Financial crime in the UK (England and Wales): overview

A Q&A guide to financial and business crime law in the UK (England and Wales).

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 global guide to financial and business crime law. For a full list of jurisdictional Q&As visit www.practicallaw.com/corporatecrime-guide.

Contents

Fraud

Regulatory provisions and authorities

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

The main fraud offences are contained in the Fraud Act 2006 (Fraud Act) and the Theft Act 1968 (Theft Act). Additional offences exist in specific statutes such as companies and tax legislation.

Offences

2. What are the specific offences that can be used to prosecute corporate or business fraud?

Fraud Act offences

The Fraud Act contains three main fraud offences:

  • Fraud by false representation (section 2). A representation may be express or implied. It is false if it is untrue or misleading and the person making it knows that this is, or might be, the case.

  • Fraud by failing to disclose information where there is a legal duty to disclose it (section 3).

  • Fraud by abuse of position (section 4). Abuse of position applies where a person occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person. A person may abuse that position through an act or omission.

Common to all three Fraud Act offences is the requirement that the person act dishonestly, intending to make a gain for himself or another or to cause loss to another (or expose another to a risk of loss).

The Fraud Act contains additional offences relating to the possession, manufacture or supply of articles for use in frauds (sections 6 and 7), and obtaining services dishonestly (section 11).

Theft Act offences

The Theft Act contains the offences of:

  • False accounting (section 17).

  • False statements by company directors (section 19).

For more information, see Questions 31 to 33, Financial record keeping.

Conspiracy to defraud

It remains an offence at common law to conspire, with one or more persons, to deprive a person of something which belongs to him or to which he is entitled. Since it does not matter if the intended fraud was never in fact committed, conspiracy to defraud is a popular charge with prosecutors where the evidence of actual fraud taking place is complex or weak. The prosecution must prove the existence of an agreement and that the defendant acted dishonestly.

The above offences are capable of being committed by individuals and corporates. For the circumstances in which criminal liability can attach to a corporate, see Question 35, Corporate liability.

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? Please identify any differences between criminal and regulatory investigations.

Authorities

Serious or complex fraud is investigated by the Serious Fraud Office (SFO). Fraud cases that do not fall into this category are investigated by the police or, in the case of tax fraud, by Her Majesty's Revenue and Customs (HMRC).

Police powers are governed by the Police and Criminal Evidence Act 1984 (PACE) and include powers of arrest, detention, search and seizure, and surveillance. The SFO has additional powers to compel the provision of documents or information (see below, Powers of interview and Powers of search/to compel disclosure).

The Financial Conduct Authority (FCA), the UK's financial services regulator, also has as one of its statutory objectives the reduction of financial crime, which includes fraud. Regulated firms are required to have adequate policies and procedures in place to counter the risk that they might be used to further financial crime. Individuals authorised by the FCA must act with integrity in carrying out their accountable functions. The FCA is empowered to enforce against firms and individuals for breaches of the relevant rules. The Prudential Regulation Authority (PRA), which is responsible for the prudential regulation and supervision of various financial institutions, has similar rules and means of enforcement to the FCA.

The FCA's 2015 Financial Crime Guide provides guidance to firms on steps they can take to reduce their financial crime risk across a number of areas, including fraud. The guidance is non-binding but is an indicator of the FCA's expectations and provides examples of good and poor practice.

For more information on the prosecuting authorities, see box: The authorities.

Prosecution powers

The SFO has powers of prosecution as well as investigation. Cases investigated by the police and HMRC are prosecuted by the Crown Prosecution Service (CPS). The FCA has criminal prosecution powers and can exercise these where doing so is consistent with its statutory objectives. In particular, it prosecutes offences involving the financial markets, such as market manipulation and insider dealing (see Questions 17-19, Insider dealing and market abuse), but it is also empowered to prosecute other offences. The SFO and the FCA, along with a number of other prosecuting agencies, have agreed guidelines to assist in deciding how cases should be dealt with if they are of potential interest to more than one agency.

Powers of interview

The police, the SFO and other relevant investigatory bodies such as HMRC have the power to interview suspects under caution. In addition, the SFO has the power to require a person to provide information for the purpose of an investigation (section 2, Criminal Justice Act 1987 (CJA)). This can take the form of an interview, and failure to comply without a reasonable excuse is a criminal offence. Certain protections apply, however, in terms of how such information can be used (see Safeguards). These so-called "section 2 powers" are not shared by the police, although the CPS has the power to issue disclosure notices in connection with investigations into certain offences (section 62, Serious Organised Crime and Police Act 2005). This power broadly mirrors the SFO's section 2 powers. Non-compliance with a disclosure order is a criminal offence, but the same protections apply in terms of how the information can be used.

Powers of search/to compel disclosure

The SFO has the power to issue a notice in writing requiring a person specified in the notice to provide documents which appear to relate to any matter relevant to the investigation of serious or complex fraud, and which are specified in the notice (section 2, CJA). The notice should list the categories or types of documents required but need not be specific as to either, and notices are often very widely drawn. Where required documents are produced, the SFO may take copies or extracts from them and require an explanation of the documents. A section 2 notice does not require a court order. Failure to comply without reasonable excuse is a criminal offence.

The issuing of a section 2 notice overrides any obligations of confidentiality or secrecy attaching to the information or to the holder, thereby giving protection to the recipient from an action for breach of confidence. Section 2 notices do not, however, override legal professional privilege.

The SFO, police and HMRC can apply to the Magistrates' Court for a warrant to search premises and seize evidence relating to a criminal investigation. In addition, the CPS has the power to issue disclosure notices in connection with investigations into certain offences (section 62, Serious Organised Crime and Police Act 2005). This power broadly mirrors the SFO's section 2 powers and non-compliance is a criminal offence.

Powers to obtain evidence

The powers of the authorities to obtain evidence within the UK are set out above (see Powers of Interview and Powers of search/to compel disclosure). For powers to obtain evidence abroad, see Question 38, Cross-border co-operation.

Power of arrest

Police powers of arrest are contained in section 24 of PACE. The police must have reasonable grounds to suspect that an offence has been committed, and to believe that an arrest is necessary for one of the specified reasons. The reason most frequently relied on is that the arrest is necessary "to allow the prompt and effective investigation of the offence or of the conduct of the person in question" (section 25(5)(e), PACE).

The National Crime Agency (NCA) and HMRC also have powers of arrest, but not the SFO. Arrests on behalf of the SFO are carried out by police.

Where there is as yet insufficient evidence to charge but the detention of a suspect can no longer be justified, the suspect must be released. The police can release the suspect on bail where either:

  • There is insufficient evidence to charge and a need for further investigation.

  • The police consider there is sufficient evidence to charge but the case has been referred to the CPS for a charging decision.

There is currently no limit on the period for which a person can be kept on pre-charge bail, although this is about to change. The Policing and Crime Bill 2015 (the Bill) contains provisions that would require Magistrates' Court approval for any pre-charge bail to exceed three months (or six months in SFO investigations). The Bill is currently before Parliament and is expected to come into force in 2017.

Such conditions can be attached to the bail as are considered necessary for the person's own protection or for the purpose of ensuring that the person either:

  • Surrenders to custody.

  • Does not commit an offence on bail.

  • Does not interfere with witnesses or otherwise obstruct the course of justice.

Conditions typically imposed include residence at a particular address and a requirement that the defendant surrender his or her passport. Applications to remove or vary bail conditions can be made to the Magistrates' Court.

 
4. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?

The decision whether or not to charge a suspect is made by the prosecuting authority, generally the CPS or, for serious or complex fraud, the SFO. Whichever authority it falls to, the test to be applied is the "Full Code Test" in the Code for Crown Prosecutors.

The Full Code Test has two stages:

  • Evidential stage. Prosecutors must first ask themselves whether there is sufficient evidence to provide a realistic prospect of conviction.

  • Public interest stage. Only where there is sufficient evidence to justify a prosecution, must prosecutors then consider whether a prosecution is required in the public interest.

Factors tending in favour of and against prosecution are set out in the Code for Crown Prosecutors.

Having applied the Full Code Test, the prosecuting authority may decide to take no further action. The police and CPS also have discretion to administer a "caution" as an alternative to charge, although this will rarely be considered appropriate in cases of financial crime.

Since 2014 the SFO has had the power to enter into Deferred Prosecution Agreements (DPAs). For more on DPAs, see Question 37, Immunity and leniency.

Conviction and sanctions

5. What are the sanctions for participating in corporate or business fraud?

Civil/administrative proceedings or penalties

For the regulatory sanctions available to the FCA, see Question 22, Insider dealing and market abuse: Penalties.

Criminal proceedings

Right to bail

In criminal proceedings there is a rebuttable presumption in favour of bail. The grounds for withholding bail are set out in the Bail Act 1976.

As with pre-charge bail (see above, Power of arrest), such conditions can be attached to the bail as are considered necessary for the person's own protection or for the purpose of ensuring that the person either:

  • Surrenders to custody.

  • Does not commit an offence on bail.

  • Does not interfere with witnesses or otherwise obstruct the course of justice.

Conditions typically imposed include residence at a particular address and a requirement that the defendant surrender his or her passport. Applications to remove or vary bail conditions can be made to the Magistrates' Court or, once a case has been sent to the Crown Court, to the Crown Court. Failure to surrender to custody without reasonable excuse is a criminal offence. Breach of any bail condition can result in an arrest and the withdrawal of bail.

Penalties

The three main Fraud Act offences, the offence of making or supplying articles for use in frauds and the common law offence of conspiracy to defraud are all punishable by up to ten years' imprisonment and/or a fine. The offences of obtaining services dishonestly and possessing articles for use in frauds are punishable by up to five years' imprisonment and/or a fine.

Corporate offenders convicted of financial crime will be sentenced according to the ten-step process set out in the UK Sentencing Council's Definitive Guideline for Fraud, Bribery and Money Laundering Offences, which came into force on 1 October 2014.

A Deferred Prosecution Agreement (DPA) may also be available for cases involving fraud. For more on DPAs, see Question 37, Immunity and leniency.

Civil suits

Victims of financial crime may be able to seek redress through the civil courts. Currently there is no English law equivalent of a US class action. However, the English courts do have capacity to deal with multiparty claims. Where two or more claims can be "conveniently disposed of in the same proceedings" (Civil Procedure Rules (CPR) 7.3), multiple claimants can be added to the same claim form. Alternatively, parties who have claims that have "common or related issues of fact or law" can apply to the court to have their claims managed by a group litigation order (CPR 19.10 to 19.15). Group litigation of this kind is uncommon, in part due to the associated costs.

In some civil cases, a claimant may be awarded punitive damages in addition to any compensatory damages. The aim of punitive damages is to punish the defendant and deter similar conduct in future. Punitive damages may be awarded in cases where the defendant's conduct has been calculated by him to make a profit for himself, which might well exceed the compensation payable to the claimant (Rookes v Barnard [1964] AC 1129). However, the claimant will not be awarded punitive damages where the defendant has already been punished for the conduct in criminal proceedings.

Safeguards

6. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?

The provisions of PACE and related codes of practice confer on an arrested and detained person the right to consult with a lawyer at any time, and to have a solicitor present during interview. There is no statutory right to legal representation for those being interviewed as witnesses under powers of compulsion (for example under the SFO's "section 2" powers), and the SFO is increasingly seeking to impose restrictions on the participation of lawyers in such interviews.

English law recognises two forms of legal professional privilege. "Legal advice privilege" attaches to confidential communications passing between a lawyer and a client for the purpose of giving or receiving legal advice. "Litigation privilege" attaches to communications passing between a lawyer and a client (and also between a lawyer or client and a third party) for the sole or dominant purpose of preparing for adversarial litigation which is either in progress or in contemplation.

In criminal investigations the privilege against self-incrimination is preserved by a suspect's right to silence. This is a qualified right, however, since a failure to answer questions in an interview under caution can lead to adverse inferences being drawn at trial.

Where the SFO interviews a witness under its "section 2 powers", the contents of the interview cannot be used in evidence against the provider of the information in any subsequent criminal trial, except in very limited circumstances. "Section 2 powers" (or their equivalents in other statutes) cannot compel the provision of information and documents that are legally privileged. The criminal courts have a general discretion to exclude evidence under section 78 of PACE. It must appear to the court that, in all the circumstances (including the circumstances in which the evidence was obtained), the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it.

Administrative decisions, including those taken by courts and prosecutors, may be subject to challenges by way of judicial review. However, the appropriate route for challenging a decision to prosecute is normally through the trial process itself, as an abuse of process or an application to dismiss.

 

Bribery and corruption

Regulatory provisions and authorities

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

The Bribery Act 2010 (Bribery Act) is the primary piece of bribery and corruption legislation in the UK. The Bribery Act came into force on 1 July 2011 and only applies to conduct which took place on or after this date. Conduct before this date is subject to the pre-existing law, specifically:

  • Common law offences of bribery and accepting a bribe.

  • Public Bodies Corrupt Practices Act 1889.

  • Prevention of Corruption Act 1906.

The Ministry of Justice has issued guidance in relation to a specific offence under the Bribery Act of a commercial organisation failing to prevent bribery (section 7). There is a complete defence to this offence if the organisation has adequate procedures in place to prevent bribery.

In November 2015 the SFO secured the UK's first Deferred Prosecution Agreement (DPA) with ICBC Standard Bank plc (Standard Bank), which admitted liability for failing to prevent bribery in its Tanzanian subsidiary, Stanbic Bank Tanzania. Under the DPA Standard Bank agreed to pay US$32.5 million, which included the SFO's costs and US$7 million in compensation to the Government of Tanzania. The DPA will last for three years, during which time the indictment against Standard Bank will remain suspended provided the company meets certain conditions. These include cooperating in the investigation and prosecution of culpable individuals, and conducting an independent review of its internal anti-corruption compliance controls.

In December 2015, the SFO secured its first corporate plea to the section 7 offence. Sweett Group plc pleaded guilty to failing to prevent the payment of bribes in Dubai, in relation to a building contract. In February 2016, Sweett Group was ordered to pay GB£2.25 million (a GB£1.4 million fine and GB£851,152.23 in confiscation) plus GB£95,031.97 towards the SFO's costs.

In July 2016, the SFO obtained its second DPA against a UK small and medium-sized enterprise (SME), known as "XYZ Ltd", that cannot currently be named due to related ongoing legal proceedings. The SME had been charged with conspiracy to corrupt and failure to prevent bribery. XYZ Ltd was ordered to pay GB£6,553,085, comprising a GB£6,201,085 disgorgement of gross profits and a GB£352,000 financial penalty. GB£1,953,085 of the disgorgement will be paid by the SME's US-registered parent company as a repayment of a significant proportion of the dividends received from the SME over the indictment period.

The DPA will last for three to five years to allow time for the financial penalties to be paid. During this time, the indictment against XYZ Ltd will remain suspended if the company meets certain conditions. These include:

  • Cooperating fully with the SFO

  • Providing a report addressing:

    • all third party intermediary transactions; and

    • the completion and effectiveness of its existing anti-bribery and corruption controls, policies and procedures within twelve months of the DPA and every twelve months during its duration.

According to media reports, there are a number of ongoing SFO investigations and prosecutions under both the old corruption legislation and the Bribery Act (Rolls-Royce, ENRC, Alstom, GPT, FH Bertling, Unaoil, Airbus and GSK).

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

There are a number of international anti-corruption conventions that apply in England and Wales:

  • 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

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

Foreign public officials

Section 6 of the Bribery Act is a standalone offence of bribery of a foreign public official. The offence is committed where a person offers, promises or gives a financial or other advantage to a foreign public official with the intention of influencing the official in the performance of his or her official functions. The person offering, promising or giving the advantage must also intend to obtain or retain business, or an advantage in the conduct of business, by doing so. However, the offence is not committed where the official is permitted or required by the applicable written law to be influenced by the advantage.

A "foreign public official" includes all elected and appointed officials holding a legislative, administrative or judicial position of any kind in a country or territory outside the UK. It also includes any person performing public functions in any branch of the national, local or municipal government or exercising a public function for any public agency or public enterprise of such a country or territory, such as professionals working for public health agencies and officers exercising public functions in state owned enterprises. Foreign public officials can also be officials or agents of a public international organisation, such as the UN or the World Bank.

Under UK law, facilitation payments are illegal.

Domestic public officials

The Bribery Act does not contain a specific offence in relation to domestic public officials. Such conduct is covered by the primary offence of bribing another person (see below, Private commercial bribery).

Private commercial bribery

It is an offence for a person to offer, promise or give a financial or other advantage to another person in one of two cases (section 1, Bribery Act):

  • The bribe payer intends the advantage to bring about the improper performance by another person of a relevant function or activity, or to reward such improper performance.

  • The bribe payer knows or believes that the acceptance of the advantage offered, promised or given, in itself, constitutes the improper performance of a relevant function or activity.

Section 2 creates an equivalent offence relating to being bribed.

"Improper performance" means performance which amounts to a breach of an expectation that a person will act in good faith, impartially, or in accordance with a position of trust.

The offence applies to bribery relating to any function of a public nature, connected with a business, performed in the course of a person's employment or performed on behalf of a company or another body of persons. Therefore, bribery in both the public and private sectors is covered.

For the purposes of deciding whether a function or activity has been performed improperly, the test is what a reasonable person in the UK would expect in relation to the performance of that function or activity. Where the performance of the function or activity is not subject to UK law (for example, it takes place in a country outside the UK), any local custom or practice must be disregarded unless it is permitted or required by the written law applicable to that particular country.

All of the above offences can be committed by corporate bodies subject to the "identification principle" (see Question 35, Corporate liability). This can be a challenging threshold for any prosecutor to meet, as evidence of acts by a company's "controlling mind" is often difficult to obtain. This is one of the reasons behind the introduction of the strict liability corporate offence (section 7, Bribery Act).

Defences

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

There are certain limited defences to sections 1 and 2 of the Bribery Act if the conduct was a necessary part of exercising a function on behalf of an intelligence service or the armed forces.

An organisation will have a defence to the section 7 offence of failure to prevent bribery if it can show that it had adequate procedures in place to prevent bribery.

The Ministry of Justice guidance accepts in relation to facilitation payments that the common law defence of duress may be available if such payments are made to protect against loss of life, limb or liberty.

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

A commercial organisation is liable if a person associated with it bribes another person intending to obtain or retain business or a business advantage for the organisation (section 7, Bribery Act).

A person associated with a commercial organisation is a person who performs services for it or on its behalf. This person can be an individual or an incorporated or unincorporated body and could include agents, subsidiaries, distributors, suppliers and joint venture partners. According to the guidance, which has deliberately been drafted widely, whether a person is performing services for an organisation is to be determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between that person and the organisation.

Enforcement

12. 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? Please identify any differences between criminal and regulatory investigations.

Authorities

According to the UK Government Anti-Corruption plan published in December 2014, there are a range of agencies involved in the law enforcement response to corruption. The National Crime Agency (NCA) was established in October 2013 and oversees the law enforcement response to bribery and corruption. It works closely with law enforcement and criminal justice partners, including:

  • Serious Fraud Office (SFO), which leads on serious or complex and overseas cases of bribery and corruption.

  • Regional Organised Crime Units and local police forces, both of which deal with domestic corruption cases (except law enforcement corruption).

  • Crown Prosecution Service, which advises on investigations and conducts all relevant prosecutions, other than those brought by the SFO.

  • Police Scotland and the Police Service of Northern Ireland (PSNI).

  • Financial regulators, such as the Financial Conduct Authority (FCA). Investigations by the FCA focus on lapses of systems and controls by the regulated entity relating to bribery.

For more information on the prosecuting authorities, see box: The authorities.

Prosecution powers

See Question 3, Prosecution powers.

Powers of interview

See Question 3, Powers of interview.

Powers of search/to compel disclosure

See Question 3, Powers of search/to compel disclosure.

Where it appears that a Bribery Act offence may have been committed, the SFO's powers to compel disclosure of information and documents under section 2 of Criminal Justice Act 1987 (CJA) are exercisable even before the investigation, for the purposes of determining whether to start an investigation (section 2A, CJA).

Powers to obtain evidence

For powers to obtain evidence within the UK, see Question 3, Powers of Interview, Powers of search/to compel disclosure. For powers to obtain evidence abroad, see Question 38, Cross-border co-operation.

Power of arrest

See Question 3, Power of arrest.

Court orders or injunctions

The Proceeds of Crime Act 2002 (POCA) provides the legislative framework for the granting of restraint and confiscation orders over assets in UK criminal proceedings.

For further information on restraint proceedings, see Question 38, Cross-border co-operation: Seizing assets.

Also under Part 5 of POCA, civil recovery proceedings can be instituted to recover assets and funds deemed to be the proceeds of crime. Any benefit attributable to bribery and corruption could be recovered through the civil courts, with no upper limit. Before Deferred Prosecution Agreements became available as an enforcement tool in the UK (see Question 37, Immunity and leniency), civil recovery orders were used by the SFO to settle a number of overseas bribery cases.

 
13. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?

As an investigator and prosecutor, the SFO is empowered (like the CPS) to make charging decisions. It must apply the "Full Code Test" in the Code for Crown Prosecutors (see Question 4, Which authority makes the decision to charge and on what basis is that decision made). Charging decisions relating to NCA or police investigations are taken by the CPS.

Conviction and sanctions

14. What are the sanctions for participating in bribery and corruption?

Civil/administrative proceedings or penalties

Regulated businesses must comply with the Financial Conduct Authority's Principles for Businesses and may be enforced against for failing to have in place appropriate checks and controls to guard against the risk of bribery and corruption.

For the regulatory sanctions available to the FCA, see Question 22, Penalties.

Criminal proceedings or penalties

Individuals convicted of bribery offences can be imprisoned for up to ten years and/or receive an unlimited fine. Companies convicted of bribery can receive an unlimited fine. These fines are calculated under the Sentencing Council's Definitive Guideline for Fraud, Bribery and Money Laundering Offences which came into force on 1 October 2014.

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

A Deferred Prosecution Agreement (DPA) may be available in respect of offences under the Bribery Act. For more on DPAs, see Question 37, Immunity and leniency.

Right to bail

Bail is available pre- and post-charge. For pre-charge bail see Question 3, Arrest. For post-charge bail see Question 5, Criminal proceedings.

Safeguards

15. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?

See Question 6, Safeguards.

Tax treatment

16. 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

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

The criminal insider dealing offence is contained in section 52 of the Criminal Justice Act 1993.

The criminal market manipulation offences are contained in Part 7 of the Financial Services Act 2012.

The civil market abuse regime is governed by Part 8 of the Financial Services and Markets Act 2000.

As a result of Regulation (EU) 596/2014 on market abuse (Market Abuse Regulation), which came into force in July 2016, there have been a number of amendments to domestic legislation governing market abuse. The detail of the Market Abuse Regulation is outside the scope of this Guide, but key amendments to the main domestic offences and defences are reflected below.

Offences

18. What are the specific offences that can be used to prosecute insider dealing and market abuse?

Insider dealing

Under section 52 of the Criminal Justice Act 1993 (CJA) there are three ways of committing an offence of insider dealing:

  • A person in possession of inside information deals in price-affected securities.

  • A person in possession of inside information encourages another to deal in price-affected securities.

  • A person discloses inside information other than in the proper performance of the functions of his employment.

The following conditions must also be satisfied (section 62, CJA):

  • In relation to the dealing offence:

    • the insider (or professional intermediary relied on) was within the UK at the time of the dealing; or

    • the market on which the dealing occurred is regulated in the UK.

  • In relation to the encouraging and disclosing offences:

    • the insider was within the UK at the time of the disclosure or encouragement; or

    • the recipient of the information or encouragement was within the UK at the time.

Information is inside information if it meets the following conditions:

  • It relates to particular securities, or to a particular issuer or issuers of securities.

  • It is specific or precise.

  • It has not been made public.

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

The insider dealing offence can only be committed by individuals and does not apply to corporate entities.

Market manipulation

Under Part 7 of the Financial Services Act 2012 (FSA), it is an offence to:

  • Make misleading statements (section 89, FSA).

  • Create misleading impressions (section 90, FSA).

  • Make misleading statements in relation to benchmarks (section 91, FSA).

Misleading statements

A person commits an offence if he makes a statement or conceals material facts with the intention of inducing, or is reckless as to whether his conduct may induce another person, either to (section 89, FSA):

  • Enter into or offer to enter into, or to refrain from entering or offering to enter into, a relevant agreement.

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

The person must know that, or be reckless as to whether, the statement is false or misleading, or have dishonestly concealed the material facts.

Misleading impressions

A person commits an offence if he does an act or engages in a course of conduct which creates a false or misleading impression as to the market in, or the price or value of, any relevant investments. The person must both:

  • Intend to make the impression.

  • Intend:

  • to induce another person by making the impression to acquire, dispose of, subscribe for or underwrite the investments, or to refrain from doing so; or to exercise, or refrain from exercising, any rights conferred by the investments; or

  • to make a gain for himself or another (or cause loss to another), or be aware that it is likely to have that result, knowing that the impression is false or misleading (or be reckless as to whether it is).

Misleading statements in relation to benchmarks

There are two separate offences in relation to manipulating benchmarks, one capturing direct manipulation and the other capturing indirect manipulation.

Under section 91(1) FSA, a person who makes a false or misleading statement to another person commits an offence if all of the following criteria are met:

  • He makes the statement in the course of arrangements for the setting of a relevant benchmark.

  • He intends that the statement should be used by the recipient for the purpose of the setting of a relevant benchmark.

  • He knows that the statement is false or misleading, or is reckless as to whether it is.

Under section 91(2) FSA, a person who does any act or engages in any course of conduct which creates a false or misleading impression as to the price or value of any investment, or as to the interest rate appropriate to any transaction, commits an offence if all of the following criteria are met:

  • He intends to create the impression.

  • The impression may affect the setting of a relevant benchmark.

  • He knows that the impression is false or misleading, or is reckless as to whether it is.

  • He knows that the impression may affect the setting of a relevant benchmark.

Unlike the insider dealing offence, the market manipulation offences are capable of being committed by individuals and corporates. For the circumstances in which criminal liability can attach to a corporate, see Question 35, Corporate liability.

Civil market abuse

In addition to the criminal offences outlined above, sections 123A to 123C of the Financial Services and Markets Act 2000 empower the FCA to impose sanctions in cases of market abuse. Market abuse in this context is a contravention of Articles 14 or 15 of the Market Abuse Regulation, which together prohibit insider dealing, unlawful disclosure of inside information and market manipulation. As was the case before the Market Abuse Regulation came into force, the types of behaviour that constitute insider dealing and market manipulation in the regulatory sphere are framed slightly differently from the criminal market abuse offences and operate according to a lower standard of proof.

Inside information is information of a precise nature that:

  • Has not been made public.

  • Relates directly or indirectly to one or more issuers or to one or more financial instruments.

  • Is likely to have a significant effect on the prices of those financial instruments or of related derivative instruments, if it were made public.

The Market Abuse Regulation applies to a wider range of markets and trading venues than the previous regime.

Defences

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

Insider dealing

It is a defence to the criminal "dealing" or "encouraging" offences if the accused can show that the:

  • Person did not at the time expect the dealing to result in a profit attributable to the information.

  • Person believed at the time, on reasonable grounds, that the information had been or would be disclosed widely enough to ensure that none of those taking part in the dealing would be prejudiced by not having it.

  • Person would have done what he did even if he had not had the information.

  • Person acted in good faith in the course of his business as a market maker, or his employment in the business of a market maker.

  • Information which the person had as an insider was market information, and it was reasonable for an individual in his position to have acted as he did despite having that information as an insider at the time.

  • Person acted in conformity with Article 5 (exemption for buy-back programmes and stabilisation) of the Market Abuse Regulation and any directly applicable EU regulation made under that article.

It is a defence to the criminal "disclosing" offence if the accused can show that either:

  • The insider did not expect the other to deal in securities because of the disclosure.

  • If he did have such an expectation, he did not expect a profit attributable to that information.

Market manipulation

Misleading statements. It is a defence if the accused can show that the statement was made in conformity with either:

  • Price stabilisation rules.

  • Control of information rules.

  • The relevant provisions of Article 5 (exemption for buy-back programmes and stabilisation) of the Market Abuse Regulation .

Misleading impressions. It is a defence if the accused can show that either:

  • He reasonably believed that his conduct would not create an impression that was false or misleading as to the market in, or the price or value of, any relevant investments.

  • He acted or engaged in the conduct for the purpose of stabilising the price of investments, and in conformity with price stabilising rules.

  • He acted or engaged in the conduct in conformity with control of information rules.

  • He acted or engaged in the conduct in conformity with the relevant provisions of Article 5 (exemption for buy-back programmes and stabilisation) of the Market Abuse Regulation.

Misleading statements in relation to benchmarks. In proceedings under section 91(1) of the Financial Services Act 2012 (direct manipulation), it is a defence if the accused can show that the statement was made in conformity with either:

  • Control of information rules.

  • The relevant provisions of Article 5 (exemption for buy-back programmes and stabilisation) of the Market Abuse Regulation.

In proceedings under section 91(2) of the Financial Services Act 2012 (indirect manipulation), it is a defence for a person to show that either:

  • He acted or engaged in the conduct for the purpose of stabilising the price of investments and in conformity with price stabilising rules.

  • He acted or engaged in the conduct in conformity with control of information rules.

  • He acted or engaged in the conduct in conformity with the relevant provisions of Article 5 (exemption for buy-back programmes and stabilisation) of the Market Abuse Regulation.

Civil market abuse

The Market Abuse Regulation contains a number of provisions setting out conduct that does not amount to market abuse. These include, amongst others:

  • Article 5 (exemption for buy-back programmes and stabilisation).

  • Article 6 (Exemption for monetary and public debt management activities on behalf of Member States).

  • Article 13 (accepted market practices, as established by the relevant regulator).

Enforcement

20. 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? Please identify any differences between criminal and regulatory investigations.

Authorities

The leading enforcement authority in relation to market abuse, both in the criminal and regulatory areas, is the Financial Conduct Authority (FCA).

For more information on the prosecuting authorities, see box: The authorities.

Prosecution powers

In addition to its regulatory functions, the FCA has the power to investigate and prosecute the criminal offences of insider dealing and market manipulation.

Powers of interview

Under Part 11 of the Financial Services and Markets Act 2000, the FCA has wide powers to compel the provision of documents or information. These are broadly equivalent to the SFO's "section 2" powers and afford similar protections for those who are interviewed under compulsion. Failure to comply with a requirement to provide information, including by way of interview, is treated as a contempt of court.

The FCA also has a number of criminal powers equivalent to those of the police and other criminal bodies, including the power to interview suspects under caution and to apply for a warrant to enter premises for the purposes of search and seizure.

Powers of search/to compel disclosure

Under Part 11 of the Financial Services and Markets Act 2000, the FCA has wide powers to compel the provision of documents or information. Failure to comply with such a requirement is treated as a contempt of court. The FCA cannot, however, compel the disclosure of legally privileged communications.

Powers to obtain evidence

For powers to obtain evidence within the UK see Powers of Interview and Powers of search/to compel disclosure. For powers to obtain evidence abroad, see Question 38, Cross-border co-operation.

Power of arrest

FCA investigators do not have a power of arrest. Arrests on behalf of the FCA are carried out by police (see Question 3, Power of arrest).

Court orders or injunctions

The Proceeds of Crime Act 2002 (POCA) provides the legislative framework for the granting of restraint and confiscation orders over assets in UK criminal proceedings. For further information on restraint proceedings, see Question 38, Cross-border co-operation: Seizing assets.

Also under POCA, civil recovery proceedings can be instituted to recover assets and funds deemed to be the proceeds of crime. Any benefit attributable to market abuse could be recovered through the civil courts, with no upper limit.

 
21. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?

As an investigator and prosecutor, the FCA is empowered, like the Serious Fraud Office– to make charging decisions. It must apply the "Full Code Test" in the Code for Crown Prosecutors (see Question 4, Which authority makes the decision to charge and on what basis is that decision made?)

Conviction and sanctions

22. What are sanctions for participating in insider dealing and market abuse?

See below, Penalties; and Question 38, Cross-border co-operation: Seizing assets.

Civil/administrative proceedings or penalties

Individuals found to have committed market abuse can be:

  • Required to pay a financial penalty.

  • Prohibited, temporarily or permanently, from managing or dealing.

  • Prevented from undertaking specific regulated activities.

  • Censured through public statements.

Authorised firms can:

  • Be required to pay a financial penalty.

  • Have their authorisation withdrawn.

  • Be suspended for up to 12 months from undertaking specific regulated activities.

  • Be censured through public statements.

Financial penalties on firms and individuals are calculated according to a five-step process set out in the FCA's Decision Procedure and Penalties Manual.

Criminal proceedings

Right to bail

For all offences, bail is available pre- and post-charge in the usual way. For pre-charge bail, see Question 3, Powers of arrest. For post-charge bail, see Question 5, Criminal proceedings.

Penalties

The maximum penalty for individuals convicted of insider dealing or one of the market manipulation offences is seven years' imprisonment and/or an unlimited fine. A company convicted of market manipulation is liable to an unlimited fine. A company cannot be convicted of insider dealing. There are no published sentencing guidelines for market abuse offences.

Civil suits

See Question 5, Civil suits.

Safeguards

23. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?

See Question 6, Safeguards.

 

Money laundering, terrorist financing and financial/trade sanctions

Regulatory provisions and authorities

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

Money laundering

The main piece of legislation is the Proceeds of Crime Act 2002 (POCA). Criminal liability may also be incurred by "relevant persons" for failure to comply with the requirements imposed on them by the Money Laundering Regulations 2007 (MLR).

Section 37 of the Serious Crime Act 2015 (SCA), which came into force on 1 June 2015, amended section 338 of POCA by excluding civil liability for authorised disclosures made in good faith. This amendment was considered necessary to protect firms from civil claims in circumstances where they have made an authorised disclosure following a suspicion of money laundering and are then forced to restrict or freeze customer accounts until the relevant enforcement body decides whether to take further action.

Terrorist financing

The main piece of legislation is the Terrorism Act 2000.

Financial/trade sanctions

There is no single overarching financial sanctions legislation in the UK. EU financial sanctions are implemented in the UK by way of directly applicable EU regulations and corresponding UK statutory instruments. Each EU regulation and statutory instrument is different and the number of financial sanction regimes in force at any given time varies. There are also financial sanctions under anti-terrorism legislation, specifically the Terrorist Asset-Freezing etc. Act 2010.

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, EU trade sanctions are usually directly applicable in the UK by virtue of an EU regulation. In addition to regime-specific UK regulations on trade sanctions, the Export Control Order 2008 contains offences applicable to the trading of controlled goods on a more general basis.

Offences

25. What are the specific offences that can be used to prosecute money laundering, terrorist financing and breach of financial/trade sanctions?

Money laundering

The Money Laundering Regulations 2007 (MLR). The MLR require "relevant persons" acting in the course of any business carried on by them in the UK to take appropriate steps to detect and prevent both money laundering and the financing of terrorism. The MLR define "relevant persons" as:

  • Credit institutions.

  • Financial institutions.

  • Auditors.

  • Insolvency practitioners.

  • External accountants and tax advisers.

  • Independent legal professionals when participating in financial or property transactions.

  • Trust or company service providers.

  • Estate agents.

  • High-value dealers.

  • Casinos.

The MLR impose a number of responsibilities on such persons in the conduct of their business. This includes a duty to implement customer due diligence measures, internal controls and training/monitoring systems that are appropriate to the business in question. Non-compliance with the requirements of the MLR is a criminal offence and criminal sanctions apply (see below, Penalties).

The Directive 2015/849/EU on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (Fourth EU Anti-Money Laundering Directive) came into effect on 26 June 2015, and Member States have two years to implement its provisions. Whilst the Fourth EU Anti-Money Laundering Directive introduces several important developments, many of the provisions are already enshrined in UK law and are therefore unlikely to require substantial changes to firms' anti-money laundering procedures.

Proceeds of Crime Act 2002 (POCA). POCA contains what are often referred to as the substantive "principal" and "secondary" money laundering offences, the distinction being that the "secondary" offences are not concerned with the primary conduct but rather with a person's action or failure to act upon becoming aware of potential money laundering.

Certain secondary offences in POCA only apply to persons working in the "regulated sector". This is defined in Schedule 9 of POCA and includes firms which are part of the financial services community regulated by the FCA or PRA. It also includes those that provide relevant professional services, such as lawyers (when participating in financial or property transactions) and accountants.

The three "principal" money laundering offences are:

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

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

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

The above offences can be committed by individuals or corporates, regardless of whether they are in the regulated sector or not.

Property is "criminal property" if it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or in part and whether directly or indirectly) and the alleged offender knows or suspects that it constitutes or represents such a benefit (section 340(3)). This can include property situated anywhere and includes money (section 340(9)(a)).

The "secondary" offences are committed if:

  • A person in the regulated sector knows or suspects, or has reasonable grounds to know or suspect, that another person is engaged in money laundering (that is, one of the principal offences described above) and fails to disclose that knowledge or suspicion to the authorities (section 330).

  • A nominated officer fails to disclose money laundering to the authorities, where that information has come to him in consequence of a disclosure under POCA (sections 331 and 332).

  • A person in the regulated sector tips off a third party that a disclosure to the authorities has been made or that an investigation into the alleged money laundering is being contemplated or carried out. It must be proved that the tipping off was likely to be prejudicial to the investigation (section 333A).

  • A person in the regulated or non-regulated sector makes a disclosure that is likely to prejudice an investigation into alleged money laundering or falsifies, conceals, destroys or disposes of documents which are relevant to a money laundering investigation (section 342(2)). The person must know or suspect that an investigation is being or is about to be conducted, and that the disclosure is likely to prejudice the investigation.

The above offences can be committed by individuals or corporates.

Terrorist financing

Terrorism Act 2000 (TA 2000). Whereas POCA applies to dealings with the proceeds of criminal conduct, the TA 2000 applies to dealings with funds used to finance or otherwise support terrorism. The TA 2000 sets out separate, yet similar, offences to those contained in POCA.

The "principal" offences under TA 2000 are:

  • Inviting, receiving, providing, using or possessing money or other property intending, or having reasonable cause to suspect that it may be used for the purposes of terrorism (sections 15 and 16).

  • Entering into or becoming concerned in an arrangement as a result of which money or other property is made available or is to be made available to another, knowing or having reasonable cause to suspect that it will or may be used for the purposes of terrorism (section 17).

  • Entering into or becoming concerned in an arrangement which facilitates the retention or control by or on behalf of another person of terrorist property by concealment, removal from jurisdiction, by transfer to nominees or in any other way (section 18) (sometimes referred to as the "terrorist money laundering offence").

The TA 2000 also contains similar, but not identical, "secondary" offences to those found in POCA in relation to failure to disclose (section 19 and 21A), tipping off (section 21D) and prejudicing an investigation or interfering with material relating to an investigation into terrorism (section 39).

Financial/trade sanctions

The specific offences applicable under financial and trade sanctions differ from regime to regime. However, some of the most common offences are set out below.

Financial sanctions

It is generally an offence to:

  • Make funds or economic resources available, directly or indirectly, to or for the benefit of a target (also known as a "listed person").

  • Deal with funds or economic resources owned, held or controlled (directly or indirectly) by a target, or a person acting on behalf of a target.

  • Participate, knowingly and intentionally, in activities the object or effect of which is:

    • to directly or indirectly circumvent the prohibitions on making funds available and dealing with funds; or

    • to enable or facilitate the commission of the offences above.

Trade sanctions

It is generally an offence to:

  • Export military goods or transfer military software or technology to sanctioned countries without obtaining 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 work will be done on the goods, software or technology before they reach their end destination), without obtaining a licence to do so.

  • Export non-controlled dual-use goods or transfer 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

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

Money laundering

Money Laundering Regulations (MLR). 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 (Regulation 45(4)).

Proceeds of Crime Act 2002 (POCA)

Principal Offences (section 327-329). It is a defence if the accused:

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

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

  • Knows, or believes on reasonable grounds, that the relevant conduct occurred outside the UK and the relevant conduct was not unlawful under the criminal law applying in that country or territory at the time it occurred, so long as it is not of a description prescribed by an order made by the Secretary of State.

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

  • Commits the act in carrying out a function relating to the enforcement of POCA or other enactment relating to criminal conduct.

  • Only in relation to the section 329 offence, acquired, used or had possession of the property for adequate consideration.

Secondary offences

The defences to secondary offences are as follows:

  • Failure to disclose (sections 330–332). It is a defence if the accused:

    • had a reasonable excuse for not making the required disclosure;

    • is a professional legal adviser or relevant professional adviser and the information came to him in privileged circumstances;

    • knew, or believed on reasonable grounds, that the money laundering was occurring outside the UK and was not unlawful under the criminal law applying in that country or territory, so long as it is not of a description prescribed by an order made by the Secretary of State; or

    • in relation to the section 330 offence only, did not know or suspect that another person was engaged in money laundering and had not been given adequate training by his employer in money laundering risks or procedures.

  • Tipping off (section 333A). There are a number of defences relating to disclosures between professional advisers or institutions operating in the EEA states or in countries with equivalent money laundering requirements. In addition, it is a defence if the accused:

    • made the disclosure to another employee, officer or partner in the same undertaking;

    • is a law enforcement officer who needs to make a prohibited disclosure in the course of their official duties;

    • is a professional legal adviser or relevant professional adviser and the disclosure is to the adviser's client and is made for the purpose of dissuading the client from engaging in conduct amounting to an offence; or

    • did not know or suspect that the disclosure was likely to prejudice a money laundering investigation.

  • Prejudicing an investigation (section 342). It is a defence if the accused:

    • did not know or suspect that the disclosure would likely prejudice the investigation;

    • is a professional legal adviser and the disclosure is covered by legal professional privilege (subject to the crime/fraud exception);

    • did not know or suspect documents were relevant to an investigation or did not intend to conceal any facts disclosed in documents from any appropriate officer or proper person carrying out the investigation; or

    • made the disclosure in the exercise of a function of POCA or other relevant legislation.

Terrorist financing

Terrorism Act 2000 (TA 2000). The defences under TA 2000 are again similar, but not identical, to the defences available under POCA. In summary, some of the defences available to the accused are that:

  • The person did not know, and had no reasonable cause to suspect, that the arrangement related to terrorist property.

  • An authorised disclosure was made and appropriate prior consent had been obtained.

  • The person had a reasonable excuse for not making an authorised disclosure.

  • The person is a professional legal adviser and the information came to him in privileged circumstances.

Financial/trade sanctions

Certain activities or goods are (after obtaining the appropriate licence or authorisation) exempt from the sanctions regime. These activities are usually very specific and typically relate to activities or goods required for humanitarian purposes, or which relate to contractual or other obligations entered into prior to certain dates or for specific purposes.

Otherwise, it is generally a defence to show that the accused did not know and had no reasonable cause to suspect that they were in breach of the relevant prohibition.

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

Enforcement

 
27. 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? Please identify any differences between criminal and regulatory investigations.

Authorities

Money laundering. Money laundering offences are usually investigated by the National Crime Agency (NCA), the police or Her Majesty's Revenue and Customs (HMRC). Where money laundering has allegedly been committed by an institution based in the City of London, it will generally be investigated by the Money Laundering Investigations Unit of the City of London Police. If the matter relates to money laundering by a politically exposed person (PEP), then the matter will usually be investigated by the International Corruption Unit within the National Crime Agency. Cases are generally prosecuted by the Crown Prosecution Service (CPS). However, if the case is linked to a serious fraud or corruption, the matter may be investigated and prosecuted by the Serious Fraud Office (SFO). In addition, the Financial Conduct Authority (FCA), the UK's financial services regulator, has the power to investigate and prosecute a firm or person it supervises for offences under Proceeds of Crime Act 2002 (POCA) and the MLR.

Terrorist financing. The NCA and police typically investigate terrorist financing offences, with the CPS bringing the prosecution. The FCA also has the power to investigate and prosecute a firm or person it supervises for terrorist financing offences.

Financial/trade sanctions. HM Treasury's Financial Sanctions Unit (HM Treasury) is the authority responsible for implementing, administering and ensuring compliance with financial sanctions in the UK. To help with compliance of the financial sanctions regime, HM Treasury maintains a consolidated list of sanctions targets in the UK. HM Treasury updates the consolidated list whenever the UK financial sanctions regime is updated.

The Export Control Organisation (part of the Department for International Trade) is the authority responsible for implementing trade sanctions in the UK.

HM Treasury, HMRC and the police will typically investigate breaches of sanctions, with the CPS bringing the prosecution. The FCA can also investigate and prosecute a firm or person it supervises for sanctions violations.

For more information on the prosecuting authorities see box: The authorities.

Prosecution powers

See above, Authorities.

Powers of interview

See Question 3, Powers of interview.

Powers of search/to compel disclosure

Wide investigation powers are included in Part 8 of POCA including the power to seek production orders, search and seizure warrants, disclosure orders, customer information orders and account monitoring orders.

See also Question 3, Powers of search/to compel disclosure.

Powers to obtain evidence

For powers to obtain evidence within the UK, see above Powers of search/to compel disclosureand Question 3, Powers of Interview, Powers of search/to compel disclosure. For powers to obtain evidence abroad, see Question 38, Cross-border co-operation.

Power of arrest

See Question 3, Power of arrest.

Court orders or injunctions

The courts have the power to grant restraint orders under POCA, prohibiting the subject from dealing with specified property. A restraint order may include a provision authorising the detention of lawfully seized property. For more information on restraint proceedings, see Question 38, Cross-border co-operation: Seizing assets.

The courts also have the power to make a restraint order under the TA 2000, where it appears to the court that a forfeiture order may be made.

Whilst investigations into alleged sanctions violations take place, the authorities may apply for freezing injunctions over any assets believed to be involved. Such injunctions, if granted, place restrictions on how assets can be dealt with or disposed.

See also Question 3, Court orders or injunctions.

 
28. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?

Conviction and sanctions

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

For all offences, bail is available pre- and post-charge in the usual way. For pre-charge bail, see Question 3, Powers of arrest. For post-charge bail, see Question 5, Criminal proceedings.

Money laundering

Money Laundering Regulations (MLR). The maximum penalty on conviction for an offence under the MLR is two years' imprisonment and/or an unlimited fine.

Proceeds of Crime Act 2002 (POCA). The following penalties apply to the offences under POCA:

  • "Principal" offences (sections 327-329): up to 14 years' imprisonment and/or an unlimited fine.

  • Failure to disclose (sections 330-332) and prejudicing an investigation (section 342) offences: up to five years' imprisonment and/or an unlimited fine.

  • Tipping off offence (section 333A): up to two years' imprisonment and/or an unlimited fine.

Confiscation orders, through which the proceeds of the criminal conduct can be confiscated, may also be imposed by the court.

Directors of companies may be disqualified from continuing to hold appointments as directors in certain circumstances following a conviction for money laundering offences.

Public authorities are required to exclude from public contracts all organisations that have been convicted of a money laundering offence under POCA.

Civil recovery orders and cash forfeiture may also be used to recover criminal property outside of criminal proceedings. Neither of these remedies requires securing a criminal conviction. Similarly, criminal taxation is a non-conviction based power that allows tax to be charged on a person's income, profits or gains where there are reasonable grounds to suspect that they are derived from criminal conduct.

Courts can also make an order for compensation to be paid to any victim that has suffered losses.

Corporate offenders convicted of financial crime will be sentenced according to the ten-step process set out in the UK Sentencing Council's Definitive Guideline for Fraud, Bribery and Money Laundering Offences, which came into force on 1 October 2014.

A Deferred Prosecution Agreement (DPA) may be available in respect of money laundering offences. For more on DPAs, see Question 37, Immunity and leniency.

Terrorist financing

The following penalties apply to the offences under Terrorism Act (TA):

  • "Principal" offences (sections 15-18, TA 2000): up to 14 years' imprisonment and/or an unlimited fine.

  • Failure to disclose (sections 19 and 21A, TA 2000) and prejudicing an investigation (section 39, TA 2000) offences: up to five years' imprisonment and/or an unlimited fine.

  • Tipping off offence (section 21D, TA 2000): up to two years' imprisonment and/or an unlimited fine.

Financial/trade sanctions

The specific penalties for violations of financial and trade sanctions are set out in each of the corresponding statutory instruments. Generally speaking, sanctions offences are punishable by imprisonment of up to two years and/or a fine. However, there are exceptions to this rule. For example, under the Terrorist Asset-Freezing etc Act 2010, the maximum prison sentence is ten years.

Safeguards

30. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?

See Question 6, Safeguards.

 

Financial record keeping

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

The obligation on companies to keep adequate accounting records is governed by the Companies Act 2006 (Companies Act). Section 386 provides that companies must maintain adequate accounting records that are sufficient to both:

  • Show and explain the company's transactions.

  • Disclose, with reasonable accuracy, the financial position of the company at any time.

Those accounting records must contain both:

  • Day to day entries of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place.

  • A record of the assets and liabilities of the company.

Section 388 provides that the records must be kept at the company's registered office (or other place thought fit by the company's directors) and must at all times be open to inspection by the company's officers. The records must be preserved for a period of:

  • Three years in the case of a private company.

  • Six years in the case of a public company.

Unless a company is exempt by virtue of its small size (determined by reference to annual turnover, assets and number of employees) or dormancy, independent auditors must be appointed to audit the annual accounts for each financial year (section 485).

An auditor is granted the right at all times to access the company's books and accounts and to require any officer or employee (among others) to furnish him with such information or explanations as he deems necessary for the performance of his duties. However, an auditor cannot compel the disclosure of information which is legally privileged (section 499).

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

Companies Act offences

An offence is committed by every officer of a company who is in default if a company fails to comply with either:

  • The duty to keep adequate accounting records.

  • The requirement to make accessible and preserve those accounting records (section 387).

It is a statutory defence for a defendant to show that he acted honestly and that, in the circumstances in which the company's business was carried on, the default was excusable (sections 387(2) and 389(2)).

Under section 501 it is an offence for a person knowingly or recklessly to make a misleading, false or materially deceptive statement to a company's auditor in response to any request for information or explanation that the auditor is statutorily entitled to require.

The maximum penalty on conviction is two years' imprisonment and/or an unlimited fine.

Theft Act 1968 offences

Under section 17 of the Theft Act 1968 (Theft Act), an offence of false accounting is committed where a person, dishonestly and with a view to gain for himself or with intent to cause loss to another, either:

  • Destroys, defaces, conceals or falsifies any account or document made or required for any accounting purpose.

  • In furnishing information for any purpose, produces or makes use of any account or document (made or required for any accounting purpose) which to his knowledge is or maybe misleading, false or materially deceptive.

Where the facts of a case are particularly complex, false accounting often offers prosecutors the best prospect of a successful prosecution and for this reason it remains a popular charge with UK prosecutors.

Under section 19 of the Theft Act, a company director or other officer commits an offence if, with intent to deceive members or creditors about the company's affairs, he publishes or concurs in publishing a written statement or account which, to his knowledge, is or may be misleading, false or deceptive in a material particular.

The maximum penalty for both offences is seven years' imprisonment.

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

Each of the offences under the Companies Act and the Theft Act outlined above is capable of being prosecuted in isolation or alongside supplementary white collar criminal charges.

There have been notable instances where UK prosecutors have brought charges of a "books and records" nature against companies to dispose of offences of bribery and corruption. By way of example, BAE Systems plc (BAE) pleaded guilty in 2010 to an offence of failing to keep accurate accounting records, in relation to allegations that bribes were paid on BAE's behalf in a number of jurisdictions.

The BAE settlement was, however, a product of its time. Having re-emphasised the SFO's role as a prosecutor and now armed with the option of charging a company with a strict liability offence under section 7 of the Bribery Act 2010 (providing the relevant conduct took place on or after 1 July 2011), it is unlikely that the SFO under its current leadership would seek to dispose of corruption allegations in this way.

 

Due diligence

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

Due diligence is considered a key requirement for a commercial organisation seeking to implement adequate procedures under the Bribery Act 2010. Guidance issued by the Ministry of Justice recommends the adoption of a risk-based approach to conducting due diligence in conjunction with appropriate risk assessment and anti-bribery terms and conditions. Independent legal professionals, financial institutions and members of certain professions are also subject to the due diligence requirements imposed by the Money Laundering Regulations 2007 (MLR). Many firms which are not the subject of legal requirements to conduct due diligence will still be required to observe the regulatory requirements. For example, the Financial Conduct Authority requires firms to put in place systems and controls to prevent financial crime.

The exact procedures that should be followed are not specified. Instead, under both the legal and regulatory requirements, firms are expected to take a risk-sensitive approach to their due diligence. Certain low-risk entities, such as UK public bodies, may require only simplified due diligence, whilst higher-risk entities or transactions may merit additional checks and monitoring. Customer due diligence is specified in the MLR to mean verifying the customer's identity, verifying the beneficial owners of the customer and the ownership and control structure, and obtaining information on the purpose and intended nature of the business relationship.

In practice, the level of due diligence that needs to be conducted can vary from simple and appropriate questioning of a customer to investigations, monitoring and independent reviews of high-risk external parties. Contractual rights of audit and inspection to confirm compliance with contractual terms have typically been constrained to long-term contracts in the public sector. If an organisation takes a right of audit or inspection, it will be important that this right is reviewed and exercised appropriately to demonstrate that the adequate procedures were in place.

 

Corporate liability

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

There are two main types of corporate criminal liability at common law:

  • Vicarious liability. For certain offences, companies can be held criminally liable for the unlawful acts of their employees and agents under the principle of vicarious liability. Vicarious liability generally applies to strict liability offences. It is most commonly imposed by statute and tends to feature in quasi-regulatory areas of criminal law such as health and safety, food and drug safety and environmental law.

  • The identification principle, or "directing mind" liability. For serious offences that do not impose strict liability, a company will only normally be criminally liable where the commission of the offence can be attributed to someone who at the material time was the "directing mind and will" of the company (Lennard's Carrying Co. Ltd v Asiatic Petroleum Co Ltd [1915] A.C 705, at 713) or "an embodiment of the company" (Tesco Supermarkets Ltd v Nattrass [1972] AC 153, at 170E). It will normally only be senior officers of a company, at or close to board level, whose acts are capable of being imputed to the company in this way.

Certain specified criminal offences, such as insider dealing and the cartel offence, only apply to individuals and are incapable of being committed by corporations.

The Bribery Act 2010 (Bribery Act) and the Corporate Manslaughter and Corporate Homicide Act 2007 (Corporate Manslaughter Act) are two important statutory exceptions to the common law position. The Corporate Manslaughter Act deals only with corporate conduct that results in a person's death and is therefore outside the scope of this guide. For an overview of the Bribery Act, see Questions 7-16,Bribery and corruption.

It is difficult to prosecute companies for most criminal offences because the threshold for criminal liability attaching to a corporate entity is high. For reform in this area, see Question 42, Reform, Trends and Developments.

 

Cartels

36. 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 principle cartel enforcement body in the UK is the Competition and Markets Authority (CMA). In regulated industries (such as communications, electricity and gas, civil aviation, water, and more recently financial services), the CMA shares its civil enforcement powers with the relevant sector regulator.

The civil competition regime in the UK is governed by the Competition Act 1998 (Competition Act). Section 2(1) of the Competition Act sets out the so-called "Chapter 1 prohibition". It is modelled on EU law and prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices, which both:

  • May affect trade within the United Kingdom.

  • Have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom.

Agreements that infringe the Chapter 1 prohibition are void, and the CMA may impose fines of up to 10% of an undertaking's worldwide turnover. The civil Competition Act prohibitions do not apply to individuals.

The criminal regime is contained in the Enterprise Act 2002 (EA 2002), as amended by the Enterprise and Regulatory Reform Act 2013. Under section 188 of the EA 2002, it is a criminal offence for an individual to agree to make or implement, or cause to be made or implemented, certain prohibited arrangements (price fixing, limiting or preventing supply or production, market sharing and bid rigging) relating to at least two undertakings. The offence applies only to horizontal agreements between parties at the same level in the supply chain, and can only be committed by individuals. It is committed irrespective of whether the agreement is implemented, and irrespective of whether the individuals concerned have authority to act on behalf of their employers. No proceedings can be brought in respect of an agreement made outside the UK, unless it has been implemented in whole or in part in the UK.

In criminal prosecutions relating to agreements made on or after 1 April 2014, the prosecution does not have to prove that a defendant acted dishonestly. However, section 188A excludes agreements that are made openly (that is, where relevant information about the arrangements is to be published or given to customers prior to implementation). Section 188A also provides an exclusion for agreements made in compliance with a legal requirement under UK law or any applicable EU law.

In addition to the exclusions, section 188B provides a defence where there was no intention to conceal the nature of the arrangements, or where reasonable steps were taken to seek legal advice on them. Since the amended cartel offence has yet to be prosecuted, it is unclear how section 188B would apply where a defendant had sought and received appropriate legal advice but failed to follow it.

The maximum penalty for the criminal cartel offence is five years' imprisonment and/or an unlimited fine. In the absence of judicial guidance it is too early to tell what the typical penalty is in practice. To date there have only been two convictions for the offence. The first was in R v Whittle and others [2008] EWCA Crim 2560 (known as the "Marine Hose case"), but due to the unique circumstances surrounding the defendants' guilty pleas in that case the sentences imposed cannot be taken as a guideline. The second conviction in 2014 was a guilty plea resulting in a sentence of six months' imprisonment, suspended for one year.

The CMA's criminal investigation powers broadly mirror those of the Serious Fraud Office (SFO). They include the power to require answers, information and documents; the power to enter and search premises under a warrant; and the power to conduct surveillance. Although the SFO also has the power to investigate and prosecute the cartel offence, the three prosecutions of the cartel offence to date have been undertaken solely by the CMA and its predecessor.

See Cartel Leniency Q&A: United Kingdom.

 

Immunity and leniency

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

Deferred Prosecution Agreements (DPAs), which have been available to the SFO and CPS since February 2014, are a discretionary tool which, subject to judicial approval, may be used as an alternative to criminal prosecution in appropriate cases. They involve the suspension of a criminal indictment for an agreed period, in exchange for the defendant company fulfilling certain agreed requirements. If the DPA remains in force until its expiry date, the criminal proceedings are formally discontinued and fresh criminal proceedings may not be instigated except in certain limited circumstances. DPAs are not available to individuals.

Under sections 71 and 72 of the Serious Organised Crime and Police Act 2005 (SOCPA), the SFO and other specified prosecutors have a wide discretion to offer conditional immunity notices and restricted use undertakings to offenders who agree to assist in the prosecution of others. An immunity notice is an agreement not to prosecute the offender, whereas a restricted use undertaking is an agreement not to use certain specified information as evidence against him. Assisting offenders who plead guilty may also benefit from a reduction in sentence under section 73, although this remains at the discretion of the court. Despite being in force since April 2006, the SOCPA provisions are rarely used.

A separate regime operates in the cartels arena. The CMA offers co-operating undertakings different types of immunity or leniency, depending on whether the undertaking was the first to provide the CMA with evidence and whether the CMA had already started an investigation or had sufficient evidence of the alleged activity. Depending on the stage at which the information is provided, the undertaking may benefit from:

  • Automatic Type A immunity.

  • Discretionary Type B immunity or leniency (a reduction of up to 100% of the fine).

  • Discretionary Type C leniency (a reduction of up to 50% of the fine).

Type A or B civil immunity also results in automatic criminal immunity for all implicated current and former employees and directors who co-operate.

See Cartel Leniency Q&A: United Kingdom.

 

Cross-border co-operation

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

Obtaining evidence

The UK is party to a significant number of multilateral and bilateral mutual legal assistance (MLA) treaties. These include, amongst others, the following multilateral agreements:

  • Convention on Mutual Assistance in Criminal Matters between the Member States of the European Union (2000).

  • European Convention on Mutual Assistance in Criminal Matters (1959).

  • United Nations Convention against Corruption (2003).

  • Commonwealth Scheme Relating to Mutual Assistance in Criminal Matters (1986) (commonly referred to as the "Harare Scheme").

  • Bilateral agreements entered into with, amongst others, the United States (1994), Brazil (2011), Canada (1990), Libya (2009) and Vietnam (2009).

Section 7 of the Crime (International Co-operation) Act 2003 (CICA) enables judges and prosecutors in the UK to issue requests to obtain evidence from another country by way of a formal written request commonly referred to as a "letter of request". Section 9(2) of CICA provides that any evidence obtained by prosecutors in the UK pursuant to an MLA request may not be used for any purpose other than that specified in the letter of request, without the consent of the appropriate overseas authority.

Seizing assets

The Proceeds of Crime Act 2002 (POCA) provides the legislative framework for the granting of restraint and confiscation orders over assets in UK criminal proceedings.

Under section 40 of POCA, in anticipation of the granting of a confiscation order, a restraint order may be granted over "realisable property" in order to prevent the dissipation or hiding of those assets by a suspect in a criminal investigation. A restraint order can be obtained as soon as a criminal investigation has begun and prior to a person's arrest on suspicion of having committed an offence. There must be reasonable grounds to suspect that the alleged offender has benefited from his criminal conduct.

Together, sections 74 and 447 of POCA provide that a restraint order may be made in support of criminal proceedings in England and Wales over realisable property, wherever in the world that property is located. Section 141 of POCA provides that a UK prosecutor may send a request for assistance to another country, via the UK Secretary of State, to prohibit a person from dealing with realisable property. Before such an order can be effective over the realisable assets in question, however, it must be recognised in the country where those assets are located.

The POCA 2002 (External Requests and Orders) Order 2005 and the Criminal Justice (International Co-operation) Act 1990 (Enforcement of Overseas Forfeitures) Order 2005 permit the restraint of assets in the UK at the request of a foreign law enforcement agency and the enforcement in England and Wales of forfeiture orders granted by foreign courts, respectively.

The criminal courts can also impose confiscation orders to deprive a guilty person of the benefit of their criminal conduct. Confiscation proceedings are initiated after a person has been convicted. The court must apply the test for a confiscation order (set out in section 6 of POCA) if the prosecution requests one or if the court believes it appropriate to do so.

Sharing information

The links, both formal and informal, between law enforcement agencies, within the UK and abroad, are becoming stronger. A suspect or defendant would be well advised to assume that the content of any information disclosed to a UK law enforcement agency (for example, by way of a suspicious activity report) that may be relevant to an overseas authority, will be shared with the overseas authority.

A number of UK statutes provide explicit gateways for the passing of information (both domestically and internationally) for the purposes of the investigation and prosecution of crime, including the:

  • Serious Crime Act 2007 (section 68).

  • Anti-Terrorism Crime and Security Act 2001 (sections 17 to 20).

  • Serious Organised Crime and Police Act 2005 (section 33).

  • Financial Services and Markets Act 2000 (Part XXIII).

As well as these statutory gateways and the formal MLA framework, there are a number of Memoranda of Understanding (MoU) in place which provide for the transfer of information between international regulatory authorities. By way of example, the MoU entered into between the US Securities and Exchange Commission and the Financial Services Authority (now the Financial Conduct Authority) in 2006 expressly recognises that the information which is shared may be used for enforcement purposes, including criminal prosecution.

Such information is in addition to that which is shared regularly on an informal, day-to-day basis by police forces (such as the City of London police) with other police forces around the world.

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

It is a well-established presumption of statutory interpretation in the UK that a statute will not have extra-territorial effect. An offence will generally only be triable in the jurisdiction in which the offence takes place unless a statute specifically enables the UK to exercise extra-territorial jurisdiction. Examples of such offences and the underlying legislation include:

  • Fraud (Fraud Act 2006).

  • Terrorism (Terrorism Act 2000 and Terrorism Act 2006).

  • Bribery (Bribery Act 2010)(Bribery Act).

The jurisdictional reach of the Bribery Act is particularly broad. Under section 7 of the Bribery Act, once it is established that a commercial organisation carries on a business, or part of a business, in the UK (regardless of where it was incorporated) it may be guilty of failing to prevent bribery if an associated person bribes another person or a foreign public official for the benefit of the commercial organisation. It is irrelevant whether the offences take place outside the UK or whether the associated person is unconnected with the UK.

In the 2014 case of R v Rogers (Bradley) and others [2014] EWCA Crim 1680, the Court of Appeal held that the three money laundering offences under Part 7 of the Proceeds of Crime Act 2002 have extra-territorial reach. It would therefore appear that the UK courts have jurisdiction to prosecute even where the money laundering offence (as opposed to the predicate offence) is committed abroad.

 
40. 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?

The Extradition Act 2003 sets out a number bars to extradition, or reasons for refusing an extradition request that is made to the UK authorities. Such bars include situations where:

  • There is a possibility that the requested person will be sentenced to death.

  • The extradition would be incompatible with the requested person's human rights under the European Convention on Human Rights.

  • The requested person would be prosecuted or sentenced in respect of an offence that they had already been convicted or acquitted of (double jeopardy).

Following a perceived imbalance in the UK's extradition arrangements with the US, a new "forum bar" was introduced into the Extradition Act 2003 by the Crime and Courts Act 2013. The "forum bar" operates to allow a court to bar an extradition request where a substantial measure of the requested person's conduct was performed in the UK and where it is in the interest of justice to do so, having had regard to a range of specified matters.

The Secretary of State is also granted the discretion, under the Protection of Trading Interests Act 1990, to give directions (to any person carrying on a business in the UK) prohibiting compliance with any foreign law which would regulate or control international trade in such a way as to damage, or to threaten to damage, the trading interests of the UK.

 

Whistleblowing

41. Are whistleblowers given statutory protection?

Workers are protected from detriment when whistleblowing, provided they make a protected disclosure under the Employment Rights Act 1996 (as amended). Workers can disclose, to the appropriate people, information about criminal activity, dangers to health and safety, miscarriages of justice or other serious malpractice. Personal grievances are therefore unlikely to be covered. Workers can make disclosures to certain specified persons or organisations or to their own organisation. Many organisations now have confidential reporting policies that govern internal disclosures. Firms regulated by the Financial Conduct Authority (FCA) must comply with the FCA's rules regarding whistleblowing, which include putting in place mechanisms to allow employees to raise concerns internally and appointing a senior person to take responsibility for the effectiveness of these arrangements. Most disclosures to the media will forfeit any protections for the worker. Independent contractors are not protected.

 

Reform, trends and developments

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

Following the SFO's delivery of the UK's first DPA and section 7 conviction (see Question 7, Bribery and corruption), it was announced in February 2016 that David Green's contract as Director of the SFO had been extended for a further two years to April 2018, providing the SFO with some welcome continuity.

Following the media outcry accompanying the publishing of the so-called Panama Papers in April 2016, the UK Prime Minister announced in May 2016 that the Ministry of Justice (MOJ) would launch a public consultation in respect of proposals for the strict liability offence, under section 7 of the Bribery Act 2010, to be extended to other acts of financial crime, such as fraud and money laundering, together with the provision of an "adequate procedures" style defence. This represents a U-turn on the government's previous announcement in September 2015 that it would carry out no further reforms in the area of corporate criminal liability. The MOJ's consultation is yet to be published and the precise terms of the proposals are keenly awaited.

HM Revenue & Customs' public consultation on draft legislation and guidance for the proposed corporate offence of failure to prevent the criminal facilitation of tax evasion closed in July 2016. It is anticipated that this new law will be introduced during 2017.

The Home Office and HM Treasury published a joint Action Plan for Anti-Money Laundering and Counter-Terrorist Financing in April 2016. It proposes, amongst other items, an overhaul of the Suspicious Activity Reports (SAR) regime, including the removal of the current consent regime and a refocusing of the SAR regime on the highest risk entities, rather than targeting transactions. The reforms are scheduled to be implemented by October 2018.

Notwithstanding the decision in the UK's EU membership referendum in June 2016, any existing EU regulations currently in place in respect of financial crime will remain fully in force unless and until the UK decides formally to withdraw. UK legislation to implement the Fourth EU Anti-Money Laundering Directive must be in place by June 2017.

 

Market practice

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

Companies have now had five years to respond to the requirements of the Bribery Act 2010. Strong regulation and recent enforcement action have ensured that companies continue to develop their due diligence and compliance procedures. Having compliance or legal involvement throughout all significant transactions or business processes has become common in many organisations that are looking to take preventative rather than purely responsive measures. Many organisations have taken steps to expand and improve their training programmes and complement existing traditional customer due diligence with an increasing use of electronic compliance systems, such as automated transaction monitoring.

 

The authorities

Bank of England (BofE)

W www.bankofengland.co.uk

Status. The UK's central bank.

Principal responsibilities. It is responsible primarily for maintaining monetary and financial stability and setting the UK's official interest rate. The Prudential Regulation Authority (see below) is a subsidiary of the Bank of England. The Bank of England is also responsible for the supervision of financial market infrastructures and has powers to prosecute a limited number of offences related to that supervision.

Crown Prosecution Service (CPS)

W www.cps.gov.uk

Status. The CPS is the government department responsible for prosecuting criminal cases investigated by the police and other investigative bodies in England and Wales. The head of the CPS is the Director of Public Prosecutions.

Principal responsibilities. The CPS provides legal advice to the police and other investigative agencies during the course of criminal cases, decides whether a suspect should face criminal charges and conducts prosecutions at court. It is the principal prosecuting authority in England and Wales.

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 and customs authority. It is responsible for investigating crimes involving taxes and other regimes it deals with. It is not responsible for deciding whether there should be a criminal prosecution, as this will be decided by the CPS (or its equivalent in Scotland or Northern Ireland). It has the power to issue compound penalties in respect of certain offences and it is also the authority responsible for investigating certain trade sanction offences.

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 is responsible for maintaining the integrity of the UK's financial markets. It has a wide range of rule-making, investigative and enforcement powers. This includes the ability to prosecute persons in the regulated sector for certain criminal offences (such as insider dealing and money laundering).

National Crime Agency (NCA)

W www.nationalcrimeagency.gov.uk

Status. The NCA is a non-ministerial government department operating under the Director General. It is 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. The NCA is also the UK's financial intelligence unit and is the central authority for receiving suspicious activity reports in connection with suspected money laundering or terrorist financing offences. The NCA does not have its own powers of prosecution. In May 2015, the NCA's International Corruption Unit (ICU) was created. The main functions of the ICU are to:

  • Investigate money laundering in the UK resulting from:

    • The corruption of high-ranking officials overseas;

    • Bribery involving UK-based companies or nationals which has an international element; and

    • Cross-border bribery where there is a link to the UK.

  • Trace and recover the proceeds of international corruption.

Prudential Regulation Authority (PRA)

W www.bankofengland.co.uk/pra

Status. The PRA is an independent subsidiary of the Bank of England.

Principal responsibilities. The PRA is responsible for the prudential regulation and supervision of systematically important financial institutions. It currently is responsible for around 1,700 banks, building societies, credit unions, insurers and major investment firms. It has similar enforcement powers to the FCA.

Serious Fraud Office (SFO)

W www.sfo.gov.uk

Status. The SFO is an independent government department, accountable to the Attorney General.

Principal responsibilities. The SFO investigates and prosecutes cases of serious or complex fraud, bribery and corruption. It works closely with a range of other agencies in the UK and overseas. The SFO has special compulsory powers to require the production of relevant documents and to require individuals to answer questions at interview under section 2 of the Criminal Justice Act 1987.

Department for International Trade (DIT)

W https://www.gov.uk/government/organisations/department-for-international-trade

Status. The DIT was created in July 2016, taking on some of the functions of the Foreign and Commonwealth Office and the Department for Business Innovation and Skills.

Principal responsibilities. The DIT oversees The Export Control Organisation which maintains responsibility for issuing licences and controlling the export of strategic goods.



Online resources

Bribery Act 2010 Guidance

W www.gov.uk/government/publications/bribery-act-2010-guidance

Description. Official Ministry of Justice guidance to help commercial organisations understand the sorts of procedures they can put in place to prevent bribery. Contains links to the Quick Start Guide and the Bribery Act 2010: Guidance to help commercial organisations prevent bribery.

British and Irish Legal Information Institute

W www.bailii.org

Description. Free access to case law and legislation in a variety of jurisdictions. Contains official judgments of the majority of leading cases across all UK jurisdictions.

EUR-Lex

W eur-lex.europa.eu

Description. This official EU website provides free access to EU law. It also provides access to consolidated and amended versions of the legislation.

Gov.uk

W www.gov.uk

Description. This official UK government website is designed to provide comprehensive access to information and resources provided by the various ministries and departments of the government. Information is still being transferred from the previous ministerial websites, but the majority of this process has now been completed. Policy documents, statistics and consultations are all available here.

Legislation.gov.uk

W www.legislation.gov.uk

Description. UK government website providing free access to legislation. Information may be out-of-date as amendments are added infrequently.



Contributor profiles

Christopher David, Counsel

WilmerHale

T +44 20 7872 1015
E Christopher.David@WilmerHale.com
W www.WilmerHale.com

Professional qualifications. Solicitor, England and Wales

Areas of practice. White collar criminal defence; regulatory enforcement defence; corporate internal investigations; anti-bribery and money laundering compliance; sanctions.

Non-professional qualifications. BA, International History, London School of Economics and Political Science, 2002

Recent transactions

  • Currently acting for an individual in relation to the SFO prosecution of Alstom (corruption).

  • Currently acting for an individual in relation to the SFO investigation into ENRC (corruption).

  • Currently advising a number of corporates and financial institutions in relation to their anti-bribery and corruption compliance programs.

  • Advising a number of corporates and financial institutions in relation to cross-border investigations.

  • Representing an individual in a case involving allegations of fraudulent bankruptcy and usury, brought by the Italian authorities, in relation to the collapse of the Italian company Parmalat.

  • Secured the acquittal of a Securency director accused by the SFO of conspiring to corrupt the Governor of the State Bank of Vietnam.

Publications.

  • Co-author of PLC's Bribery and corruption: negotiated settlements in a global enforcement environment.

  • Co-author of GIR's Handling internal investigations (UK).

  • Regular contributor to the Law Society Gazette on white collar crime issues.

Elly Proudlock, Counsel

WilmerHale

T +44 20 7872 1016
F +44 20 839 3537
E elly.proudlock@wilmerhale.com
W www.wilmerhale.com

Professional qualifications.

Solicitor, England and Wales (2008)

Areas of practice. White collar criminal defence; financial services enforcement; internal investigations.

Non-professional qualifications.

BA, Modern and Medieval Languages, Cambridge University, 1999

Recent transactions

  • Represents a client in the SFO investigation into Barclays (payments to Qatar).

  • Represents a client in the SFO investigation into Serco (alleged overcharging).

  • Is part of the team representing an individual in the SFO investigation into ENRC (alleged corruption in Africa).

  • Represents a suspect in an SFO investigation into alleged fraud.

  • Represents a suspect in a police fraud and money laundering investigation.

  • Represented a client in the LIBOR investigation.

Languages. English, Spanish, French

Professional associations/memberships

Elly is a member of the Law Society and the Fraud Lawyers Association

Publications.

  • Co-author of PLC's Bribery and corruption: negotiated settlements in a global enforcement environment.

  • Author of Lexis PSL's Practice Note on The FCA's approach to AML.

  • Co-author of GIR's Handling internal investigations (UK).

  • Regular contributor to the Law Society Gazette on white collar crime issues.

  • Named among the top Women in Investigations by Global Investigations Review (GIR).

Alison Geary, Senior Associate

WilmerHale

T +44 (0)20 7872 1036
F +44 (0)20 7839 3537
E alison.geary@wilmerhale.com
W www.wilmerhale.com

Professional qualifications. Solicitor, England and Wales

Areas of practice. White collar criminal defence.

Non-professional qualifications. BA, Social Policy and Administration, University of Nottingham, 2004

Recent transactions

Acting for:

  • Individuals in relation to the FX and LIBOR investigations.

  • An individual in relation to the investigation by the Metropolitan Police into Phone Hacking.

  • A corporation being investigated by the World Bank Integrity Vice Presidency

  • A professional service firm conducting an investigation into allegations of criminal offences committed by senior management.

  • An individual in relation to US and UK investigations into a complex algorithmic trading strategy.

  • A bank being investigated by the FCA and SEC in relation to allegations of corruption in South America.

Languages. English

Professional associations/memberships. Membership Secretary of the Young Fraud Lawyers Association and Member of the Female Fraud Forum.

Publications.

  • Editor of and contributor to the WilmerHale W.I.R.E. (White Collar, Investigations and Regulatory Enforcement) UK Blog (www.wilmerhale.com/blog/wireuk).

  • Fraud Intelligence.

  • Lexis PSL.

  • Criminal Law and Justice.

Lloyd Firth, Associate

WilmerHale

T +44 (0)20 7872 1014
F +44 (0)20 7872 1000
E Lloyd.firth@wilmerhale.com
W www.wilmerhale.com

Professional qualifications. Solicitor, England and Wales

Areas of practice. White collar criminal defence.

Non-professional qualifications. LLB, First Class Honours, Durham University, 2008

Recent transactions

Defended clients in respect of investigations and enforcement proceedings initiated by authorities including the Serious Fraud Office, the Financial Conduct Authority and H.M. Revenue & Customs, further to allegations of corruption, money laundering, tax fraud and insider dealing.

Languages. English

Professional associations/memberships. Member of the Young Fraud Lawyers Association and the Proceeds of Crime Lawyers Association.

Publications.

  • Regular contributor to the WilmerHale W.I.R.E. (White Collar, Investigations and Regulatory Enforcement) UK Blog (www.wilmerhale.com/blog/wireuk).

  • Fraud Intelligence magazine.

  • Lexis PSL.

  • Columbia Law School, Blue Sky Blog.

Michael Roach, Associate

WilmerHale

T +44 (0)20 7872 1608
F +44 (0)20 7839 3537
E michael.roach@wilmerhale.com
W www.wilmerhale.com

Professional qualifications. Solicitor, England and Wales

Areas of practice. White collar criminal defence.

Non-professional qualifications. LLB, First Class Honours, Warwick University, 2010

Recent transactions

Defended clients in investigations and enforcement proceedings initiated by authorities such as the Serious Fraud Office, the Financial Conduct Authority, the Securities & Exchange Commission and the US Department of Justice further to allegations of bribery, corruption, money laundering, fraud and antitrust violations.

Languages. English

Professional associations/memberships. Member of the Young Fraud Lawyers Association.

Publications.

  • Regular contributor to the WilmerHale W.I.R.E. (White Collar, Investigations and Regulatory Enforcement) UK Blog (www.wilmerhale.com/blog/wireuk).

  • Lexis PSL.

  • Criminal Law & Justice Weekly.


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