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What do the provisions of the Serious Crime Act 2015 (SCA 2015) tell us about the development of the regulatory environment in the UK? Daniel Hudson, partner at Herbert Smith Freehills, explores the key provisions of SCA 2015.
Serious Crime Act 2015, LNB News 04/03/2015 101
What are the key changes that will arise as a result of the coming into force of SCA 2015?
There are two principle changes of interest from a corporate crime perspective.
SCA 2015, s 3 makes an addition to the Proceeds of Crime Act 2002 (POCA 2002) to the effect that any party that makes a disclosure of money laundering and request for consent in good faith pursuant to POCA 2002, s 338 will be protected from civil liability. This protection doesn’t explicitly apply to disclosures that banks and other POCA 2002 regulated firms (which can include law firms) conducting transactional business are separately required to make when they have suspicions of money laundering. It’s going to be difficult, however, for any claimant to assert or prove conclusively that they had suffered any loss as a result of a mandatory money laundering disclosure.
SCA 2015 also creates a new offence of participating in the activities of an organised crime group. ‘Organised crime group’ is defined quite broadly, where three or more persons have as their purpose the carrying out of criminal activities. So, in principle, this offence could be triggered in relation to any activity that assists, enables or is participatory in, for example, a conspiracy to steal or commit a fraud involving three or more people. The reason why this is significant is because this offence has a slightly lower threshold in terms of mens rea. Ordinarily in criminal law, you have to prove that one knows that what one is doing is going to assist some offence whereas the test in this offence is effectively one of negligence. While the obligation on those in the POCA 2002 regulated sector to report money laundering under POCA 2002 is triggered at the point where the reporter has reasonable grounds for suspicion that someone has been involved in money laundering, under this new offence, we are dealing with the committing of a substantive criminal offence predicated upon reasonable grounds to believe or suspect that what one is doing is going to assist the organised crime group.
Of additional potential interest—although of less general application to companies—are the changes to confiscation provisions in POCA 2002. There are amendments in SCA 2015 which enable the authorities to freeze assets quicker and earlier in investigations, and strengthen the hand of prosecutors in terms of compelling convicted criminals to comply with confiscation orders that often follow convictions in the fraud area.
Are there concerns about any of the provisions?
There is a question as to whether or not the additional defence in POCA 2002, s 338 will apply whenever a reporter who is seeking consent is doing so in good faith. Even though the debate in the House in Lords suggested that negligent reports would still be a basis for liability, on the face of the statute, if a report has been made in good faith this should provide immunity from civil liability.
There is also the question of whether the new offence of participating in an organised crime group is actually necessary. Professionals in the regulated sector already have an obligation to make money laundering disclosures that are based on objective suspicion—these offences are not currently regularly prosecuted. Prosecutions under POCA 2002, s 330 are rare. There is a sense that these provisions could more properly be used to charge people or that enablers could be charged as a party to or with conspiracy or assisting or encouraging the commission of, for example, a theft or fraud. On the face of it, this aspect of SCA 2015 appears to be like using a sledgehammer to crack a nut.
Should lawyers be taking any action now SCA 2015 has received Royal Assent?
These legislative changes are effectively part of the ongoing scrutiny of lawyers and other professionals and the extent to which they might be complicit in organised crime and criminal activity. In this respect, lawyers both in-house and in private practice ought to think about any adjustments that might need to be made to their procedures to satisfy themselves they are compliant with the law in this area.
With the general election coming, are there concerns aspects of this legislation could be changed by a different incoming government?
I can’t see it happening. It’s not a vote-winner to repeal this legislation and the new government will have more pressing things to do.
How does SCA 2015 fit in with other legal developments/regulatory changes?
SCA 2015 is part of a general move within the regulatory environment towards the increased scrutiny of professionals—including lawyers—and their part in policing (sometimes criminal)activity within their institutions:
Do you have any predictions for future related developments?
It is well trailed that the director of the Serious Fraud Office has called for the Bribery Act 2010, s 7 (BA 2010) (failure of commercial organisations to prevent bribery) to be extended to cover all manner of financial crimes. It is now on the government’s agenda and likely to be taken forward regardless of a change in government. So we may have in the next Parliament an Act introduced that extends BA 2010, s 7 to include fraud, money laundering, insider dealing and other financial crimes.
Interviewed by Duncan Wood.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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