Yesterday the government signalled it will introduce amendments on corporate criminal liability reform in the Economic Crime and Corporate Transparency Bill. We strongly welcome this major development on an issue we have advocated for a long time.
Security Minister Tom Tugendhat confirmed to the House that the government will “address the need for a “failure to prevent” offence” when the Bill goes to the Lords. This followed a persuasive speech from former Justice Secretary Sir Robert Buckland in favour of three amendments which received wide cross-party backing, including from head of the Justice Committee Sir Bob Neil.
- The first would create an offence of failure to prevent fraud, false accounting or money laundering for commercial organisations.
- The second would create the same offence but for a “senior manager or corporate officer of a corporate body”.
- The final amendment sought to reform the underlying identification doctrine, long seen by experts as a serious barrier to holding large corporates to account when they engage in wrongdoing.
Of course, the devil will be in the detail of the government’s amendment. We hope that it will be broad and ambitious and include both a failure to prevent money laundering, reform to the identification doctrine and robust measures to hold senior executives to account where the companies they lead engage in economic crime.
Resourcing, resourcing, resourcing
While reform in this area would be a real game changer for the ability of the UK’s enforcement agencies to prosecute corporates for economic crime, as several MPs yesterday pointed out, new laws are useless if the agencies tasked with enforcing them are not properly resourced.
It was therefore heartening to see two key amendments – supported by key figures in virtually every party – that sought to boost resources for the UK’s economic crime fighting agencies.
The first amendment would have created a mechanism enabling more of the funds generated by these agencies through their enforcement activity to be reinvested back into the agencies. Crucially, as Labour grandee Dame Margaret Hodge and the Conservative chair of the Treasury Select Committee Harriet Baldwin said, such a mechanism would be of “no cost to the taxpayer”.
The second amendment sought to protect law enforcement agencies from adverse costs when they bring civil recovery proceedings, as long as they act reasonably and honestly. Law enforcement heads say that the risk of extremely high costs is a big issue and can deter them from taking on deep-pocketed crooks, and results in them focusing on low hanging fruit rather than ambitious targets. We hope that the Lords will continue to run with these amendments and also make sure that agencies are protected from adverse costs when they make restraint orders in criminal cases – a move recommended by the Law Commission and already backed by the government.
Other amendments to watch for in the Lords
As the Bill heads to the Lords for its Second Reading on 8 February, we hope that Peers will persuade the government to adopt the ambitious reforms supported by MPs in the Commons.
Key issues raised at Report Stage alongside those we’ve discussed above and which we hope will be revisited by Peers include:
- The ongoing failure of the government to publish in full its Tier 1 (Investor) or “golden visa” review, or to release any meaningful statistics from the review. Liberal Democrat Layla Moran’s amendment to get the government to publish the report and reveal which crucial and basic details about its findings was put to a vote but didn’t make it past the government’s majority. The Lords might want to probe a little further about what real action has been taken.
- Making sure the UK’s seriously fragmented and weak anti-money laundering regime doesn’t undermine the corporate register. Conservative backbencher and co-chair of APPG on Fair Business Banking Simon Fell tabled an amendment to ensure that verification of details on the register are not be outsourced to Corporate Service Providers until the promised consultation on anti-money laundering supervision is completed and its results implemented.
- One of the hot political issues of the year – how to seize frozen assets to benefit Ukraine’s reconstruction. Conservative Jonathan Djanogly led an amendment to generate a discussion, which he called the “chink in the armour” amendment – which would make non-disclosure of all UK-based assets by a sanctioned individual a criminal offence, as the EU has recently done. Commons’ Clerks ruled this out of scope, but the wide cross-party support it received in the Commons should encourage Lords to fully debate this.
Obviously there’s also lots to do to make sure the provisions in the main part of the Bill on Companies House reform are fit for purpose and will stand the test of time. Do check out work by our friends at Open Ownership, the Royal United Services Institute, and Transparency International on this bit of the Bill.