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21 Sep 2016

Jessica Parker discusses financial crime liability in PaymentsCompliance

Payments boardroom executives in the UK could face legal retribution if they do not take steps to prevent their staff and associates from committing financial crime, the government has said.

A bill soon to be put forward for public consultation will attempt to rewrite the rules on corporate liability around white-collar crime, including money laundering, fraud and false accounting.

Under the rules, employers could be tasked with preventing their staff and agents, including third-party partners, from committing such crimes, and could be prosecuted for failure to put in “adequate” or “reasonable” controls.

Jessica Parker, a partner specialising in financial crime at Corker Binning in London, told PaymentsCompliance that the plans “will move compliance issues up the agenda in the boardroom”.

Such rules could affect a wide array of industries, she added, with payments companies and other financial groups potentially more exposed than most, even if they are more used to dealing with regulations.

“Any businesses that deal with money are more likely to be caught up in some part of the criminal process,” she said.

“It is likely that the proposals will result in criminal culpability for the company, even in circumstances where no one at board level has any knowledge of the conduct, and will shift the responsibility for the prevention of financial crime onto businesses.”

She did add, however, that the extent of board liability would only emerge once the consultation was released.

Revealing the proposals earlier this month, Jeremy Wright, the UK’s attorney general, said responsibility for economic crime was “found at every level, from the boardroom down”.

According to The Times, he told the International Symposium on Economic Crime in Cambridge earlier this month that the current system “incentivises a board to distance itself from the company’s operations”.

The government’s plans to enhance corporate responsibility for financial crime are expected to follow the lines of the Bribery Act 2010, which introduced a strict liability offence for failing to prevent bribery, under Section 7.

This means that if a person associated with a given firm committed bribery to secure a business advantage for that company, the accused firm would need to prove its procedures for stopping such behaviour were adequate.

These Section 7 offences also do not require prosecutors to prove intent or significant management failures on the part of executives.

Similar rules on tax evasion are also currently in the works.

According to Parker, “it is likely that the consultation will propose new legislation which contains a new offence of failure to prevent financial crime, which will include money laundering”.

She added that in line with the Bribery Act, the rules would also likely include a defence of having “adequate” procedures in place to prevent such crime, or the “reasonable” procedures demanded in relation to facilitating tax evasion.

“Many businesses will wish to enhance their risk assessment, training and monitoring in order to be able to rely on the defence,” she said.

“It is likely that guidance will be published by the Ministry of Justice to accompany the new legislation which will aim to set out how businesses should approach adequate or reasonable procedures.”

Although the changes will attract boardroom attention, their actual impact on company procedures may be less dramatic than it seems.


Read the full article in PaymentsCompliance here.

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