On 13 January, Parliament debated an amendment to the Financial Services Bill to insert a facilitation of and "failure to prevent" economic crime offence (economic crime being fraud, false accounting and money laundering).
The proposed offence was introduced in December 2020 as a late amendment to the Financial Services Bill, and was debated during the Bill’s Third Reading in the House of Commons on 13 January 2021. The proposed amendment would only have applied to businesses regulated by the UK Financial Conduct Authority (FCA).
As we set out in our blog post on 6 November 2020: No decision yet on failure to prevent economic crime offence (Fraud, Financial Crime and Investigations Blog | No decision yet on failure to prevent economic crime offence | Fieldfisher), the Government finally published its response to its call for evidence on reforms to the law on corporate liability for economic crime on 3 November 2020 (the consultation having run in early 2017). Proposals forming part of the consultation included introducing a strict liability corporate offence for failing to prevent employees (and others) committing economic crimes in a similar way to the "failure to prevent" offences contained in the Bribery Act 2010 and Criminal Finances Act 2017. Only a little over half (51.6%) of respondents considered that a failure to prevent offence modelled on that in the Bribery Act should be introduced for economic crime more widely and it must be remembered that liability under the Bribery Act does not require knowledge of the offence by the business or there to be any fault on its part (other than failing to prevent the bribery). Due to this, this type of legislation can be very burdensome for businesses to fully address. Following the end of the consultation, the Government concluded that it needed more information to decide what to do and has commissioned an expert review of the current law from the Law Commission (which should publish its recommendations in late 2021).
The tabled amendment to the Financial Services Bill appears to have been an attempt to bypass consideration of the conclusions in the Law Commission review and introduce a "failure to prevent" offence (at least for FCA regulated businesses) now with no assessment of its impact. The amendment was debated in Parliament with John Glen, the economic secretary to the treasury and city minister, stating: "Before any broader new “failure to prevent” offence for economic crime is introduced, there needs to be strong evidence to support it, as there was when similar bribery and tax evasion offences introduced in 2010 and 2017 respectively took place. A new offence will also need to be designed rigorously, with specific consideration given to how it sits alongside associated criminal and regulatory regimes and to the potential impacts on business."
The amendment was not voted on by the House of Commons due to wish not to pre-empt the ongoing review by the Law Commission. This will be a relief to financial services business, which no doubt would be asking why they should have found themselves subject to a broad new offence, and the additional burden that would place on them, when other sectors (many of which are less well regulated and therefore potentially more susceptible to economic crime issues) are not. If allowed, this amendment may also have signalled the start of a waterfall of "failure to prevent" offences being shoehorned into legislation without proper consideration of how they fit within the wider legislative and regulatory landscape. It is to be hoped that John Glen's comments that consideration should be given to these issues and to the impact on business are heeded, and the Law Commission report waited for, before further attempts are made to bring in this offence through the backdoor.
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