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UK economic crime strategy specifics remain unclear

18 December 2017 by Jimmy Nicholls

UK economic crime strategy specifics remain unclear - read more

Campaigners are pleased policing financial misdeeds is back on the government agenda, but the details are vague

Although smothered in the fallout of the referendum on EU membership, corruption and economic crime was once a central concern of David Cameron’s government. The then prime minister even held an international anti-corruption summit shortly before he resigned.

Though the wind was knocked out of the anti-corruption sails after Cameron's exit, Theresa May’s subsequent administration is seeking to revive it. In December, Amber Rudd, the home secretary, revealed several measures to this effect, as her office published an anti-corruption strategy.

Under the plans, the government will establish a national economic crime centre under the National Crime Agency (NCA), which deals with organised crime. The NCA itself will be able to direct the Serious Fraud Office (SFO) to investigate certain offenders, more closely entwining the two bodies.

The government has also appointed a backbench anti-corruption champion in John Penrose MP, and will create a minister for economic crime within the Home Office.

‘I think there is some good stuff in the anti-corruption strategy; it is very broad, and shows they are going to plough ahead with anti-corruption commitments,’ said Susan Hawley, policy director at Corruption Watch.

Outside the main changes, a 72-page strategy document sets out the UK’s anti-corruption priorities until 2022. Although explicit policies are mentioned, many of the goals and measures of success are vaguely worded.

Among the six priorities are aims to ‘reduce the insider threat in high-risk [security-related] domestic sectors’, to ‘strengthen the integrity of the UK as an international financial centre’ and to ‘reduce corruption in public procurement and grants’. The tests for success in these areas include there being ‘greater confidence in the integrity of key institutions and sectors’.

Raj Chada, a partner specialising in criminal law at Hodge Jones & Allen, said: ‘It is absolutely true that the government does not commit itself to very specific or onerous goals.’

Hawley worries about the anti-corruption agenda again being derailed by Brexit. ‘There is no legislative space for two years, and we need legislation,‘ she said. ‘That is the part where the government is going to have to be really creative, but anti-corruption is clearly going to be low priority [compared to] Brexit.’

Adequate measures

Many observers feel the government has not updated the law to allow law enforcement to effectively police economic crime. In a letter to The Guardian, several non-governmental organisations faulted Rudd for this.

‘Large companies that commit economic crimes cannot be held to account under current laws,’ the letter said. ‘Meanwhile, non-economic crimes by companies – such as deaths and injuries in their operations or supply chains – have not been addressed at all, making it next to impossible for those affected to get justice.’

The Bribery Act 2010 has been seized on by some as a model for increasing corporate liability in corruption and other economic crimes. This legislation includes offences for failing to prevent bribery, which means that a senior-level staffer – typically a board member – need not be directly implicated for a company to be prosecuted.

‘At the moment, to prove a corporate offence prosecutors have to establish that someone senior in the business intended for the offence to be committed,’ said Marilyn Croser, director at the Corporate Responsibility Coalition. ‘Obviously in an enormous firm it can be difficult to prove senior-level involvement, so there is a huge accountability gap.’

Under the Bribery Act model, which is similar to that used to combat facilitation of tax evasion, emphasis shifts to having adequate procedures in place to prevent or mitigate economic crime. According to Croser, bribery-related prosecutions have increased in the last few years.

‘Our argument is that it is unfair for small and medium-sized enterprises, which bear the brunt of prosecution, and it creates perverse incentives for companies to insulate their boards,’ said Corruption Watch's Hawley. ‘Particularly in the area of money laundering there has been no prosecution of banks and it is questionable whether the authorities could hold banks to account on crime [under existing law].

‘There is a lack of willingness from the FCA to use its existing powers. There needs to be an aggressive prosecution stance in place, but the creation of a new offence would help to deal with that.’

Enforcement of the Bribery Act has made use of deferred prosecution agreements, which allow companies to avoid prosecution so long as they meet certain remedial conditions. Croser said: ‘For deferred prosecution agreements to be effective, they need to be accompanied by a real threat of prosecution, otherwise there is no incentive for companies to enter into an agreement.’

There is some uncertainty as to how prosecution of corporate liability will develop in future. ‘I would be surprised if the current government goes more wholesale into that direction, bearing in mind the mood music is about less regulation and freeing companies up,’ said Hodge Jones & Allen’s Chada.

‘But there is clearly a tendency for the government to tinker with corporate liability, because it used a similar model to the Bribery Act in the Criminal Finances Act, in relation to tax evasion.’

Agency shuffle

At least for staff at the SFO, the reforms have quietened speculation the agency would be rolled into the NCA, as was set out in the Conservative election manifesto in June.

‘The prospect of shutting down the SFO seems to have disappeared, and nobody seems to have mentioned it since it appeared in the Conservative manifesto [in June],’ said Chada. ‘Virtually the entire financial world seemed to be against it.’

He added that the office had chalked up some successes against economic crime of late, but its small budget invited questions of ‘if it is being spread too thinly’.

Under the government plans, the national economic crime centre, sitting under the NCA, will be able to coordinate action on economic crime. The NCA will be able to direct SFO staff to work on certain investigations, but the SFO director will retain the right to decide who to prosecute.

‘Our understanding is if there is a national economic crime centre there should not be a need for the NCA to use that power,’ said Hawley. ‘I think the question is whether we can create effective change in economic crime without having new resources.’ The Home Office would not comment on how the new centre would be funded.

The appointment of a new anti-corruption champion and creation of the economic crime minister role has also been broadly welcomed. ‘It is probably overdue; it has been some time since the last champion Eric Pickles stood down,’ Chada said. ‘But the appointments also show the extent of the issues that still exist in relation to corporate crime.’

Jimmy Nicholls is deputy editor of Governance and Compliance

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