Financial crime in Scotland: overview

A Q&A guide to financial crime in Scotland.

The Q&A gives a high level overview of matters relating to corporate fraud, bribery and corruption, insider dealing and market abuse, money laundering and terrorist financing, financial record keeping, due diligence, corporate liability, immunity and leniency, and whistleblowing.

To compare answers across multiple jurisdictions, visit the Financial and Business Crime Country Q&A tool.

This Q&A is part of the multi-jurisdictional guide to financial crime law. For a full list of jurisdictional Q&As visit www.practicallaw.com/financialcrime-guide.

Contents

Fraud

Regulatory provisions and authorities

1. What are the main regulatory provisions and legislation relevant to corporate or business fraud?

In Scotland, criminal fraud is mainly dealt with under the common law. There are also a wide range of statutory offences which involve an element of fraud and are closely related to the common law criminal fraud. For relevant statutory provisions, see Question 2.

The Fraud Act 2006 and the Theft Act 1968 do not apply in Scotland (apart from section 10(1) of the Fraud Act which increases the maximum custodial sentence for fraudulent trading to ten years).

Offences

2. What are the specific offences relevant to corporate or business fraud?

Common law fraud

Fraud is a common law crime which is committed when someone achieves a practical result by the means of a false pretence. In other words, where someone is caused to do something they would not otherwise have done, or vice versa, by the use of deception. Proving an intention to deceive is essential in all cases. A "false pretence" can range from blatant lies to silence when an answer should have been given. Attempted fraud is also a criminal offence.

Uttering

The crime of "uttering" occurs when someone tenders as genuine a forged document to the prejudice of another person. Most cases of uttering have a practical result and can be treated as cases of common law criminal fraud. Uttering and fraud are often interchangeable offences, although prosecutors tend to proceed with an uttering charge if a forged document is used.

Statutory offences

There are a great number of statutory frauds of differing kinds, including the following that involve an element of fraud:

  • Criminal Justice and Licensing (Scotland) Act 2010 (conspiracy to commit fraud overseas).

  • Companies Act 2006 (fraudulent trading and false and misleading financial statements).

  • Insolvency Act 1986 (fraudulent trading and fraud in anticipation of winding up).

  • Financial Services and Markets Act 2000 and the Financial Services Act 2012 (misleading statements and impressions in relation to investments and financial products).

  • Consumer Protection from Unfair Trading Regulations 2008 (misleading commercial practices).

  • Value Added Tax Act 1994 (fraudulent evasion of VAT).

  • Custom and Excise Management Act 1979 (fraudulent evasions of duty).

Money Laundering offences can also be committed under the Proceeds of Crime Act 2002 by concealing, disguising, transferring acquiring, using, possessing and so on the proceeds of criminal fraud. For money laundering offences, see Questions 18 to 22.

Corporate criminal liability

In the absence of legislation which expressly creates criminal liability for businesses, corporate liability can be established by non-vicarious liability arising from the so-called "identification principle". The identification principle determines whether the offender was a directing mind and will of the company. In general, for a company to be convicted of a fraud offence, the prosecutor must show that a director or senior officer of the company was personally guilty of a fraud offence.

Enforcement

3. Which authorities have the powers of prosecution, investigation, and enforcement in cases of corporate or business fraud? What are these powers and what are the consequences of non-compliance?

Authorities

Cases of fraud are investigated by the Police Service of Scotland (commonly referred to as Police Scotland) and Scotland's public prosecutor, the Crown Office & Procurator Fiscal Service (COPFS). Police Scotland has dedicated economic crime units. Investigations into serious and complex frauds are overseen by COPFS' Economic Crime Unit.

The UK's Serious Fraud Office (SFO) can also investigate frauds committed in Scotland if they impact elsewhere in the UK but the SFO cannot prosecute fraud cases in or from Scotland.

Prosecution powers

The Crown Office & Procurator Fiscal Service is the sole prosecutor in Scotland.

Powers of detention and interview

The police have powers to detain persons suspected of criminal offences for up to 12 hours (although this can be extended to 24 hours on the authorisation of a police custody review officer).

Following the decision in Cadder v HMA, UKSC [2010] 43, Scots Law recognised that a detained suspect must have the opportunity to consult a solicitor before being questioned in relation to a criminal allegation.

The Police and Criminal Evidence Act 1984 (PACE), which is applicable in England and Wales, does not apply in Scotland. Nonetheless, where someone is suspected of an offence a caution should be administered before they are questioned as a matter of fairness. A failure to do so may make the answers inadmissible in court.

In Scotland, an adverse inference cannot be drawn from a suspect's failure to answer any question put to him. An individual being interviewed is only required to provide their name, address, nationality and date and place of birth (unless required to answer questions. under a specific statutory provision).

Companies are not usually interviewed under caution or asked questions in writing under caution.

Powers of search/to compel disclosure

The police can search premises and seize documents and computers but only under a warrant issued by a sheriff or a judge under the common law or the Criminal Procedure (Scotland) Act 1995. or with the consent of the owner of the premises that that the police wish to search. Production orders requiring companies to provide documents are commonly sought under Part 8 of the Proceeds of Crime Act 2002 (POCA).

In the investigation of serious or complex fraud, the Lord Advocate can exercise powers to (sections 27 and 28, Criminal Law (Consolidation) (Scotland) Act 1995):

  • Authorise a nominated investigator to compel the production of documents.

  • Require a person to answer questions and to provide information.

These powers are similar to the SFO's powers under section 2 of the Criminal Justice Act 1987. For more information on the SFO's powers see, Financial crime in the UK.

Court orders or injunctions

Civil claims for recovery of losses arising from fraud can be brought under the law of delict in Scotland. A successful claim for misrepresentation renders the contract voidable and several remedies are available including the reduction of the contract entered into and the recovery of damages for loss suffered.

Scotland's Civil Recovery Unit (CRU) can take legal action through the civil courts to recover the proceeds of crime (see Question 4).

Steps can be taken in the civil courts to obtain documents and information and locate and preserve the assets of a defender in a civil fraud case.

Orders for the preservation of assets can be obtained on the dependence (that is, when the claim is raised and in advance of any final determination of the merits by the court) of a claim for damages and can be achieved very quickly. These remedies are:

  • Inhibition. This prevents the defender from being able to dispose of its interests in Scottish heritable property.

  • Arrestment. This freezes any movable assets held on behalf of the defender by third parties (such as his bank).

  • Attachment. This freezes certain articles owned by the defender. If warranted by the circumstances, these remedies can be obtained within short notice and often within 24 hours.

Protections available

An individual who is being interviewed must only provide his name, address, nationality, date and place of birth. Individuals have a right to not answer further questions unless required to do so under a specific statutory provision.

Suspects should be told they are suspected of an offence, that they do not have to answer questions and that they have a right to speak to a solicitor before answering any questions.

The production or seizure of documents can be resisted if the document is legally privileged, either under legal advice privilege (covering communications between a lawyer and client which relate to legal advice), or litigation privilege (communications made in circumstances where a party anticipates or is contemplating litigation).

Practically speaking, where legally privileged documents are requested by investigative agencies, the documents may be provided in a sealed envelope marked "legally privileged". The lawyer providing the documents should apply to be heard by a Sheriff or High Court judge on their seizure.

The provision of post incident or post event reports commissioned by a company can also be resisted on grounds of the right to not self-incriminate.

Failing to comply with investigators may in certain circumstances comprise a separate offence.

There are no similar statutory protections in Scotland for "excluded material", "journalistic material" or "special procedure material" as apply under PACE.

Penalties

4. What are the potential penalties or liabilities for participating in corporate or business fraud?

Civil/administrative proceedings or penalties

Firms regulated by the FCA may face financial penalties and sanctions (including removal of authorisation) under the Financial Services and Markets Act 2000 for failing to prevent financial crime and/or breaching the FCA's Principles for Business.

Scotland's Civil Recovery Unit (CRU) has powers under Part 5 of the Proceeds of Crime Act 2002 (POCA) to take legal action through the civil courts to recover the proceeds of crime. POCA allows the forfeiture of funds which either arise from criminal conduct, or are likely to be used in the furtherance of criminality.

The CRU frequently raises civil proceedings:

  • Where there is insufficient evidence to proceed with a criminal prosecution.

  • Following a criminal trial where there has been no conviction or where there has been a conviction but no confiscation made under Part 3 of the Proceeds of Crime Act 2002.

For the court orders that can be obtained in civil proceedings, see Question 3.

Criminal proceedings or penalties

Penalties. Prosecutions can take place before any of the following:

  • Justice of the Peace (on summary complaint, for less serious summary offences).

  • Sheriff (on summary complaint).

  • Sheriff and jury (on indictment).

  • High Court judge and jury (on indictment).

The maximum sentence for summary offences is 12 months imprisonment and/or a fine up to the "prescribed sum".

The maximum penalty on conviction on indictment that a sheriff can impose is an unlimited fine and/or imprisonment of up to five years subject to any wider power granted by statute for particular offences.

In cases tried by a sheriff where the sheriff holds that any competent sentence that he could impose would be inadequate, he can remit the case to the High Court for sentence. The maximum penalty at the High Court is an unlimited fine and/or life imprisonment subject to any restrictions imposed by statute.

Where an individual is convicted of crime, including a fraud offence, punishable by imprisonment, the court can impose a community pay back order, which may include a requirement to compensate any victims of the offence or carrying out unpaid work.

On conviction, the Crown Office & Procurator Fiscal Service (COPFS) can use its powers under Part 3 of the Proceeds of Crime Act 2002, to confiscate from the accused a fixed sum of money relating to benefit obtained from the criminal conduct.

Right to bail. Following an interview under caution, individuals are commonly arrested and charged. The police will then either:

  • Release the individual from custody subject to an undertaking that he will appear at court on a particular date and comply with certain other conditions (often called a "bail undertaking"). A failure to comply with the terms of the undertaking is a separate criminal offence.

  • Release the individual without any undertaking and report the matter to the Crown Office and Prosecutor Fiscal to determine whether or not the individual should be prosecuted with a criminal offence.

  • Detain the individual in custody to appear before a sheriff on the next "lawful day", which is the next day that the relevant court is sitting.

It is a matter for Police Scotland to determine which course to follow and the severity of the suspected criminal offence will be a consideration in that decision.

On the first appearance in court (whether from custody, in compliance with a "bail undertaking'' or following an order by COPFS to attend Court), the court will consider whether or not to release the accused on bail. All criminal offences are "bailable". The grounds for refusing bail are:

  • Risk of absconding.

  • Interference with witnesses or the course of justice.

  • Failure to appear at future diets.

  • Further offending.

  • Any other relevant factors.

Bail is granted on the basis that certain conditions are observed. Depositing a sum of funds with the court as a condition of bail is competent but unusual.

 

Bribery and corruption

Regulatory provisions and authorities

5. What are the main regulatory provisions and legislation relevant to investigating bribery and corruption?

The UK Bribery Act 2010 (Bribery Act) applies in Scotland.

The Bribery Act does not apply to conduct which took place before it came into force on 1 July 2011. Conduct before that date remains subject to the pre-existing law:

  • Scottish common law offences of bribery and accepting a bribe.

  • Public Bodies Corrupt Practices Act 1889.

  • Prevention of Corruption Act 1906.

 
6. What international anti-corruption conventions apply in your jurisdiction?

There are a number of international anti-corruption conventions which apply in Scotland:

  • European Union Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union 1997 (ratified 1999).

  • OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997 (ratified 1998).

  • Council of Europe Criminal Law Convention on Corruption 1999 (ratified 2003).

  • UN Convention against Transnational Organized Crime 2000 (ratified 2006).

  • UN Convention against Corruption 2003 (Corruption Convention).

Offences

7. What are the specific bribery and corruption offences in your jurisdiction?

Bribery of a foreign public official (section 6, Bribery Act)

In respect of foreign public officials a bribe is any financial or other advantage that is offered or given with the intention of influencing that person in his capacity as a foreign public official to obtain or retain business or a business advantage.

The only exception to this is where a foreign public official is permitted or required to be influenced by the written law applicable to the foreign official.

The term "foreign public official" includes:

  • Officials, whether elected or appointed, who hold legislative, administrative or judicial positions of any kind in a country or territory outside the UK.

  • Persons who perform public functions in any branch of the national/local/municipal government.

  • Persons who exercise a public function for any public agency, public enterprise, or state-owned or controlled enterprise of such a country or territory.

Organisations can commit an offence of failing to prevent bribery where a person associated with it bribes a foreign public official on its behalf (see below, Corporate failure to prevent bribery (section 7, Bribery Act))

Paying and receiving bribes (sections 1 and 2, Bribery Act)

A person is guilty of a criminal offence if he (directly or indirectly) offers, promises, gives, requests, or agrees to receive or accept a "financial or other advantage", and either:

  • Intends the financial or other advantage to induce someone else to perform a relevant function or activity improperly, or reward them for doing so.

  • Is aware that the acceptance of the advantage itself constitutes improper performance of a relevant function or activity. Improper performance involves a breach of an expectation of:

    • Good faith.

    • Impartiality.

    • Trust.

    A relevant function or activity refers to any:

    • Function of a public nature.

    • Business activity.

    • Activity performed in the course of employment.

Corporate failure to prevent bribery (section 7, Bribery Act)

A "relevant commercial organisation" can be criminally liable if a person associated with it bribes another person (such that an offence is or would be committed under sections 1 or 6 of the Bribery Act), intending to obtain or retain business or a business advantage for that organisation. A "relevant commercial organisation" includes a body or partnership:

  • Incorporated or formed in the UK.

  • Carrying on a business or part of a business in the UK.

An "associated person" means any person or entity that performs services for or on behalf of a commercial organisation (for example, employees, agents, contractors, sub-contractors and subsidiaries).

Senior officer offence (section 14, Bribery Act)

If a body corporate or Scottish partnership commits a bribery offence under section 1, 2 or 6 of the Bribery Act, and it is proved that the offence was committed with the consent or connivance of a senior officer of the body corporate or partnership, the senior officer will also be guilty of the offence and can be prosecuted.

A senior officer can include a director, manager, company secretary, or other similar officer in a body corporate, or a partner in a Scottish partnership.

Defences

8. What defences, safe harbours or exemptions are available and who can qualify?

An organisation will have a defence to the section 7 offence of failing to prevent bribery if it can show that it had adequate procedures in place to prevent bribery (section 7, Bribery Act).

The UK Ministry of Justice has published guidance designed to assist businesses to formulate anti-bribery procedures (The Bribery Act 2010 - Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing). A British Standard has also been issued on Anti-Bribery Management (BS 10500).

Certain limited defences to the sections 1 and 2 offences (bribing or receiving bribes) are available if it can be proven that the conduct was a necessary part of exercising a function on behalf of an intelligence service or the armed forces.

There is no exception for facilitation payments under the Bribery Act. Facilitation payments are typically small unofficial payments paid to public officials to speed up or ensure the performance of a routine government action. Facilitation payments are bribes under the Bribery Act.

The common law defence of duress may be available if such payments are made to protect against loss of life, limb or liberty.

 
9. Can associated persons (such as spouses) and agents be liable for these offences and in what circumstances?

The Bribery Act applies to indirect bribery (that is, advantages given through intermediaries) and to direct bribery. Any individual can be prosecuted for a Bribery Act offence if he:

  • Commits the acts which comprise the offence.

  • Has the necessary criminal intent.

  • Is subject to the jurisdiction of the UK authorities under the Bribery Act (see Question 10).

Enforcement

10. Which authorities have the powers of prosecution, investigation, and enforcement in cases of bribery and corruption? What are these powers and what are the consequences of non-compliance?

Prosecution powers

The Serious Fraud Office (SFO) has jurisdiction to prosecute any UK or overseas company for offences under the Bribery Act and the Crown Office & Procurator Fiscal Service (COPFS) can prosecute a Scottish company or an English or overseas company that engages in an act of bribery, in whole or in part , in Scotland.

In respect of Scottish companies and bribery that takes place in or from Scotland there is therefore concurrent jurisdiction between the SFO and COPFS. However, in practice the SFO respects that COPFS has primacy over Scottish companies and acts of bribery that occur in Scotland. There is a memorandum of understanding between the SFO and COPFS which addresses the approach to concurrent jurisdictions.

Cases for which COPFS has primacy are investigated by Police Scotland. The SFO also has powers to investigate bribery in Scotland, although typically will require the assistance of Police Scotland / the Scottish Courts.

Powers of detention and interview

For Police Scotland's powers of detention and interview, see Question 3.

Powers of search/to compel disclosure

For Police Scotland's powers of search and to compel disclosure, see Question 3.

The Serious Fraud Office (SFO) has the power to search and compel the production of information or documents in overseas bribery and corruption cases (sections 2 and 2A, Criminal Justice Act 1987).

Court orders or injunctions

Civil claims for recovery of losses arising from bribery can be brought under the law of delict in Scotland and can potentially be directed at the briber, the receiver of bribes and /or their agents.

Scotland's Civil Recovery Unit (CRU) can take legal action through the civil courts to recover the proceeds of crime (see Question 11).

The powers of the CRU to take legal action through the civil courts to recover the proceeds of crime and the Court orders that can be obtained in civil proceedings are described in Question 4 and Question 3 respectively.

Protections available

For the protections available when responding to investigations by Police Scotland, seeQuestion 3.

Penalties

11. What are the potential penalties for participating in bribery and corruption?

Civil/administrative proceedings or penalties

Firms regulated by the FCA may face financial penalties and sanctions (including removal of authorisation) under the Financial Services and Markets Act 2000 for failing to prevent financial crime and/or breaching the FCA's Principles for Business. Under the Proceeds of Crime Act 2002, civil recovery proceedings can be instituted to recover assets and funds deemed to be the proceeds of crime. As such, any benefit attributable to bribery or corruption could be recovered, with no upper limit.

The Crown Office & Procurator Fiscal Service (COPFS) may offer a civil settlement with a company that self-reports a bribery offence by a reporting company (the civil settlement initiative is not open to individuals). The amount of any settlement is agreed with Scotland's Civil Recovery Unit (CRU). The civil settlements to date were settled on the basis of the company paying to the Scottish Government the gross profit derived by the company from the corrupt conduct.

Criminal proceedings or penalties

Penalties. Individuals convicted of bribery offences may be imprisoned for up to ten years and/or receive an unlimited fine. Companies convicted of bribery may receive an unlimited fine.

Where an individual is convicted of crime, including a bribery offence, punishable by imprisonment, the court may impose a community pay back order (Criminal Procedure (Scotland) Act 1995), which may include a requirement to compensate any victims of the offence or carrying out unpaid work.

Individuals or companies convicted of bribery offences can also face confiscation or civil recovery proceedings under the Proceeds of Crime Act 2002 (see Question 4).

Under EU procurement rules, public authorities in the EU must exclude or debar an organisation that is convicted of paying bribes (including bribing a foreign public official) from the award of public contracts. A public body may also exclude or debar from public contracts an organisation that has been convicted of receiving bribes or the corporate offence of failure to prevent bribery.

Right to bail. For the provisions relating to bail see Question 4.

Tax treatment

12. Are there any circumstances under which payments such as bribes, ransoms or other payments arising from blackmail or extortion are tax-deductible as a business expense?

There are no circumstances under which payments such as bribes, ransoms or other payments arising from blackmail or extortion are tax-deductible.

 

Insider dealing and market abuse

Regulatory provisions and authorities

13. What are the main regulatory provisions and legislation relevant to insider dealing and market abuse?

The Criminal Justice Act 1993 contains three "insider dealing" criminal offences:

  • Dealing.

  • Encouraging.

  • Disclosure.

Part 7 of the Financial Services Act 2012 contains the offences of making misleading:

  • Statements.

  • Impressions.

Regulatory and administrative measures to combat market abuse are contained in Part 8 of the Financial Services and Markets Act 2000.

Offences

14. What are the specific insider dealing and market abuse offences?

Insider dealing

Dealing. An individual commits the dealing offence if he has "information as an insider" and:

  • The information is price-sensitive in relation to securities.

  • He deals in the securities.

  • The dealing takes place on a regulated market or through a professional intermediary.

Encouraging. The encouraging offence is committed when such an individual encourages another person to deal in securities in the circumstances described above, whether or not that other person knows it.

Disclosure. The disclosure offence is committed when such an individual discloses the information to another person, otherwise than in the proper performance of his employment, office or profession.

An individual has information as an insider if the information:

  • Is about particular securities or an issuer of securities.

  • Is specific and precise.

  • Is not in the public domain.

  • If made public, would be likely to have a significant effect on the price of the securities.

In addition an individual must have the information and know he has it through being, or his source being, a director, employee, shareholder of an issuer of securities or through his employment, office or profession.

Misleading statements and impressions

The misleading statements offence has two components. The accused must (section 89, Financial Services Act 2012):

  • Have made a statement which they either know to be, or have been reckless as to whether it is, false or misleading or dishonestly concealed any material facts.

  • Intend with the statement or concealment to induce, or be reckless as to whether it induces, another person to:

    • enter into or refrain from entering into a relevant investment; or

    • exercise or refrain from exercising any rights conferred by a relevant investment.

The misleading impression offence is committed where an individual engages in a course of conduct that creates a false or misleading impression as to the market in, or the price or value of any, relevant investments (section 90, Financial Services Act 2012). The offence is committed if the individual either:

  • Intends to create such an impression to induce another person to acquire, dispose of, subscribe for or underwrite the investments or to exercise or refrain from exercising any rights conferred by the investments.

  • Knows that the impression is false or misleading, or is reckless as to whether it is, and intends to:

    • make a gain from himself or another, cause a loss to another; or

    • expose them to a risk of loss.

The Financial Services Act 2012 also contains offences in relation to statements concerning "relevant benchmarks", being benchmarks of a kind specified in an order made by the Treasury.

Market abuse

Market abuse (Part VIII, Financial Services and Markets Act 2000) is behaviour which falls within one or more of the six types of behaviour listed in section 118 of the Financial Services and Markets Act 2000. Behaviour falls into two main categories:

  • Insider dealing (section 118(2) to (3)).

  • Market manipulation (section 118(5) to(8)).

The descriptions of these behaviours are not the same as the definitions in the Criminal Justice Act 1993 and the Financial Services Act 2012. Market abuse sits alongside the criminal regime of insider dealing but operates with the lower standard of proof required for civil proceedings and potentially covers more transactions.

The Financial Conduct Agency (FCA) Code of Market Conduct provides guidance on determining whether or not behaviour amounts to market abuse.

Defences

15. What defences, safe harbours or exemptions are available and who can qualify?

Insider dealing

An individual is not guilty of the dealing offence or an encouraging offence (see Questions 13 and 14) if he can demonstrate that:

  • He did not expect the dealing to result in a profit attributable to the fact that the information was price-sensitive.

  • He reasonably believed that the information had been disclosed widely enough to avoid prejudicing other parties to the transaction.

  • He would have acted in the particular manner that he did even if he had not had the information.

It is a defence to the disclosure offence if the accused can demonstrate either that he did not expect:

  • Any person, as a result of the disclosure, to deal either on a regulated market or in reliance on a professional intermediary.

  • The dealing to result in a profit attributable to price-sensitive information.

Schedule 1 to the Criminal Justice Act 1993 also contains special defences relating to:

  • Market makers.

  • Market information.

  • Price stabilisation.

Misleading statements and impressions

It is a defence to a misleading statement offence for the accused to demonstrate that a statement, which is alleged to be false or misleading, was made in compliance with:

  • Price stabilisation rules.

  • Control of information rules.

  • EC buy-back and stabilisation rules.

It is a defence to elements of the misleading impression offence for an accused to show that he reasonably believed his conduct would not create a false or misleading impression or his conduct was in conformity with the rules listed above.

The Financial Services Act 2012 also contains defences in relation to the offences concerning "relevant benchmarks".

Market abuse

The Financial Services and Markets Act 2000 provides that persons notifying the FCA of cases of suspected market abuse are, in specified circumstances, not liable for any breach of a restriction on the disclosure of information.

Enforcement

16. Which authorities have the powers of prosecution, investigation and enforcement in cases of insider dealing and market abuse? What are these powers and what are the consequences of non-compliance?

Authorities

Crimes in Scotland are investigated by Police Scotland and are prosecuted by the Crown Office & Procurator Fiscal Service (COPFS) (see Question 3).

The Financial Conduct Agency (FCA) also has wide investigatory powers in cases in Scotland of suspected:

  • Criminal insider dealing.

  • Misleading statements or impressions.

  • Market abuse.

For the provisions relating to interacting and cooperating with overseas regulators and the circumstances in which the Scottish Courts have extra-territorial jurisdiction, see Questions 30 and 31.

Prosecution powers

Crimes in Scotland are prosecuted by the Crown Office & Procurator Fiscal Service (COPFS) (see Question 3).

The FCA does not have the power to bring criminal prosecutions in Scotland. It can, however, carry out investigations with the assistance of Police Scotland and the Scottish courts and issue civil penalties.

Powers of detention and interview

For Police Scotland's powers of detention and interview, see Question 3. The FCA investigators can require any person to answer questions.

Powers of search/to compel disclosure

For Police Scotland's powers of search and to compel disclosure, see Question 3.

The FCA investigators can require the provision of information or documents from any business/individual regulated by the FCA.

An investigator appointed by the FCA or the Secretary of State can obtain a warrant for entry to any premises from a justice of the peace or sheriff. The warrant can then be executed by a constable of Police Scotland, who can require any person on the premises to provide information or documents.

Court orders or injunctions

No civil remedies are conferred by the Criminal Justice Act 1993 or the Financial Services Act 2012. Civil claims for recovery of losses arising from insider dealing / misleading statements and impressions would need to be brought under the law of delict in Scotland.

Scotland's Civil Recovery Unit (CRU) can take legal action through the civil courts to recover the proceeds of crime (see Question 17).

For the powers of the CRU to take legal action through the civil courts to recover the proceeds of crime and the court orders that can be obtained in civil proceedings, see Question 3and 4.

On the application of the FCA, the Scottish courts can grant an interdict prohibiting market abuse.

Protections available

For the protections available when responding to investigations by Police Scotland, see Question 3. Similar protections are in place when responding to investigations by the FCA.

Penalties

17. What are the potential penalties for participating in insider dealing and market abuse?

Civil/administrative proceedings or penalties

No civil remedies are conferred by the Criminal Justice Act 1993 or the Financial Services Act 2012.

The Financial Conduct Agency (FCA) has a number of sanctions it can invoke against persons engaging in market abuse under the Financial Services and Markets Act 2000. The sanctions fall into two categories:

  • Administrative sanctions that the FCA can initiate such as:

    • public censure statements;

    • a financial penalty; and

    • restitution of profits for compensation.

  • Sanctions that involve an application to the Scottish courts such as:

    • interdicts;

    • remedial and asset freezing orders; and

    • restitution and compensation orders.

Criminal proceedings or penalties

Penalties. An individual convicted of any of the insider dealing offences is liable on:

  • Summary conviction to either or both:

    • a fine not exceeding the statutory maximum;

    • six months' imprisonment.

  • Indictment to either or both:

    • an unlimited fine;

    • seven years' imprisonment.

The same penalties apply for the misleading statement or impression offence but on summary conviction the maximum period of imprisonment is 12 months.

Scotland's Civil Recovery Unit (CRU) can take legal action through the civil courts to recover the proceeds of crime under the Proceeds of Crime Act 2002 (POCA). The persons concerned can also be disciplined by the relevant regulator.

Right to bail. For the provisions relating to bail, see Question 4.

 

Money laundering, terrorist financing and financial/trade sanctions

Regulatory provisions and authorities

18. What are the main regulatory provisions relevant to money laundering, terrorist financing and/or breach of financial/trade sanctions?

Money laundering

The main regulatory provisions are the:

  • Proceeds of Crime Act 2002.

  • Money Laundering Regulations 2007.

Terrorist financing

The main regulatory provision is the Terrorism Act 2000.

Financial/trade sanctions

Financial sanctions. Financial sanctions are not a devolved matter and the relevant legislation in Scotland is therefore that enacted by the UK Government. There is no single piece of overarching financial sanctions legislation in the UK.

EU financial sanctions are implemented in the UK by way of directly applicable EU Regulations and enforced by corresponding UK statutory instruments. The number of financial sanctions regimes in force varies from time to time. Each regime is unique in terms of the sanctions applied. There are separate statutory instruments/EU regulations in place in respect of each sanctions regime. There are also specific financial sanctions under terrorism legislation, specifically the Terrorist Asset - Freezing etc Act 2010.

Trade sanctions. Trade sanctions and embargoes are usually imposed by the UN, the EU or the Organisation for Security and Co-operation in Europe. As with financial sanctions, trade sanctions are usually directly applicable in the UK by virtue of an EU regulation and the UK enforces any such implementing or enforcement legislation (or will make amendments to existing secondary legislation) as is necessary. In addition to regime specific UK regulations on trade sanctions, the Export Control Order 2008 contains offences applicable to the trading in controlled goods on a more general basis.

Offences

19. What are the specific offences relating to money laundering, terrorist financing and breach of financial/trade sanctions?

Money laundering

The Proceeds of Crime Act 2002 (POCA) draws a distinction between "principal" and "secondary" money laundering offences.

The three "principal" money laundering offences are:

  • Concealing, disguising, converting or transferring criminal property or removing criminal property from the UK (section 327, POCA).

  • Entering into or becoming concerned in an arrangement knowing or suspecting that it facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person (section 328, POCA).

  • Acquiring, using or possessing criminal property (section 329, POCA).

Criminal property is defined as property that the alleged offender knows or suspects to be a benefit from criminal conduct, either in whole or in part, directly or indirectly (section 340(3), POCA).

The "secondary" offences are:

  • Failure by a person in the "regulated sector" to disclose, if he knows or has reasonable grounds to know or suspect, that an individual is engaged in money laundering (section 330, POCA and section 21A, Terrorism Act 2000) (see below).

  • Failure by a person to report knowledge or suspicion of any of the offences in sections 15 to 18 of the Terrorism Act 2000, where that knowledge or suspicion has come to the person in the course of a trade, profession or business (see below).

  • Failure by a "nominated officer" to disclose knowledge or suspicion of money laundering to the National Crime Agency (sections 331 to 332, POCA).

  • In the regulated sector, "tipping off" another person that a disclosure has been made under section 331 of the POCA or section 21D of the Terrorism Act 2000.

  • Making a disclosure that is likely to prejudice an investigation, or to falsify, conceal, destroy or otherwise dispose of, documents relevant to an investigation (section 342, POCA).

Money Laundering Regulations 2007. Individuals or companies that are subject to the Money Laundering Regulations 2007 must:

  • Appoint a Nominated Officer to receive and make money laundering reports.

  • Put in place procedures relating to due diligence and ongoing monitoring of their business relationships.

They may also need to register with the FCA, HMRC or another designated body.

Terrorist financing

Terrorism Act 2000. Under the Terrorism Act 2000 there are offences relating to the (sections 15 to 17, Terrorism Act 2000):

  • Funding of terrorism.

  • Use of money or property for terrorism.

  • Entering of any arrangement which makes funds available for the purposes of terrorism.

It is also an offence in respect of any terrorist property, to enter into , or become concerned in, an arrangement which facilities the retention or control by, or on behalf of, another person of terrorist property in any way (section 18, Terrorism Act 2000).

Financial/trade sanctions

The specific offences applicable under financial and trade sanctions differ from regime to regime. The following are however some of the most common prohibitions.

Financial sanctions. It is generally an offence to:

  • Deal with funds or economic resources belonging to or owned, held or controlled by a designated person (that is, a person who is the subject of sanctions).

  • Make funds or economic resources available, directly or indirectly, to or for the benefit of, a designated person.

  • Provide or perform other financial services (for example, insurance or re-insurance) to individuals or governments designated under the Terrorist Asset - Freezing etc Act.

  • Circumvent financial sanctions or enable or facilitate their contravention.

Under some sanctions regimes (most noticeably Iran) offences can be committed by transferring funds to or from any non-designated person within the sanctioned country, without firstly making the required notification to, or obtaining consent from, HM Treasury.

Trade sanctions. It is generally an offence to:

  • Export military goods or transfer military software or technology to sanctioned countries or without a licence to do so.

  • Export UK controlled dual-use goods or transfer UK controlled dual-use software or technology to a prohibited destination, or where it is known that the end destination is a prohibited destination (and that no processing or working will be done on the goods, software or technology before they reach their end destination), without a licence to do so.

  • Export non-controlled dual-use goods or transferring non-controlled dual-use software or technology where it is suspected that they may be intended for WMD (weapons of mass destruction) purposes.

  • Traffic and broker military items between a third country and the sanctioned country without a licence to do so.

  • Become knowingly concerned in an activity prohibited by the EU Regulations on trade sanctions with the intention of evading the relevant prohibition.

  • Fail to comply with licence conditions.

Defences

20. What defences, safe harbours or exemptions are available and who can qualify?

Money laundering

There are a number of defences depending on the nature of the offence.

Proceeds of Crime Act (POCA). It is a defence if the accused can show that he (sections 327 to 330, POCA):

  • Made an authorised disclosure to the authorities and obtained prior consent.

  • Intended to make an authorised disclosure but had a reasonable excuse for not doing so.

  • Knew or believed that the criminal conduct occurred outside the UK and it was not unlawful under the applicable criminal law or within a description prescribed by an order of the Secretary of State.

  • Is a deposit-taking body and the value of the criminal property is less than GB£250.

  • Acquired the criminal property for adequate consideration (but only in respect of an offence under section 329 of POCA).

  • Did not know or suspect that another person was engaged in money laundering and had not been given adequate training by their employer in money laundering risks or procedures.

  • Is a professional legal adviser and the information came to him in privileged circumstances.

Tipping off. It is a defence if the accused can show that he:

  • Made the disclosure to another employee, officer or partner in the same company or undertaking.

  • Made the disclosure between credit or financial institutions in the same group within the European Economic Area or in a country which imposes equivalent money laundering requirements.

  • Is a professional legal adviser or other relevant professional adviser to another person performing professional activities within different undertakings that share common ownership, management or control.

There are separate defences for permitted disclosures between institutions and permitted disclosures, for example for the detection, investigation or prosecution of an offence.

Prejudicing an investigation. It is a defence if the accused can show that he:

  • Did not know or suspect that the disclosure would likely prejudice the investigation.

  • Is a professional legal adviser and the disclosure was made in the course of giving advice in connection with legal proceedings.

  • Did not know or suspect documents were relevant to an investigation or did not intend to conceal any facts disclosed in documents from any person carrying out the investigation.

Money Laundering Regulations 2007. It is a defence if the accused can show that he took all reasonable steps and exercised all due diligence to avoid committing the offence.

Terrorist financing

Terrorism Act 2000. It is a defence if the accused can show that he (sections 18 and 21A, Terrorism Act 2000):

  • Did not know or suspect, that the arrangement related to terrorist property.

  • Made an authorised disclosure and obtained prior consent.

  • Had a reasonable excuse for not making an authorised disclosure.

  • Did not know or suspect that another person was engaged in money laundering and had not been given adequate training by their employer in money laundering risks or procedures.

  • Knew or believed that the money laundering was taking place in a jurisdiction where it was not unlawful under the applicable criminal law.

  • Is a professional legal adviser and the information came to him in privileged circumstances.

Financial/trade sanctions

There are some activities which would otherwise be an offence under financial and trade sanctions, that are exempt from the regime. The exemptions are typically very specific and vary from regime to regime but generally they relate to activities or goods that are required for humanitarian purposes or that relate to contractual or other obligations entered into prior to certain dates or for specific purposes.

Activities authorised by a licence or authorisation are exempt from the regime if any attached conditions are complied with. It is generally a defence to offences committed under financial and trade sanctions regimes for the perpetrator to show that he did not know and had no reasonable cause to suspect that he was in breach of the relevant prohibition.

The legislation relevant to each regime must be checked in each case for applicable exemptions and/or defences.

Enforcement

21. Which authorities have the powers of prosecution, investigation, and enforcement in cases of money laundering? What are these powers and what are the consequences of non-compliance?

Authorities

As with other crimes in Scotland Police Scotland and the Crown Office & Procurator Fiscal Service (COPFS) have powers to investigate.

The National Crime Agency (NCA) also has jurisdiction in respect of investigating money laundering and terrorist financing and information is commonly shared between the NCA and others involved in prosecuting related crimes, such as COPFS and the Serious Fraud Office. In Scotland, the delivery of the NCA's functions is governed by a Memoranda of Understanding with the Scottish Ministers and with the Lord Advocate's Office. The Director General of the NCA can designate appropriately-qualified NCA officers with the powers of Scottish Constable and NCA can conduct its own operations in Scotland with the consent of the Lord Advocate.

HM Treasury is the authority responsible for implementing, administering and ensuring compliance with financial sanctions in the UK. The Export Control Organisation (ECO) (part of the Department for Business, Innovation and Skills (BIS)) is the authority responsible for implementing trade sanctions in the UK. HM Revenue & Customs also has jurisdiction to investigate breaches of trade sanctions.

For the provisions relating to interacting and cooperating with overseas regulators and the circumstances in which the Scottish Courts have extra-territorial jurisdiction, see Questions 30 and 31.

Prosecution powers

The Crown Office & Procurator Fiscal Service (COPFS) has the responsibility for bringing any prosecution in Scotland thought to be in the public interest.

Powers of detention and interview

For Police Scotland's powers of detention and interview, see Question 3.

Powers of search/to compel disclosure

For Police Scotland's powers of search and to compel disclosure see Question 3.

Court orders or injunctions

Scotland's Civil Recovery Unit (CRU) can take legal action through the civil courts to recover the proceeds of crime (see Question 22).

For the powers of the CRU to take legal action through the civil courts to recover the proceeds of crime and the Court orders that can be obtained in civil proceedings see Question 4 and Question 3.

Protections available

For the protections available when responding to investigations by Police Scotland see Question 3. Similar protections are in place when responding to investigations by the other authorities.

Penalties

22. What are the penalties for participating in money laundering, terrorist financing offences and/or for breaches of financial/trade sanctions?

Money laundering

Penalties. The penalties for participating in money laundering are:

  • 14 years' imprisonment and/or an unlimited fine (sections 327 to 329, Proceeds of Crime Act (POCA)).

  • Five years' imprisonment and/or an unlimited fine (sections 330 and 342, POCA).

  • Two years' imprisonment and/or an unlimited fine (section 333A, POCA and the Money Laundering Regulations 2007).

The Crown Office & Procurator Fiscal Service use confiscation orders under the POCA to recover profits of criminal conduct from individuals convicted of money laundering offences. It is also an increasing practice of the Scottish Government's Civil Recovery Unit to use civil recovery orders under Part 5 of the POCA to recover criminal property outside of criminal proceedings.

Right to bail. For the provisions relating to bail, see Question 4.

Terrorist financing

Penalties. The penalties for participating in terrorist financing are (Terrorism Act 2000):

  • 14 years' imprisonment and/or an unlimited fine (sections 15 to 18).

  • Five years' imprisonment and/or an unlimited fine (section 21A).

Right to bail. For the provisions relating to bail, see Question 4.

Financial/trade sanctions

Penalties. The specific penalties for commission of crimes under financial and trade sanctions are set out in the relevant statutory instruments. In general, UK sanctions offences are punishable by imprisonment and/or a fine.

The maximum imprisonment level for offences committed under EU regimes is generally two years while under the Terrorist Asset-Freezing etc. Act 2010 the maximum is ten years. Scotland's Civil Recovery Unit (CRU) can also take legal action through the civil courts to recover the proceeds of crime.

Right to bail. For the provisions relating to bail, see Question 4.

 

Financial record keeping

23. What are the general requirements for financial record keeping and disclosure?

All companies must ensure that accurate financial records and accounts are kept that (section 386, Companies Act 2006):

  • Accurately show the financial position of the company.

  • Detail transactions that the company has been party to.

  • Record the assets and liabilities of the company.

There are also requirements on larger companies to publish anti-slavery statements (see section 54 of the Modern Slavery Act 2015) and companies involved in the logging and extractive industries may need to report separately on payments to governments (see Payments to Governments Regulations 2014).

 
24. What are the penalties for failure to keep or disclose accurate financial records?

Each officer of a company that fails to keep adequate accounting records may be guilty of an offence (section 387, Companies Act 2006).

If prosecuted on indictment, the maximum penalty is two years' imprisonment and/or an unlimited fine. For summary prosecutions, the maximum penalty is six months' imprisonment and/or a fine of GB£10,000.

It is a defence for any person charged under section 387 to show that he acted honestly and that in the circumstances the default was excusable.

 
25. Are the financial record keeping rules used to prosecute white-collar crimes?

Individuals can be prosecuted for a section 387 Companies Act 2006 offence in isolation from, or in addition to, charges in respect of other corporate crime offences.

 

Due diligence

26. What are the general due diligence requirements and procedures in relation to corruption, fraud or money laundering when contracting with external parties?

Members of certain professions, including credit and financial institutions, are subject to due diligence requirements under the Money Laundering Regulations 2007. These require persons to carry out identity checks, satisfy themselves as to the source of funds received and the identity of the ultimate beneficiary of the transaction. The Regulations require a risk-based approach, with certain low-risk clients attracting a simpler "basic due diligence" requirement, while clients considered to be high-risk require "enhanced due diligence" and ongoing monitoring.

A similar risk-based approach to due diligence is encouraged by the UK Ministry of Justice Guidance issued in relation to the Bribery Act 2010 (see Question 8). Specific practical measures can range from simply asking the right questions of a client or prospective contractual party, to carrying out an active investigation of high-risk parties.

 

Corporate liability

27. Under what circumstances can a corporate body itself be subject to criminal liability?

Corporate bodies can be liable for criminal offences which require mens rea (criminal intent), where a senior level employee or agent of the company possesses the requisite mens rea. This is often referred to as the "identification principle" (Transco plc v. HM Advocate 2004 JC 29).

Companies can also be criminally liable for statutory offences where specific provision is made. For example, a company can commit an offence of corporate homicide in Scotland if it causes death by grossly breaching a duty of care in the way in which its activities are organised or managed, and the actions or omissions of senior management constitute a substantial element of that breach (Corporate Manslaughter and Corporate Homicide Act 2007).

Under the Bribery Act 2010 a "relevant commercial organisation" can be criminally liable if a person associated with it bribes another person, intending to obtain or retain business or a business advantage for that organisation (see Question 7).

A corporate body can also be criminally liable for strict liability offences without having the culpability of its agents and employees attributed to it because mens rea is not an element of a strict liability offence.

 

Cartels

28. Are cartels prohibited in your jurisdiction? How are cartel offences defined? Under what circumstances can a corporate body be subject to criminal liability for cartel offences?

The Enterprise Act 2002 provides that an individual commits a criminal offence if he agrees with one or more persons to make or implement, or cause to be made or implemented, arrangements for "hardcore cartels". Such arrangements must relate to at least two undertakings and, if operating as intended by the parties, involve:

  • Price fixing.

  • Limiting production or supply of a good or service.

  • Market sharing.

  • Bid-rigging.

Before 1 April 2014 individuals could only be criminally liable if they entered into the arrangement "dishonestly", however it is no longer required to prove a criminal offence.

The offence is subject to exclusions contained in section 118A of the Enterprise Act 2002, which relate to the disclosure of specific information about the arrangements. No offence is committed if the arrangement is in order to comply with a legal requirement.

It is a defence to show that:

  • There was no intention to conceal the arrangements from customers or the Competition and Markets Authority.

  • Before making the arrangements, reasonable steps were taken to ensure that their nature would be disclosed to professional legal advisers for the purposes of obtaining advice about them before their making or implementation.

The maximum penalty for a cartel offence is five years imprisonment, an unlimited fine or both. Individuals may also be disqualified from acting as a director for up to 15 years and have assets confiscated under the Proceeds of Crime Act 2002.

Businesses are subject to a regulatory regime that prohibits cartels agreements, decisions and/or practices that affect trade or have as their object or effect the prevention, restriction or distortion of competition in the UK. Such agreements, decisions or practices are void but there is no corporate criminal liability unless the case is prosecuted as a fraud. Businesses found to have breached the regulatory regime can be subject to fines based on a percentage of global turnover. Civil actions may also be brought by customers who have suffered a loss because of the cartel.

As with other criminal offences, in Scotland, prosecutions must be brought by the Crown Office and Procurator Fiscal Service (COPFS). COPFS and the Competition and Markets Authority (CMA) agreed a Memorandum of Understanding in July 2014 (the MOU) regarding the investigation and prosecution of cartel offences. The MOU provides that CMA will conduct the initial investigation. Therefore, even if a suspicion is reported to the COPFS that a cartel offence has been committed, in the first instance COPFS will refer the matter to the CMA for investigation before taking further action. Where an offence involves Scotland and England and Wales, the CMA, COPFS and the SFO will liaise and agree the most appropriate jurisdiction in which to prosecute the criminal offence, applying the normal principles applicable to cross-jurisdictional offences.

The CMA's powers are modelled broadly on those available to the SFO under section 2 of the Criminal Justice Act 1987 and include:

  • Requiring a person under investigation or any other person who it has a reason to believe has relevant information:

    • to answer questions or otherwise provide information regarding any matter relevant to the investigation;

    • to produce specified documents or documents of a specified description that appear to the CMA to relate to any matter relevant to the investigation and provide an explanation of such documents.

  • To enter a premises under a warrant and seize or take steps to preserve any documents that appear to be relevant and to require any person to provide an explanation for such a document.

There are various safeguards to protect the party under investigation. For example:

  • Nobody can be compelled to disclose privileged information.

  • A statement made by an individual in response to a requirement to give an answer cannot be used as evidence against that person in a prosecution for a cartel offence, except for limited circumstances (for example, where he is also accused of making false or misleading statements, or making an inconsistent statement in relation to the prosecution of another offence).


 

Immunity and leniency

29. In what circumstances is it possible to obtain immunity/leniency for co-operation with the authorities?

General

A prosecutor may give a person immunity from prosecution if doing so would further the purpose of an investigation or prosecution of an offence (section 97, Police, Public Order and Criminal Justice (Scotland) Act 2006).

Discounts in sentences of up to a third are offered to companies that co-operate with the authorities and that plead guilty at the first available opportunity (usually by way of a "section 76 letter").

Bribery offences

The Crown Office & Procurator Fiscal Service (COPFS) operate corporate self-reporting initiatives which offer the opportunity for a self-reporting company to obtain a "civil settlement". No guarantees are given.

COPFS will accept reports from businesses that have discovered conduct within their organisation which can amount to an offence under the Bribery Act. COPFS will consider not prosecuting the business and instead refer the case to the Civil Recovery Unit (CRU) for civil settlement. COPFS will also consider reports relating to conduct that occurred before the Act came into force that would have constituted an analogous offence under the old law. The self-reporting regime in Scotland applies only to corporate bribery offences.

Cartels

The Competition and Markets Authority (CMA) offers lenient treatment to businesses or individuals that self-report involvement in cartel activity. Under this scheme, businesses can receive a substantially reduced financial penalty and individuals may avoid prosecution.

To qualify for leniency, applicants must:

  • Admit their involvement in unlawful cartel activity.

  • Co-operate fully with a CMA investigation.

  • Stop their involvement in the cartel.

Total immunity is available to the first member of the cartel who comes forward with relevant information and meets other conditions.

It should be noted that "No-action letters" cannot be issued in respect of offences committed in Scotland. However, the CMA will report the level of co-operation of relevant individuals to the Lord Advocate, who will give "serious weight" to any CMA recommendation that immunity should be granted and will also take cognisance of the CMA's published leniency guidance.

VAT, duty and export control breaches

HM Revenue and Customs can issue a compound penalty in respect of certain VAT, duty and minor export control breaches, offering the chance to settle a case which would otherwise be referred for prosecution (section 152, Customs & Excise Management Act 1979). Unlike in England, a compound penalty or settlement cannot be achieved once a case is being prosecuted on indictment in Scotland.

In compounded cases a settlement is made on the basis of:

  • Arrears of tax.

  • Interest.

  • A figure representing a penalty.

There is no maximum compound penalty limit.

Financial sector

The Financial Conduct Authority (FCA) offers a discount scheme for early settlement of enforcement cases, under which a financial penalty can be reduced by up to 30%, depending on the timing of the settlement.

 

Cross-border co-operation

30. What international agreements and legal instruments are available for local authorities?

Obtaining evidence

The UK (of which Scotland forms part) is a party to numerous cross-border co-operation treaties, including the:

  • EC Convention on Mutual Assistance in Criminal Matters between the member states 2000.

  • Mutual Legal Assistance Treaty with the United States 1994.

  • Harare Scheme in relating to Mutual Assistance in criminal matters 1986.

The UK regime for making and processing requests for mutual legal assistance is contained in the Crime (International Co-operation) Act 2003 (CICA). Prosecutors can request evidence from abroad (section 7, CICA).

In practice, requests by Scottish prosecutors are handled by the Crown Office & Procurator Fiscal Service's International Co-operation Unit (ICU). The ICU also deals with incoming requests from foreign states. Requests for assistance which fall out with the scope of CICA are processed by the National Crime Agency.

For further information on the UK regime, see Financial crime in the UK.

Seizing assets

In criminal proceedings where a confiscation order is anticipated, restraint orders can be placed on certain "realisable property" under the Proceeds of Crime Act (POCA). Where the realisable property is overseas, prosecutors can request assistance from foreign states in preventing the property being interfered with, and (where confiscation has been ordered) assistance in recovering or realising the value of the property (section 141, POCA).

The POCA 2002 (External Requests and Orders) Order 2005 allows the Lord Advocate corresponding powers to apply to the court at the request of foreign states to restrain assets in Scotland. The Criminal Justice (International Co-operation) Act 1990 (Enforcement of Overseas Forfeiture Orders) (Scotland) Order 2005 allows for the enforcement in Scotland of forfeiture orders made by courts in certain jurisdictions.

Sharing information

Although the international co-operation unit of COPFS has close links to regulators in other jurisdictions and will co-operate where possible, COPFS are unlikely to share information where there is only a suspicion that a crime has been committed.

Police Scotland however operates an intelligence database which they may on occasion share with other equivalent bodies in different jurisdictions.

 
31. In what circumstance will domestic criminal courts assert extra-territorial jurisdiction?

Scottish criminal courts can claim jurisdiction where any act forming part of the alleged criminal conduct takes place in Scotland. Historically Scottish courts have also claimed jurisdiction regardless of extra-territoriality for certain serious crimes committed abroad by Scottish citizens or residents such as piracy, murder and treason.

In general, without specific statutory authorisation, extra-territorial jurisdiction is limited to particularly serious offences where the accused person is a citizen or resident of Scotland.

Statutes such as the War Crimes Act 1991 follow this pattern, as does the Bribery Act in relation to persons with a "close connection" to the UK. However, section 7 of the Bribery Act gives extra-territorial reach without any requirement for such a connection. A number of other provisions apply extra-territorial jurisdiction to terrorism-related offences.

 
32. Does your jurisdiction have any statutes aimed at blocking the assertion of foreign jurisdictions within your territory? Are there statutes aimed at blocking the assertion of foreign jurisdictions within their territory?

Extradition

Extradition will be refused in Scotland if any of a number of grounds apply, for example, delay and "double jeopardy" (Extradition Act 2003).

Schedule 20 of the Crime and Courts Act 2013 (not yet in force) will amend the Extradition Act so that, where an offence has not yet been tried, and there is concurrent jurisdiction between the UK and the state requesting extradition, the court will decide whether it would be in "the interests of justice" to have the case tried in the UK, thus blocking the assertion of foreign jurisdiction. The court will consider questions of practicality, as well as the view of the prosecutor.

Protection of Trading Interests Act 1980

The Protection of Trading Act 1980 gives the Secretary of State power to block compliance with foreign law where it would control or regulate international trade in a way which damages the UK's interests.

The Act prohibits the disclosure of documentation or information in certain circumstances and contains restrictions on the enforceability of certain overseas judgments, including those for multiple damages. The powers under the Act are exercisable only by statutory instrument and have been used sparingly.

 

Whistleblowing

33. Are whistleblowers given statutory protection?

Whistleblowers are given statutory protection under the Public Interest Disclosure Act 1988. The Act provides that whistleblowers will be protected if they:

  • Believe that malpractice in the workplace is happening, has happened or will happen.

  • Reveal "qualifying disclosures", including criminal offences, failures to comply with legal obligations, threats to health and safety or miscarriages of justice.

  • Reveal disclosures in the correct way to the correct person in the public interest and in a reasonable belief that the information is substantially true.

 

Reform, trends and developments

34. Are there any impending developments or proposals for reform?

Significant reform of Scotland's criminal procedure and law is expected. The Scottish Government has introduced the Criminal Justice (Scotland) Bill. The legislation has been delayed due to significant concerns about the proposed abolition of the requirement that facts can only be proved by corroborated evidence. Scotland is one of the few countries in the world that still requires corroboration.

Proposed reforms in England and Wales to the law of corporate criminal liability for economic crimes may also be adopted in Scotland.

 

Market practice

35. What are the main steps foreign and local companies are taking to manage their exposure to corruption/corporate crime?

The introduction of the Bribery Act has led to companies focusing on anti-bribery compliance. In particular, with the oil and gas industry's appetite for exporting its expertise to new emerging markets, Scottish-based companies are carrying out extensive assessments of the risks posed to their business from operations in high risk markets and putting in place training programmes to address perceived bribery risks.

 

The regulatory authorities

Crown Office and Procurator Fiscal Service (COPFS)

W www.crownoffice.gov.uk

Status. The COPFS is Scotland's prosecution service, funded by the Scottish Government.

Principal responsibilities. The COPFS receives reports about crimes from the police or other reporting agencies and decides what action to take, including whether to prosecute. It has a key role in investigating and directing Police Scotland's investigation of crime and in seizing the proceeds of crime. The Serious and Organised Crime Division often deals with corporate crime cases.

Her Majesty's Revenue & Customs (HMRC)

W www.hmrc.gov.uk

Status. HMRC is a non-ministerial government department established by the Commissioners for Revenue and Customs Act 2005.

Principal responsibilities. HMRC is the UK's tax authority. It is responsible for investigating crime involving the taxes and other regimes it deals with but is not responsible for criminal prosecutions. It has the power to issue compound penalties in respect of certain offences. It is also the authority responsible for investigating breaches of some offences under trade sanctions.

Financial Conduct Authority (FCA)

W www.fca.gov.uk

Status. The FCA is an independent non-governmental body financed by the financial services firms it regulates. It is accountable to the UK Treasury and Parliament.

Principal responsibilities. The FCA regulates the UK financial services industry and has a wide range of rule-making, investigative and enforcement powers.

National Crime Agency (NCA)

W nationalcrimeagency.gov.uk

Status. The NCA is a non-ministerial government department, accountable to the Home Secretary and UK Parliament.

Principal responsibilities. The NCA is responsible for tackling serious and organised crime in the UK. The NCA's Economic Crime Command attempts to co-ordinate and improve communication between the SFO, FCA and other prosecutors of economic crime. In addition to having law enforcement and civil recovery powers, the NCA is intended to function as a financial intelligence unit and is the central authority for receiving suspicious activity reports in connection with suspected money laundering offences.

Serious Fraud Office (SFO)

W www.sfo.gov.uk

Status. The SFO is an independent government department, operating under the superintendence of the Attorney General. Generally, the SFO has jurisdiction in England and Wales (not Scotland). In theory, the SFO has jurisdiction to prosecute Scottish companies for Bribery Act offences, but in practice these cases are handled by COPFS.

Principal responsibilities. The SFO investigates and prosecutes cases of serious or complex fraud, bribery and corruption and pursues the proceeds of crime. It works closely with a range of other agencies in the UK and overseas. 

HM Treasury

W www.gov.uk/government/organisations/hm-treasury

Status. HM Treasury is a ministerial department of the UK Government and is responsible for financial sanctions.

Principal responsibilities. HM Treasury is responsible for the implementation and administration of international financial sanctions in effect in the UK and for the licensing exemptions to financial sanctions.

Department for Business, Innovation and Skills (BIS)

W www.gov.uk/government/organisations/department-for-business-innovation-skills

Status. BIS is a ministerial department of the UK government and has responsibility for trade sanctions.

Principal responsibilities. BIS has licensing and enforcement powers in respect of the exporting and trading in controlled strategic goods which it exercises through the Export Control Organisation (ECO) (which forms part of BIS).



Online resources

Legislation

W www.legislation.gov.uk

Description. Publishes all UK legislation, including Scottish legislation. Maintained by National Archives for HM Government. Potentially out of date, need to search for lists of recent amendments (the lists themselves may be out of date).

Cases

W www.scotcourts.gov.uk

Description. Publishes Scottish court judgments and opinions where a significant point of law or public interest is involved. Maintained by Scottish Court Service.

W www.scottishlawreports.org.uk

Description. Provides access to various free sources of Scottish case reports. Maintained by Scottish Council of Law Reporting (charitable company established by Scottish legal profession to manage publication of Scots law materials).



Contributor profiles

Tom Stocker, Partner

Pinsent Masons LLP

T +44 131 777 7362
F +44 131 777 7003
E tom.stocker@pinsentmasons.com
W www.pinsentmasons.com

Professional qualifications. LLB (Hons); Dip LP Scotland, 1999; England and Wales, 2003

Areas of practice. Corporate crime, sanctions and export controls; health and safety.

Recent transactions

  • Abbot Group Limited: advising Abbot on an internal investigation into suspicions of overseas bribery, self-reporting to the criminal authorities and negotiating a civil settlement with the Crown Office and Procurator Fiscal Service and Civil Recovery Unit.
  • Acting in another corporate self-report of bribery to the Crown Office and Procurator Fiscal Service.
  • Rangers International Football Club plc: independent lawyer for a corporate investigation into a number of serious allegations.
  • Aerospace exporter: acting in a voluntary disclosure to HMRC and HM Treasury of export control and sanctions breaches which resulted in no enforcement action being taken.
  • Acting for a major newspaper group in a police investigation into data protection offences.
  • Industrial machinery exporter: lead partner in an audit committee investigation into allegations of overseas bribery, advising on money laundering disclosures, and self-reporting.
  • Facilities management company: acting in a police investigation into allegations of fraud and bribery.
  • Advising an oil and gas service company in investigating breaches of EU sanctions and UK export controls. A voluntary disclosure to HM Revenue & Customs led to no enforcement action being taken.
  • Advising an exporter on whether it was required to seek prior authorisation for the receipt of payments which originated from Iranian customers and on making a voluntary disclosure to HM Treasury.
  • Advising numerous exporters on the application of EU and UK sanctions/export controls, applications for licences to export, and the making of notifications to HM Treasury in respect of the receipt of funds covered by financial sanctions.

Professional associations/memberships. Fraud Advisory Panel; Scottish Corporate Crime Centre; Institute of Occupational Health & Safety (IOSH).

Stacy Keen, Senior Associate

Pinsent Masons LLP

T +44 141 249 5443
F +44 131 777 7003
E stacy.keen@pinsentmasons.com
W www.pinsentmasons.com

Professional qualifications. LLB (Hons); Dip LP Scotland, 2005

Areas of practice. Corporate crime; bribery sanctions and export controls; health and safety

Recent transactions

  • Conducting an investigation on behalf of a multinational provider of services in the oil and gas industry into allegedly inappropriate payments made by its subsidiary in return for the award of a contract.
  • Representing a film director during an interview with HM Revenue and Customs in respect of tax evasion.
  • Advising an advanced manufacturer on whether or not offences had been committed under the Bribery Act 2010 and subsequently submitting a self-report to the criminal authorities and negotiating a civil settlement.
  • Negotiating with the Crown Office and Prosecutor Fiscal Service in relation to charges brought against a major high street gaming retailer under the Environmental Protection Act 1990. Successful in convincing the prosecutor to drop the charges.
  • Assisting with the representation of the first company prosecuted under the Corporate Manslaughter and Corporate Homicide Act 2007.
  • Advising a building and civil contractors on the prospects of successfully appealing a prohibition notice issued by the Health and Safety Executive.
  • Carrying out an export control and sanctions compliance review on behalf a chemical products exporter and advising on policies and procedures to be strengthened and implemented.
  • Acting on behalf of a UK exporter of engineering solutions following the company realising it may have exported military items without the requisite licences, including advising on the company’s review and on the making of a voluntary disclosure to HM Revenue & Customs.
  • Advising exporters operating in a range of sectors on the application of EU and UK financial and trade sanctions, with particular focus on Russia and Iran, on submitting applications for licences to export and the making of notifications to HM Treasury in respect of the receipt of funds covered by financial sanctions.
  • Regularly advising on disclosures to criminal authorities, including HM Treasury, HM Revenue & Customs, the National Crime Agency, the Serious Fraud Office and the Crown Office and Procurator Fiscal Service.

Professional associations/memberships. Fraud Advisory Panel; Institute of Occupational Health & Safety and Health and Safety Lawyers' Association.


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