MoJ call for evidence on corporate liability for economic crime The Ministry of Justice (MoJ) has launched a call for evidence on the reform of the law on corporate liability for economic crime, focusing on criminal offences designed to prevent economic crimes such as fraud, false accounting and money laundering when committed on behalf or in the name of companies.  The call for evidence seeks views on:

  • whether the need to prove the involvement of a “directing mind” in corporate offending is hindering the prosecution of companies for wrongdoing; and
  • alternatives to proving “directing mind” complicity in corporate criminal conduct, including US-style 'vicarious' liability offences and the "failure to prevent" model. Comments should be submitted by 24 March 2017. 

SFO enters into third and largest Deferred Prosecution Agreement On 17 January 2017, Sir Brian Leveson QC approved the UK's third Deferred Prosecution Agreement ("DPA"), resulting in orders for disgorgement, penalties and costs exceeding £500 million. This is the largest DPA since their introduction in the UK in 2014. Herbert Smith Freehills' London Corporate Crime and Investigations team negotiated the first DPA with the Serious Fraud Office ("SFO"), which was concluded in November 2015. This latest agreement confirms the position that they are becoming a more important and useful tool for the SFO in tackling financial crime, at a time when the government is consulting and taking other steps to increase the offences available to prosecutors in respect of corporates.  See our full briefing here.

SFO speech on fighting fraud

The SFO has published a speech by Hannah von Dadelszen, Joint Head of Fraud at the SFO, on fighting fraud. In her speech, Ms von Dadelszen focused on the factors which give rise to an SFO investigation, including:

  • whether the apparent criminality undermines UK PLC commercial or financial interests in general and in the City of London in particular;
  • whether the actual or potential financial loss involved is high;
  • whether the actual or potential economic harm is significant;
  • whether there is a significant public interest element; and
  • whether there is a new species of fraud.

The speech also focused on the SFO's process for dealing with individual cases.  

SFO wins Property Freezing Order appeal in Chad oil corruption case  

The Court of Appeal has ruled in favour of the SFO in an appeal by Ikram Mahamat Saleh against a property freezing order made in respect of £4.4m plus interest, the proceeds from the sale of 800,000 shares in a Canadian oil and gas company Caracal Energy Inc, formerly Griffiths Energy International Inc.

The SFO argued that Mrs Saleh’s acquisition of the shares was part of a series of corrupt transactions, which involved personnel and companies connected to the diplomatic staff at the Chadian Embassy in Washington DC in order to promote and secure its commercial interests in Chad. This resulted in a property freezing order made by Mr Justice Mostyn in the UK on July 2014. Following the appeal, the SFO will now continue its pursuit of a civil recovery order in this case.

FCA FAQs on REP-CRIM The FCA has published frequently asked questions (FAQs) on REP-CRIM – Financial Crime Return. REP-CRIM is the financial crime data return requirement that came into force on 31 December 2016.  Firms caught by the requirement (including electronic money institutions with revenue of £5m or more) must submit a REP-CRIM return within 60 business days of the firm’s accounting reference date; for firms whose accounting reference date is 31 December 2016, REP-CRIM must be submitted on or before 24 March 2017.

MLD IV – European Parliament resolution on high-risk countries The European Parliament has published a resolution objecting to delegated regulation proposed by the Commission which seeks to amend a delegated regulation supplementing the fourth Money Laundering Directive (MLD IV) by identifying high-risk third countries with strategic deficiencies. The European Parliament rejected the amending delegated regulation on the basis that the list of countries too limited and should be expanded to include territories that facilitate tax crimes.  The objection calls on the Commission to submit a new delegated act which takes into account those countries.

ESAs delay on the delivery of draft RTS under MLD4 The Joint Committee of the ESAs has published a letter to Ms Věra Jourová, Commissioner, Justice, Consumers and Gender Equality regarding the delay on the delivery of draft RTS under the fourth Money Laundering Directive (MLD4). The letter states that the ESAs will not be in a position to deliver the draft RTS on time. The RTS will set out the measures that credit and financial institutions will have to take if they have branches or majority-owned subsidiaries in third countries that prohibit the implementation of anti-money laundering and counter-terrorist financing measures consistent with those required by MLD4. The ESAs will start working on the mandate in 2017 and expect to be able to submit the final draft RTS by 31 December 2017.