Category: White collar crime

White collar crime

UK/European crime-fighting coordination post Brexit “a priority”

As anticipated in our blog last June, the impact of Brexit on how the UK’s crime-fighting agencies will interact with their European counterparts is now firmly on the agenda.

On 6 March, the Home Secretary, Amber Rudd, announced that remaining in the European Arrest Warrant (EAW) system will be “a priority” in the Brexit negotiations. The following day, Europol’s director, Rob Wainwright, declared that the UK will be heading into “unchartered territory” should it wish to continue to have access to Europol’s shared platforms post Brexit.

Ms Rudd’s statement will cause some controversy. Remaining in the EAW system does not sit with the Government’s determination to extract the UK from the influence of the European Court of Justice.

However, as demonstrated in the 2014 Commons debate about the UK’s membership of the EAW system, there are mixed views on it. There is significant unease about there being no opportunity for UK judges to review the evidence underlying the warrant but during the debate in 2014, Theresa May, then Home Secretary, was an advocate of the system and argued that opting out would make the UK “a honeypot for all of Europe’s criminals on the run from justice”. The fact that over 7,000 individuals suspected of serious crimes have been extradited from the UK under the EAW system since 2010 is a strong reason to stay in it.

In contrast, the need to secure the UK’s continued access to the EU’s criminal intelligence network is uncontroversial. The UK is one of the most active users of Europol’s various platforms. How exactly that will be achieved and at what cost is not yet clear. Europol now has agreements with 19 non-EU states, which include access to a communication system and arrangements for the exchange of information. However, new regulations coming into force in May 2017 give the EU significant supervisory power over Europol and prevent it from entering into operational agreements with non-EU states. As a result, a direct agreement between the UK and Europol will not be an option. The alternatives are yet to be fully explored but if the arrangement is similar to those with the non-EU states currently in place, the UK is unlikely to have immediate access to the intelligence network.

These are significant issues and it is important that they are prioritized by the Government for the safety of both Remainers and Brexiteers alike.

White collar crime

Government considering reform to hold companies more accountable for economic crime

The Ministry of Justice has announced that it has commenced a consultation with businesses on the introduction of legislation aimed at tackling corporate economic crime and is seeking views on the extent to which reform is required. This follows on from the Prime Minister’s anti-corruption summit on 12 May 2016 and the Attorney General’s 5 September 2016 announcement of the commencement of such discussions.

Currently, in order to establish criminal liability on the part of a corporate body, prosecutors in the UK must show that the individuals involved in the wrongdoing represent the “directing mind” of the company. It has, however, been argued that this high hurdle has prevented the successful prosecution of companies, particularly in the financial sector, and the Government is asking for views on potential alternatives. The proposals under consideration (as set out in a Consultation Paper published with the Call for Evidence) include a ‘vicarious liability’ offence under which the corporate entity could be liable for the acts of its employees irrespective of whether it was complicit in them and a ‘failure to prevent’ approach, so that companies which cannot prove they have taken steps to prevent offences such as fraud, money laundering and false accounting will be held liable. This initiative follows on from The Section 7 Bribery Act ‘failure to prevent’ offence, and the UK Government’s more recent initiatives to consult on a ‘failure to prevent fraud’ offence and the launch of the ‘failure to prevent tax evasion’ offence under the Criminal Finances Bill.

The implications are potentially very significant for corporations as the reverse burden of proof and increased risk of being found liable for the acts of individuals will result in the need to incur further expense on corporate governance. The Call for Evidence will remain open until 24 March 2017 and views can be submitted here. Unsurprisingly, there is a range of opinions on this issue but we will continue to monitor developments in this area as the Government appears committed to strengthening the UK regulatory regime in its efforts to repair trust in businesses and improve corporate accountability.

Anti-corruptionBriberyWhite collar crime

UK’s Serious Fraud Office secures second deferred prosecution agreement – this time with the UK Subsidiary of US Corporate

Lord Justice Leveson has approved the Serious Fraud Office’s (“SFO’s”) second application for a Deferred Prosecution Agreement (“DPA”). The Agreement is with a company which cannot be named because of continuing related legal proceedings. The first DPA was with ICBC Standard Bank in December 2015. Further agreements under the DPA system have been keenly awaited, and this second DPA sends a strong message to UK Plc and international companies that the DPA model is here to stay.

The DPA involved a small to medium sized (“SME”) UK company and allegations of overseas bribery in a number of countries with bribes paid through third parties in Asia. The agreement encompasses financial orders totalling £6.5m, and continuing co-operation by way of an annual report to the SFO on third party intermediary transactions, and the company’s anti-bribery controls, policies and procedures. Charges laid under both pre Bribery Act and Bribery Act law have been suspended and will be discontinued within 5 years as long as the company is compliant with the DPA.

The judgment is interesting to companies from all sectors, including financial services, in a number of respects:

  • The SME company is of limited means and the question of sentencing and the potential consequence of a company insolvency is addressed. SFO Director David Green has stated, “This case raised the issue about how the interests of justice are served in circumstances where the company accused of criminality has limited financial means with which to fulfil the terms of a DPA but demonstrates exemplary co-operation.” The fine was lower than the recommended guideline amount because of the risk of insolvency.
  • The bribery was discovered as a result of the SME’s US parent company implementing a global compliance programme.
  • The fine will be paid by the UK company but £2m of the disgorgement payment will be met by the US parent which is not accused of any misconduct, as a repayment of a significant proportion of the dividends that it received from the SME over the indictment period.
  • The judgment gives useful commentary on the meaning of co-operation, including the company providing comprehensive information on the initial self-report, and oral summaries of first accounts of interviewees. It also facilitated interviews, and responded promptly and completely to SFO requests for information.

UK and international corporates will follow this decision with interest. The entity and the amount involved may be modest, in this case but the guidance on several important DPA issues given by Lord Justice Leveson is crucial to any company which has any jurisdictional nexus with the UK, discovers it is affected by criminal conduct, and considers availing itself of the UK self-reporting regime.

Louise Delahunty, a partner in our White Collar Crime & Regulatory Defense practice, can provide more information if you need it.