UK Economic Crime Group: Enforcement Update - January 2021

• Published date: 27 January 2021
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Criminal Law, Compliance, Corporate and Company Law, Money Laundering, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Arnold & Porter
• Author: Ms Kathleen Harris, Sean Curran, Melissa Dames and Maya Paunrana

Executive Summary

In this edition of the UK Enforcement newsletter, we provide an update on recent anti-corruption and fraud developments, as well as other economic crime issues in the UK. We consider recent enforcement actions by the Serious Fraud Office (SFO), Financial Conduct Authority (FCA) and the National Crime Agency (NCA). We comment on the ninth Deferred Prosecution Agreement (DPA) negotiated with the SFO, as well as guidance issued by the SFO in relation to DPAs.

We also consider the impact of the UK/EU Agreement on their ongoing relationship in connection with criminal matters following the end of the Brexit transition period. In addition, we look at various reviews and inquiries into current legislation and international standards, as well as two reports regarding the FCA's regulatory conduct.

In terms of enforcement news, we consider:

• Update on the use of Unexplained Wealth Orders (UWOs) by the NCA
• New Memorandum of Understanding (MOU) agreed between the SFO and Competition and Markets Authority (CMA)
• SFO guidance on DPAs
• DPA agreed between SFO and Airline Services Limited
• FCA investigation into Airbnb over financial crime controls
• Market abuse regulatory action across Europe
• NCA Annual Report on Suspicious Activity Reports (SARs)

In relation to governmental matters and legislative reform, we discuss the following:

• Brexit impact on Europol and European Arrest Warrants
• FRC review into auditors' obligation to detect fraud
• UK Government continues consideration of Corporate Criminal Liability
• FCA criticism by Connaught Review and Gloster Review

Considering social commentary, we look at measures intended to assist with tackling diversity disparity amongst the judiciary, and the review of potentially imbalanced police "stop and search" powers.

Enforcement Update

Update on UWO Use by the NCA

Two notable UWO cases have provided recent success for the NCA, with the first UWO to yield recovery of alleged proceeds of crime and the challenge to the first ever UWO being refused by the Supreme Court in the past few months.

In early October 2020, the NCA was able to recover almost '10 million worth of assets that had been the subject of a UWO obtained by the NCA in July 2019. The subject of the investigation, businessman Mansoor Hussain, was alleged to have links to individuals involved in serious organised crime, including drug trafficking, armed robberies and supplying firearms. This UWO is notable as it was based solely upon a suspicion of involvement in serious organised crime, rather than being based on underlying criminal convictions. Having obtained the UWO, the NCA was able to seek information from Mr Hussain regarding the details and extent of his interest in eight properties, which were believed to be funded by criminal enterprise. Following provision of that information, the NCA was able to reach a settlement with Mr Hussain which resulted in him forfeiting ownership of the properties, as well as other assets and cash, with a total value of '9.8 million. In this case, the NCA was able to reach a settlement rather than having to bring civil recovery proceedings. It remains to be seen what success the NCA will have if they are required to go before the courts in order to obtain recovery of assets which have been the subject of a UWO.

Separately on 21 December 2020, in a further success for the NCA, the Supreme Court refused permission to appeal the decision of the Court of Appeal in the case of the UWO granted against Mrs Zamira Hajiyeva, the wife of a former Azerbaijani banker. As we reported in our April 2020 Enforcement Update, the Court of Appeal had dismissed Mrs Hajiyeva's appeal in her claim for discharge of a UWO which required her to explain the financial source of her '15 million London home and a '16 million shopping spree in Harrods. Following the Supreme Court's decision, Mrs Hajiyeva has now exhausted her rights of appeal and will need to comply with the UWO by explaining the source of the funds used to purchase her assets. If she is unable to do so, the NCA will be able to bring civil recovery proceedings in relation to those assets.

While these successes demonstrate that UWOs are a powerful tool in the NCA's arsenal, their use remains relatively limited. With it now being three years since the NCA gained the power to apply for UWOs, there have only been three public cases, yielding a total of six UWOs. With the completion of the Hussain case, the success in the Hajiyeva matter and the end of the Aliyev case (which we previously reported on in our July 2020 Enforcement Update), it will remain to be seen whether in 2021 the NCA is able to use the resources that have now been freed up, as well as the learnings from these cases, to bring further UWOs before the court in appropriate cases.

New MOU Agreed Between SFO and CMA

On 21 October 2020, the SFO and the CMA entered into a new MOU, extending their relationship and outlining their intention to cooperate in the investigation and prosecution of criminal cartels. The MOU is intended to ensure cooperation and the most efficient use of resources and expertise when investigating and prosecuting criminal cartel activity. The criminal cartel offence was established by Section 188 of the Enterprise Act 2002 and can be investigated by the SFO, the CMA or jointly by both agencies. Historically, the SFO has not prosecuted these types of offences, but with the release of this new MOU, it appears to be considering an extension of the cases it is willing to take on, as well as ways to cooperate further with the CMA.

The MOU sets out how the SFO and the CMA will engage with each other to investigate cartel offences. Going forward, initial enquiries for these offences will be conducted by the CMA, with the SFO providing any information it receives that suggests criminal cartel activity to the CMA for investigation. After initial enquiries, the CMA may refer a case to the SFO if it considers that it would be more appropriately dealt with by the SFO. The SFO will...