SCOTTISH AUTHORITIES ANNOUNCE FIRST SETTLEMENT OF THE CRIMINAL OFFENCE OF FAILURE TO PREVENT BRIBERY
The Scottish Crown Office and Procurator Fiscal Service announced on 25 September 2015 the first disposal of an offence under section 7 of the Bribery Act 2010. Section 7, introduced under the Bribery Act 2010, created a corporate offence of failure to prevent bribery by an associated person. The case, involving Brand Rex Limited, was disposed of by way of a civil recovery order under the Proceeds of Crime Act 2002 in consideration of the Defendant's decision to self-report to the authorities and its extensive investigation into the incident. Our full briefing is available here.
NO EXTENSION OF SECTION 7 STYLE CORPORATE LIABILITY TO 'FAILURE TO PREVENT ECONOMIC CRIME'
The government has announced that it will not be taking steps to establish a new offence of failure to prevent economic crime.
Further to the inclusion of an action for the Ministry of Justice (MoJ) to examine the possibility of a new offence in the UK's first Anti-Corruption Plan in December 2014, a written parliamentary question was put as to what progress had been made. The MOJ indicated that it does not intend to carry out further work at this stage as there have not yet been any prosecutions under the model Bribery Act offence (Section 7) and there is little evidence of corporate economic wrongdoing going unpunished.
The issue of the potential creation of a new offence and the examination on the rules for establishing corporate liability has been a focus of law officers, and notably the Director of the SFO, David Green CB QC, for some time. Mr Green has argued, as recently as September this year, that the SFO is disadvantaged in prosecuting corporates, relying as it must on the identification principle. This principle means that in order to obtain a conviction a prosecutor must show that an individual sufficiently senior to be the 'directing mind and will' of a commercial organisation consented or connived in the offence. Compared to other jurisdictions, including the US, this has historically made it difficult to convict a large commercial organisation, where there may be a number of levels of individuals between those involved in wrongdoing and the Board.
Whilst a new tax offence relating to corporate failure to prevent the facilitation of tax evasion has been subject to an HMRC consultation (which closed on 8 October 2015), and this remains a possibility, it seems that wider reforms to corporate criminal liability are not in the running in the near future. The response of those who had called for change to the announcement remains to be seen. In light of the comment on the lack of prosecutions under the Bribery Act offence, it may be that the position is revisited once Section 7 prosecutions begin to be seen.
FCA AND PRA NEW WHISTLEBLOWING RULES
- FCA policy statement (PS15/24) entitled "Whistleblowing in deposit-takers, PRA-designated investment firms and insurers"; and
- PRA policy statement (PS24/15), also entitled "Whistleblowing in deposit-takers, PRA-designated investment firms and insurers" (Appendix 1, Appendix 2, Appendix 3) and accompanied by a supervisory statement (SS39/15).
The rules follow recommendations in 2013 by the Parliamentary Commission on Banking Standards that banks put in place mechanisms to allow employees to raise concerns internally. Firms have until 7 September 2016 to comply with the requirements. The requirement to assign responsibility to a whistleblowers' champion will take effect on the same date as the Senior Managers Regime, on 7 March 2016.
Our full briefing discussing the implications of the new rules, and highlighting action points for firms to consider now, is available here.
NATIONAL RISK ASSESSMENT OF MONEY LAUNDERING AND TERRORIST FINANCING
HM Treasury has published the first UK National Risk Assessment (NRA) of money laundering and terrorist financing. The aim of the assessment is to identify, understand and assess the money laundering and terrorist financing risks faced by the UK. The NRA covers the domestic risks of money laundering and terrorist financing within the regulated sector, including financial institutions and other regulated professionals, and the risks associated with cash, new payment methods, and UK legal entities and arrangements. In addition, the NRA covers the international risks to the UK from money flowing into and out of the country.
The NRA notes that the government has already committed to publishing an Anti-Money Laundering Action Plan, which will set out how it will work with supervisors and the private sector to address the risks identified in the NRA. Priorities for the action plan will include:
- plugging significant intelligence gaps, in particular in relation to 'high end' money laundering;
- reforming the suspicious activity reports (SARs) regime, and upgrading the capabilities of the UK Financial Intelligence Unit (UKFIU); and
- addressing inconsistencies in the supervisory regime.
CPMI CONSULTATION ON CORRESPONDENT BANKING
The Committee on Payments and Market Infrastructures (CPMI) has published a consultation on correspondent banking. The consultation provides some basic definitions, outlines the main types of correspondent banking arrangement, summarises recent developments and touches on the underlying drivers and makes four recommendations on technical measures. Responses are requested by 7 December 2015.
TOM HAYES TO APPEAL PRISON SENTENCE
Tom Hayes is seeking to appeal against his 14 year conviction for Libor rigging. In August 2015, a jury found him guilty of eight counts of conspiring to rig Libor. Hayes was the first person to be convicted in relation to the manipulation of benchmark interest rates.
JOINT COMMITTEE OF ESAS 2016 WORK PROGRAMME
The Joint Committee of the European Supervisory Authorities (ESAs) has published its 2016 Work Programme. Among a broader set of topics considered, the Joint Committee will issue a joint opinion on the money laundering and terrorist financing risks affecting the EU financial sector at some point in 2016 and will publish guidelines on the following:
- money laundering and terrorist financing risk factors and the application of enhanced and simplified customer due diligence;
- risk-based AML supervision; and
- the information on the payer or the payee accompanying a wire transfer.
OECD REPORT ON CO-OPERATION AND INFORMATION SHARING BETWEEN GOVERNMENT AGENCIES TO COUNTER FINANCIAL CRIMES
The OECD has launched a report aimed at improving cooperation and information sharing between government agencies to counter financial crimes. The report highlights the need for governments to maximise their effectiveness in tackling financial crimes and ensuring tax compliance and shows the benefits of greater co-operation between Financial Intelligence Units (FIUs) and tax administrations. It recommends that, subject to the necessary safeguards, tax administrations should have the fullest possible access to the Suspicious Transaction Reports received by the FIU in their jurisdiction.
ISSA ADOPTS FINANCIAL CRIME COMPLIANCE PRINCIPLES FOR SECURITIES CUSTODY AND SETTLEMENT
The International Securities Services Association (ISSA) has adopted the ISSA Financial Crime Compliance Principles. They aim to support the efforts of the global community of securities custodians and intermediaries to address the critical challenges posed by financial crime. The Principles provide practical guidance to parties who intermediate cross-border securities. The guidance covers how to most effectively counter the risks of money laundering, terrorist financing, market abuse, corruption, fraud and the evasion of sanctions.