Regulatory Timeline: Anti-bribery, Corruption and Ethics

“The next twelve months will see businesses having to grapple with the corporate reporting obligation under the recently in-force Modern Slavery Act, moves to update the Money Laundering regime, more detail on the first corporate deferred prosecution agreements obtained by the Serious Fraud Office and more such agreements which are in the pipeline, and, potentially, a lowering of the corporate criminality threshold. While much remains uncertain, the potential developments in this area may provide companies with more practical guidance in complying with the law and their corporate obligations. Potentially most significant of all, the wait continues for a first SFO prosecution of a business for the corporate offence of failing to prevent bribery.”

October 2015 – The Modern Slavery Act 2015

From October 2015, businesses with a UK presence whose global annual turnover exceeds £36 million will be required to make an annual statement indicating what steps they have taken to ensure there is no slave labour in their business or supply chain (or state that they have taken no such steps). While there is no specific corporate offence for not complying, the reputational risks of not making a statement are clear, particularly in sectors with long and complex supply chains. 

Further guidance will be issued by the Government which should, amongst other things, help businesses understand what should be in their statements. However, those who have already developed adequate CSR or ABC systems and controls may find that small adjustments to those systems enable them to gather the information they need to understand the risks they face in this regard and formulate their annual statements. 

The Act also includes offences of slavery, servitude, forced or compulsory labour and human trafficking and provides for a maximum penalty of life imprisonment. As with other statutes, a corporate may be held criminally responsible for the acts and state of mind of those who represent the “directing mind and will” of the business. While this has often been a difficult test for prosecutors to meet, as we discuss below this bar may be lowered in the coming year. For more detail see our note here.

October 2015 – Lowering the threshold for corporate criminal responsibility

Over the next 12 to 18 months, we expect to see continued reform of the law on corporate criminal responsibility. There is strong cross-party political support and authorities such as the SFO have made no secret of their desire to see more corporate prosecutions. 

Two recent pieces of legislation have sought to overcome this hurdle by creating specific corporate offences: 

• Corporate manslaughter (Corporate Manslaughter and Corporate Homicide Act 2007); and 
• Failure to prevent bribery (Bribery Act 2010). 

HMRC has been consulting on introducing a further corporate offence, that of failing to prevent tax evasion. Under this proposed new offence, a company could face prosecution if it fails to take reasonable steps to prevent its employees or agents from facilitating tax evasion. In order to establish a defence to this strict liability offence, companies would need to demonstrate that they have appropriate policies and procedures in place to prevent tax evasion. The new offence would be especially relevant to organisations that provide legal, advisory, or banking services which could potentially enable a person to evade tax. 

In this context, there has been talk of broadening the ‘Failure to Prevent Bribery’ offence to a wider strict liability corporate economic crime offence, potentially with a similar ‘adequate steps’ defence. However, recent comments from the Government suggest that this has been put onto the back-burner for now.

2015 – 2016 – Deferred Prosecution Agreements

Recent reports concerning the first two Deferred Prosecution Agreement’s (“DPAs”) between the Serious Fraud Office and UK businesses have raised the profile of this, as yet, rarely utilised tool in the SFO toolbox. Of particular interest will be whether the SFO begins to modify its position on what it considers full cooperation from a business to be, as it seeks to secure DPAs with larger, better resourced, more sophisticated businesses. Either way, we expect the SFO to look to reach more DPAs during 2016.

2015 – 2016 – Updated money laundering regulations implementing the Fourth Anti-Money Laundering Directive

The EU’s Fourth Money Laundering Directive (“MLD4”) came into force on 25 June 2015 and must be implemented by member states by 26 June 2017. This will result in the current Money Laundering Regulations 2007 being replaced during this period. 

The stated objective of MLD4 is the protection of the financial system by preventing, detecting and investigating money laundering and terrorist financing. It aims to achieve this objective by setting out a high level of common standards that must be achieved by member states as a minimum (it is a minimum harmonising directive). 

Organisations caught by MLD4 include financial services institutions, auditors, external accountants and tax advisers, notaries and other independent legal professionals, trust or company service providers, estate agents, providers of gambling services and any company trading in goods that deals in cash transactions of Euro 10,000 or more.
MLD4 covers: 

• Customer due diligence; 
• Beneficial ownership information; 
• Reporting obligations; 
• Data protection and record keeping; and 
• Policies, procedures and supervision.