th October and its second reading on Tuesday 25 October. In a press release on the same day, the Home Office stated that the new legislation is designed to "tackle money laundering and corruption, recover the proceeds of crime and counter terrorist financing". The Bill is divided into four parts: Part 1 adds new powers for enforcement agencies under the Proceeds of Crime Act 2002 ("PoCA"); Part 2 makes changes to existing anti-terrorism legislation; Part 3 makes provision for two new corporate offences of "failure to prevent facilitation of tax evasion"; and Part 4 includes minor and consequential amendments to PoCA.
Our briefing sets out a brief introduction to the Bill, highlighting certain key areas of interest. Further briefings providing more detail on some of these areas will follow in the coming weeks.
Law Commission calls for reform of offence of Misconduct in Public Office
The Law Commission has published a Consultation Paper (the "Paper") launching a review of the common law offence of misconduct in public office. The Paper criticises the current law as unclear and deficient in a number of fundamental respects. It is accompanied by a statement warning of the increasing burden placed on this ancient offence, noting that "recent high-profile investigations and prosecutions have brought the problems with this offence into sharp focus." Operation Elveden, the five year investigation into allegations of inappropriate payments to members of the police and other public official by journalists, which resulted in 34 convictions and cost almost £15 million, is perhaps the most high profile example to date.
Three proposals for reform are explored in the Paper, namely: (i) a new offence based on breach of duty; (i) a new offence based on abuse of power, authority or position (the "corruption based" model); and (iii) the abolition of the current law without replacement. The Law Commission does not support abolition as it considers that it would leave a lacuna in the law. Separately, given that the concept of "public office" will form an important part of any new offence, the Paper addresses ways in which it could be defined. The consultation is open until 28 November 2016. Our full e-bulletin is available here.
FCA fines a bank and former money laundering reporting officer for AML failures
The FCA has fined Sonali Bank (UK) Limited (SBUK) and its former money laundering reporting officer (MLRO), Steven Smith, for failure to maintain adequate AML systems between 20 August 2010 and 21 July 2014. The FCA found serious and systemic weaknesses affected almost all levels of its AML control and governance structure, including its senior management team, its money laundering reporting function, the oversight of its branches and its AML policies and procedures. SBUK has been fined £3,250,600 and has been prevented from accepting deposits from new customers for 168 days. Steven Smith has been fined £17,900 and prohibited from performing the MLRO or compliance oversight functions at regulated firms.
SFO speech on DPAs
The SFO has published a speech by Ben Morgan, Joint Head of Bribery and Corruption, on Deferred Prosecution Agreements (DPAs): A Practical Guide by Defence and Prosecution. The speech sets out:
- The foundations for DPAs;
- Key challenges for the SFO's decision making in applying them;
- Opportunities offered by DPAs;
- Lessons learned from the first examples of DPAs; and
- How to approach the process.
David Green QC gives evidence at a Justice Committee evidence session on the work of the SFO.
On Tuesday, 25 October 2016, the Director of the SFO, David Green QC, attended a one-off evidence session of the Justice Committee at which he presented evidence on the work of the Serious Fraud Office. The Director noted that the SFO currently has more than 60 cases on the books, with even more "under development" within the SFO's intelligence section. When deciding what cases to investigate, the SFO does not use a monetary threshold but will investigate cases that undermine the UK financial market, particularly where there is public interest, a new species of fraud, or a significant or potential amount of money lost. There are more than 20 bribery cases under active investigation by the SFO, more than half of which involve conduct under the Bribery Act 2010.
The Director spoke about DPAs, noting that these are designed to incentivise corporate bodies to report dishonest conduct. He accepted, however, that the level of "discount" available under a DPA as compared to pleading guilty may need to be reconsidered in the future. The Director said there would be "significant" DPAs over the coming months.
MLD V – ECB opinion and updated procedure file
The Council of the European Union has published an opinion of the European Central Bank (ECB) on the proposed fifth Money Laundering Directive (MLD V). MLD V sets out additional measures to counter the financing of terrorism, to increase transparency of financial transactions and legal entities and to prevent tax evasion.
The procedure file for MLD V has been updated; MLD V is scheduled to be voted on by the European Parliament's Economic and Monetary Affairs Committee on 25 January 2017 before being put to a wider vote at the European Parliament.