Failure To Prevent Money Laundering

• Published date: 29 September 2022
• Subject Matter: Government, Public Sector, Criminal Law, Money Laundering, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: WilmerHale
• Author: Josef Rybacki

On 10 June 2022, the Law Commission published its long-awaited options paper on Corporate Criminal Liability ("the Paper").¹ The Paper discussed a "failure to prevent money laundering offence" (the "FTPML Offence"), but did not recommend one.² Although the purpose of the Paper was only to provide options for reform, Transparency International and the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax have both criticised the Law Commission for failing to push for the FTPML Offence.³

A study published in February 2022 found that the UK ranked second among OECD countries for the total sum of money laundered on an annual basis, at '87.9 billion, and estimated that it accounts for 4.3% of GDP.⁴ However, given that the misconduct targeted by the FTPML Offence would largely be caught by the UK's existing money laundering regulations ("the MLRs"), it is unlikely that more regulation is the answer to the problem.⁵

Failure to Prevent Money Laundering

What is the offence?

The Paper does not fully flesh out how the FTPML Offence might look. However, based on the "failure to prevent economic crime" offence (which is fleshed out), the FTPML Offence would be committed by a company where an associated person (an employee or an agent) launders money with intent to benefit the company, or to benefit another person to whom they provide services on behalf of the company.⁶ It would therefore mirror current failure to prevent bribery and tax evasion legislation in that it would involve a predicate substantive offence triggering a strict liability offence.⁷

By contrast, the MLRs can be breached without any money laundering having taken place. A breach will be made out where a person contravenes the various anti-money laundering requirements imposed by the MLRs. Although the offences are therefore triggered by different events (money laundering versus failing to comply with requirements), it is difficult to envisage circumstances where the FTPML Offence would not also contravene the MLRs.

What are the defences?

Under the FTPML Offence, the corporation would have a defence if it had in place such prevention procedures as were reasonable to expect.⁸ Due to the broad jurisdiction of the offence, for sectors with a negligible money-laundering risk, it would be reasonable for a business to have no AML procedures in place.

Under the MLRs, a person has a defence if they "took all reasonable steps and exercised all due diligence to avoid committing the offence." The...