Major changes to the enforcement of economic crime in the UK pass into law

On 26 October the Economic Crime and Corporate Transparency Act 2023 finished its passage into law. We reported on this legislation while it was still in the bill stage (here).

This Act introduces unprecedented changes to criminal enforcement against corporations in the United Kingdom.

In addition to a coterie of comparatively minor reforms, the most significant change is found in section 196: “If a senior manager of a body corporate or partnership (the “organisation”) acting within the actual or apparent scope of their authority commits a relevant offence after this section comes into force, the organisation is also guilty of the offence”.

This offence comes into force in 2 months’ time.

The offence can be committed by a company incorporated anywhere in the world, but for a foreign-incorporated company the underlying offence must have been committed in the UK, or be one that a foreign company can commit outside the UK.

Not all criminal offences are a “relevant offence” and those that are covered are listed in Schedule 12 of the Act. This schedule includes a long list of economic crime offences including fraud, fraudulent trading, false accounting, bribery, export offences, forgery, tax evasion, offences under the Financial Services and Markets Act 2000, the Terrorism Act 2000,  the Proceeds of Crime Act 2002 and the Fraud Act. Also included in the list of “relevant offences” are breaches of any of the UK’s sanctions regulations, as well as UN sanctions, and indeed any remaining EU sanctions still applicable in post-Brexit Britain.

The second major change adopted by this Act is the introduction of a “failure to prevent” fraud offence.

A corporation commits this offence if one of its associated persons commits a “fraud offence” intending the benefit the corporation. A company has a defence if it has “prevention procedures” in place designed to prevent the commission of fraud.

The time for when this offence comes into force is uncertain as the government is first enjoined to publish official guidance in advance on what will constitute “prevention procedures”.

This offence can be committed by a corporation or partnership established anywhere, but the offence is limited in its impact to “large” corporations. This is defined as companies having two of: i) annual turnover of more than £36 million, ii) balance sheet of more than £18 million; or iii) more than 250 employees.

The “fraud offences” covered are cheating the public revenue, false accounting, false statements by directors, fraudulent trading, as well as the offences under the Fraud Act 2006.

We will provide a further update as and when the government guidance is published.

Duane Morris attorneys have experience with conducting risk assessments and policy reviews under the U.K.’s other “failure to prevent” offences and are ready to assist.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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