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Corporate Crime analysis: As the Serious Crime Bill winds its way through the legislative process, Laura Dunseath, senior associate, and Barry Vitou, partner and head of global corporate crime, at Pinsent Masons LLP consider the implications of the Bill and how it fits in with the Government’s Serious and Organised Crime Strategy.
Serious Crime Bill [HL], LNB News 09/06/2014 29
On 5 June 2014 the Serious Crime Bill was introduced to the House of Lords. This Bill is intended to give effect to a number of legislative proposals in the Serious and Organised Crime Strategy.
The government’s Serious and Organised Crime Strategy included a number of statements about the causes, effects and methodology of organised crime including that:
‘Criminals will seek to launder money through the financial sector, or use the services of lawyers or accountants to invest in property or set up front businesses. A small number of complicit or negligent professional enablers, such as bankers, lawyers and accountants can act as gatekeepers between organised criminals and the legitimate economy.’ (para 5.20, Serious and Organised Crime Strategy)
This principle led to the most significant feature of the Serious Crime Bill from a corporate crime perspective, which is the ‘participation offence’ at clause 44 of the amended Bill. The offence is designed to target the professional and non-professional ‘enablers’ who facilitate the criminal enterprises of organised crime groups.
The Home Office has argued that the offence is required to pursue those in organised crime groups who ‘ask no questions’ and support organised crime at arm’s length. The Home Office has stated that the offence is designed to supplement the existing conspiracy offence as the ‘second tier’ of an investigation, and contend that it is significantly different to the existing offences of encouraging and assisting crime contained in the Serious Crime Act 2007, ss 44–46.
When the Bill was first introduced, the wording of the proposed offence had the effect that a person would be guilty of the offence if they took part in activities knowingly, or with reasonable cause to suspect, that the activities were the criminal activities of an organised group, or would help an organised group to carry on criminal activities, with a view to directly or indirectly obtaining a gain or benefit.
The proposal received stinging criticism particularly and significantly from two of the most prominent professional associations in the UK, the Law Society and the Institute of Chartered Accountants in England and Wales (ICAEW), who each protested the Home Office’s failure to consult with the professions in advance of the Bill being published.
The ICAEW went so far as to declare that the proposed legislation would not make it easier to convict ‘crooked’ professionals, and could in fact have a detrimental impact on the fight against organised crime by reducing the likelihood of professionals reporting suspicions. The ICAEW recommended that the clause was deleted from the Bill entirely.
The principle concern of both associations was the burden which would be imposed on businesses and professionals by the objective test of ‘with reasonable cause to suspect’ mental element. The concern was that this set a very low bar of which unwitting and naive professional advisors could fall foul.
After a summer of successful lobbying by the Law Society and ICAEW, the clause was amended in October 2014 to the subjective test of ‘reasonably suspects’.
When enacted, this legislation will add another tool to the corporate crime prosecutor’s toolkit. The scope of the offence in corporate crime terms goes beyond the professional advisors, and also targets the directors, senior officers and even third party customers or suppliers who turn a deliberate ‘blind eye’ to the suspicious circumstances, eg a request to raise a dubious and unexpected invoice just before the year-end. It is currently difficult to prove these types of individuals are part of the conspiracy and so they often evade prosecution. The proposed offence would enable the prosecutor to target those individuals as well as the protagonists of the conspiracy.
The introduction of this offence will mean that everyone needs to be more vigilant and will have to ask more questions before acting upon suspicious requests. Professional advisors in particular will need to take even greater steps to know:
• who their client is
• the purpose of the client’s business, and
• the purpose of the activity which they have been instructed to perform
For example, if the client is already under investigation in relation to previous business dealings, could the current and seemingly incidental advisory work actually be a furtherance of the criminal activities?
In preparation for the enactment of this legislation, professional advisors should consider whether their existing client due diligence procedures are adequate and also develop an action plan to use should a reasonable suspicion arise.
Interviewed by Alex Heshmaty.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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First published on LexisPSL Corporate Crime.
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