The U.K. Is Making It Easier To Prosecute Foreign And Domestic Companies For Financial Crimes

• Law Firm: Duane Morris LLP
• Subject Matter: Criminal Law, White Collar Crime, Anti-Corruption & Fraud, Crime
• Author: Mark Handley
• Published date: 15 August 2023

Legislation pending in Parliament is going to introduce major changes to the way corporates are prosecuted for financial crime in the United Kingdom. This includes foreign companies and those operating in the U.K.

The changes are:

1. For most financial crimes, a company will now have committed an offence if a "senior manager" has committed the offence and
2. The introduction of two corporate offences of failing to prevent fraud, both of which can impact foreign companies operating in the U.K. as well as U.K. companies.

This new legislation, the Economic Crime and Corporate Transparency Bill 2023 (ECCT),is the latest effort by authorities to reform corporate criminal liability. Currently a corporate, for most offences, is only liable if a person who is the corporate's "controlling mind and will" had the necessary criminal intent. This usually requires culpability at the board level.

The ECCT is expected to pass into law in the last few months of 2023.

Corporates Criminally Liable If Senior Manager Is Criminally Liable

What Is the Offence?

The first of the new offences is intentionally broad in scope. The ECCT (Section 195 in the current bill) states that:

[I]f a senior manager of a body corporate or partnership (the "organisation") acting within the actual or apparent scope of their authority commits a relevant offence after this section comes into force, the organization is also guilty of the offence.

This offence creates a much simpler route for conviction of a corporate.

Who Is a "Senior Manager"?

A "senior manager" is anyone who plays a significant role in making decisions about how the whole or a substantial part of the activities of the organization are managed or organized, or who plays a significant role in the actual managing or organizing of those activities.

Which Corporates Are Covered Under the ECCT?

Any company or partnership incorporated or formed anywhere in the world falls under the purview of this legistlation.

Does It Apply to Actions Outside the U.K.?

Yes. The ECCT is clear that the actions do not need to take place within the U.K.

How Can a Foreign Company Be Liable?

If the senior manager in question committed the offence in the territory of the U.K., then the fact that the corporate is a foreign company will offer no protection; the foreign corporate will be liable.

If the senior manager committed the offence outside the U.K., then the corporate will only be guilty if it could have committed the relevant U.K. offence by actions outside...