In July we published an updated briefing on the Economic Crime and Corporate Transparency Bill after it completed its reporting stage in the House of Lords. At that point, a number of important amendments were introduced. The most significant of which were:
- An extension of the new failure to prevent fraud offence to include money laundering and the removal of the reference to large organisations in the wording of the offence, so that all organisations would be in scope.
- An amendment which would establish an easier route to corporate criminal liability, by holding companies or partnerships liable for an economic crime committed by a senior manager acting within their actual or apparent scope of authority.
- New powers for the Registrar of Companies House to strike off companies who supply false, misleading, or deceptive information to Companies House when applying to join or be restored to the register.
On Monday 4 September following the summer recess, the House of Commons debated some of the amendments made to the Bill by the House of Lords. The debate and the subsequent vote that took place have led to further changes which are important for businesses to note.
Failure to Prevent
The Government led a successful vote to restore the reference to large organisations to the wording of the new failure to prevent offence. This means that the new failure to prevent offence will now only apply to organisations who (regardless of their sector) meet at least two of the following criteria within the scope of the new offence:
- more than 250 employees;
- more than £36 million turnover; and
- more than £18 million in total assets.
The Minister Kevin Hollinrake, speaking on behalf of the Government, explained that the rationale behind the Government's decision to reject the Lords' amendment was to ensure that significant and unnecessary pressures were not placed on smaller companies.
Failure to prevent money laundering
The Government also led a successful vote to reject the Lords' amendment which extended the scope of the new failure to prevent offence to include money laundering. The Minister argued that the anti-money laundering regime in the UK is already robust, and pointed to the fact that HMRC imposed 240 fines for money laundering breaches in the last six months of 2022 and the FCA continues to impose significant fines for money laundering breaches.
It is worth noting that much of the Commons debate concerned the issue of so called "dirty money" and how bad actors were laundering this money through the UK. Whilst the Government resisted the calls to accept the Lords' amendment to include money laundering in the new failure to prevent offence, the vigour with which the issue was debated within the House of Commons has perhaps put the Government on notice that more action needs to be taken to tackle the issue of money laundering itself. The potential knock-on effect will be that enforcement agencies like HMRC and the FCA will be put under pressure to increase activity in this area.
As we reported in our earlier briefing, the Government has introduced a game-changing reform to the identification doctrine that will make it easier to prosecute companies for economic crimes committed by middle managers. This new provision, which prosecutors and enforcement agencies have long called for, remains intact following Monday's debate. Companies would be well advised to review their current compliance and implement any changes to their policies and procedures which are appropriate.
We shall continue to keep you updated with the developments in connection with the Bill as it proceeds through Parliament.