UK Economic Crime Group: Enforcement Update

Published date07 June 2021
Subject MatterGovernment, Public Sector, Criminal Law, Money Laundering, White Collar Crime, Anti-Corruption & Fraud, Crime
Law FirmArnold & Porter
AuthorMs 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), the Financial Conduct Authority (FCA) and the National Audit Office (NAO).

We also comment on post-Brexit law enforcement, and the ongoing strains on the justice system as a result of the COVID-19 pandemic. We discuss a report on the SFO's handling of complaints, and we consider new proposals to tackle economic crime.

Considering social commentary, we look at the FCA's proposals to regulate diversity and inclusion within the financial services sector, and consider various proposals to address ethnic and racial bias within the criminal justice system.

In terms of enforcement, we consider the following topics:

  • The collapse of the SFO's investigation into former Serco executives.
  • NAO's investigation into Greensill.
  • FCA's criminal proceedings against NatWest for money laundering.
  • UK Government demonstrates its commitment to combatting international money laundering.
  • Updates on the SFO's investigation into Unaoil.
  • Supreme Court clarifies the SFO's global reach in the KBR case.

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

  • Update on the impact of Brexit.
  • Ongoing effects of COVID-19 on the criminal justice system.
  • Report on the SFO's handling of complaints.
  • CPS announces its strategy to contribute to the fight against economic crime.
  • FCA: Diversity and inclusion are regulatory issues.
  • Addressing racial bias in the use of stop and search powers.
  • Sentencing Council's guidelines to highlight disparity between ethnic minority and white offenders.

Enforcement Update

The Collapse of the SFO's Investigation Into Former Serco Executives

On 26 April 2021, the SFO's case against former Serco Geographix Limited (Serco) executives, for fraud by concealing profits related to a contract for the electronic tagging of offenders, collapsed. The trial against Nicholas Woods and Simon Marshall began in March 2021 following an eight-year long investigation. Part-way through the trial, it emerged that the SFO had failed to disclose certain materials, which meant that it could not offer any evidence against the defendants in the trial. After refusing the SFO's application to adjourn the case in order to resolve the issue, the Honourable Mrs Justice Tipples directed the jury to return not guilty verdicts.

The SFO has since committed to conducting an internal assessment to prevent this type of disclosure failure from occurring in future. However, there is a wider issue concerning the collapse of this trial, and that is the fact that it follows the SFO having approved a DPA with Serco in July 2019, which we wrote about here. While the company was required to admit wrongdoing as part of its settlement, the SFO was unable to prove its case against those attributed to the wrongdoing. To date, the SFO is yet to successfully prosecute any individuals where a DPA has been agreed with a company, highlighting the conflict between companies admitting criminal liability, and senior individuals of the company being acquitted of any wrongdoing. In light of a further acquittal of this nature, companies considering entering into a DPA may be encouraged to consider with more vigour their chances at trial, rather than entering into early settlement.

NAO Initiates an Investigation Into Greensill

The NAO, an independent body responsible for auditing central government departments, government agencies and non-departmental public bodies, initiated an investigation into Greensill Capital (Greensill) on 16 April 2021. In June 2020, Greensill, a supply-chain finance firm, was accredited by the British Business Bank to provide emergency loans to large companies on behalf of the Government as part of the national COVID-19 financial relief scheme. Although Greensill was rejected from accessing the higher level COVID Corporate Financing Facility, it became an approved lender for the Coronavirus Large Business Interruption Loan Scheme (CLBILS). In May 2021 however, Greensill filed for insolvency after its insurer declined to extend its $4.6 billion policy.

The investigation will consider Greensill's involvement in the pandemic support schemes, including how it came to be accredited as a CLBILS loan provider despite being rejected from accessing the higher level loan facility, and any post-accreditation monitoring of its activities. The NAO will publish the results of its investigation in due course, with the scope of its report limited to the establishment of facts, rather than evaluating the consequences of any of Greensill's actions.

The NAO's investigation is, however, only one of several lines of inquiry that have been launched into Greensill and several current and former government officials that have been linked to the firm. Of equal concern to these investigations is the extent of the lobbying that took place on the Greensill's behalf in securing its access to COVID-19 financial support, and whether officials properly declared their interests in the company.

Whilst some of the reports from independent inquiries may remain private, some inquiries will take place publicly such as that initiated by the Treasury Committee, the particular focus of which will be the regulatory lessons learned from Greensill's failure, and the appropriateness of the Treasury's response to lobbying on behalf of the firm. Given the scale of financial support that the Government has offered and companies have received during the pandemic, there is an urgent need for transparency both in how companies have accessed these funds, and the wider issue of whether governmental lobbying is adequately scrutinised in the UK.

FCA's Criminal Proceedings Against NatWest for Money Laundering

The FCA announced on 16 March 2021 that it has initiated criminal proceedings against a subsidiary of National Westminster Bank Plc (NatWest) in respect of offences under the Money Laundering Regulations 2007 (MLR 2007), marking its first criminal prosecution under the MLR 2007, and the first ever prosecution under MLR 2007 against a bank.

The FCA alleges that NatWest contravened provisions of MLR 2007 that required it to determine, conduct and demonstrate risk-sensitive due diligence and ongoing monitoring of its relationships with customers for the purposes of preventing money laundering. In doing so, it failed to monitor and detect...

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