Press release 10th Jun 2022

Law Commission review a missed opportunity to hold banks, accountants and law firms accountable for money laundering

‘Failure to prevent’ offences welcome, but more changes needed to bring Britain’s corporate criminal liability laws into 21st century 

 

10 June, 2022 – The UK should reform weak laws that make large companies too big to prosecute for money laundering, Transparency International UK said today. 

The Law Commission today published options for reforming the UK’s antiquated corporate criminal liability regime. Currently, it is almost impossible to successfully prosecute big companies for economic crime because investigators need to prove senior managers were the ‘controlling mind’ behind the acts (also known as the ‘identification doctrine’). 

Prosecutors, including the Serious Fraud Office, have consistently said that they are “hamstrung” by the current rules.

Transparency International UK has called for a change to the law so that a company can be held legally responsible for those who act in its name and for its benefit, drawing on best practice from the US. 

For the past six years, the Government has looked for ways to extend the application of corporate ‘failure to prevent’ offences, first used in the Bribery Act, to address economic crime more widely. Substantial efforts have been made by corporates to prevent bribery since the introduction of such a measure in the UK Bribery Act. Transparency International UK therefore supports the use of a ‘failure to prevent’ offence for economic crime, including money laundering. 

 

Duncan Hames, Director of Policy at Transparency International UK, said: 

“We welcome the Law Commission‘s appetite for new ‘failure to prevent’ offences to address companies’ roles in certain economic crimes. However, the Commission has missed an opportunity to put forward any proposals that would begin to address the key role that banks, accountancy and law firms routinely play in their clients’ money laundering schemes. 

“The ball is now in the Government’s court. It should begin by swiftly implementing the Law Commission’s proposals for a new failure to prevent offence for fraud, build on this for money laundering, and reform the identification doctrine to capture a greater number of senior executives. 

“Far more must be done to bring Britain’s corporate criminal liability laws into the 21st century so that prosecutors can properly hold the enablers of economic crime to account and stop the dirty money of kleptocrats and criminals from being laundered here.” 

 

Notes to editors: 

The UK’s existing corporate liability framework is widely recognised to be unfair and unfit for purpose. The Law Commission found in 2010 that the current laws based on the ‘identification doctrine’ – which requires prosecutors to prove that a person who controls or directs the organisation is directly involved in the wrongdoing – can make it “impossibly difficult” to prosecute large corporate actors. 

In 2016, the Government’s own assessment was that “criminal law currently renders corporations that refrain from implementing good corporate governance and strong reporting procedures hard to prosecute and offers no incentives to invest in such procedures.” Then-Attorney General Jeremy Wright MP said, “The threat of conviction is greater under ‘failure to prevent’ and as a result, companies might be more likely to not just enter into deferred prosecution agreements but also, crucially, to take the actions necessary to discourage such offending within the organisation in the first place.” 

In 2020 the Law Commission was tasked with providing the Government with an options paper following the 2017 Call for Evidence on a new offence of ‘failure to prevent’ economic crime, which saw 75.9% of respondents say the current rules inhibit prosecutors from holding companies to account. 

The House of Lords Select Committee on the Bribery Act 2010 found the Bribery Act to be an ‘excellent piece of legislation’ and that the offence of failure to prevent bribery is particularly effective, enabling management to ensure the company’s conduct ‘is ethical, and to take steps to remedy matters where it is not’. 

The Financial Action Task Force (FATF) also found in its 2018 evaluation that the UK’s ability to prosecute legal persons was “limited.”