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Insights into Economic Crime and Corporate Transparency Act by JDSupra

The Economic Crime and Corporate Transparency Act 2023: Transforming Corporate Criminal Liability in the UK

Introduction

The long-awaited Economic Crime and Corporate Transparency Act received Royal Assent on 26th October 2023, introducing new “world-leading” powers for authorities to tackle economic crime. The Act supplements the Economic Crime (Transparency and Enforcement) Act 2022 which was fast-tracked through Parliament as a result of the Russian invasion of Ukraine, and continues the theme of addressing perceived weaknesses in the UK’s ability to tackle economic crime.

The Impact of the Act

The Act represents a significant turning point for the law on corporate criminal liability in the UK, and has been welcomed by prosecutors such as the Serious Fraud Office. The Act will strengthen the powers of law enforcement agencies, improve transparency over UK companies, make it easier to prosecute corporates for certain financial crimes, and introduce a new failure to prevent fraud offence.

Changes to the Corporate Criminal Liability Regime

The Act introduces fundamental changes to the UK’s corporate criminal liability regime with respect to economic crime – the expansion of the identification principle, and the introduction of a failure to prevent (“FTP”) fraud offence. The identification principle, which has been a longstanding challenge for prosecutors, has been replaced with a new “senior manager” test. This significantly expands the group of individuals through which liability can be attributed to a company. Under the Act, criminal liability can be attributed to an organisation if a “senior manager” acting within the actual or apparent scope of their authority commits a “relevant offence” listed in the Act. “Senior managers” are defined as individuals who play a significant role in either managing a corporate’s activities or making decisions about how these are to be managed.

The Act also introduces the FTP fraud offence, limited to “large organisations” only. Organisations will benefit from a compliance defence to the FTP fraud offence if they can prove that, at the time the fraud offence was committed, they had in place “prevention procedures” (as was reasonable in all the circumstances to expect the organisation to have in place) designed to prevent an associate from committing such an offence.

Changes to Companies House and the National Crime Agency

The Act covers a number of areas, including changes to Companies House, which improve transparency over UK entities and deliver a more reliable companies register so that bad actors cannot use opaque corporate structures to move and hide money. The National Crime Agency has gained greater powers to compel businesses to hand over information regarding suspected money laundering and terrorist financing, and the Serious Fraud Office’s powers to compel individuals and companies to provide pre-investigation information have been expanded in an effort to speed up investigations.

The Implications for Corporates

Corporates now face a sizable task in ensuring that they are prepared for and have the necessary policies and procedures in place to ensure compliance with the new regime. The lack of clarity around the precise meaning of “senior managers”, and the potential that such clarification may not come for some time adds to the burden that organisations and senior managers are faced with in attempting to comply with this new regime without clear parameters as to its practical application.

Whilst much of the commentary to date has focused on the impact that this reform will have on prosecutions of corporates for bribery, corruption, and fraud, it will also be interesting to see the extent to which prosecutors utilise the reform to prosecute other offences within its scope. Corporate offenders may find themselves in prosecutors’ crosshairs, now that the bar for corporate liability has been lowered.

Conclusion

The Economic Crime and Corporate Transparency Act 2023 has overhauled the corporate criminal liability regime in the UK and brought in new powers for authorities to tackle economic crime. The Act will undoubtedly result in an increased compliance burden for corporates, but it will likely improve transparency and accountability, and help prevent economic crime.

Originally Post From https://www.jdsupra.com/legalnews/thoughts-on-the-new-economic-crime-and-9649294/

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* This article was originally published here

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