SFO guidance on effective compliance
In January 2020, the Serious Fraud Office (SFO) added a section to its Operational Handbook to give guidance on what it will view as constituting an effective corporate compliance programme. (We analysed this guidance in this Insight.) The SFO has made it clear that it will focus on assessing compliance programmes as an integral part of any investigation and will want to be satisfied that a commercial organisation has a “fully proactive and effective” programme in place and not simply a “paper exercise”. The SFO’s assessment in this regard will be likely to be central to any decision taken as to whether a deferred prosecution can be offered or whether a full prosecution should be brought.
UK Money Laundering Regulations updated
The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into force on 10 January 2020, implementing the Fifth EU Money Laundering Directive (5MLD) and updating the UK’s anti-money laundering (AML) regime.
The new regulation brings four additional sectors within the ambit of the AML regime: cryptoasset exchange providers; custodian wallet providers; art market participants; and letting agents. The new regulations also provide further requirements as to the need for enhanced due diligence to be undertaken where any party to a transaction is established in a high-risk country. There is also now an obligation to report discrepancies in information received when undertaking AML due diligence with the detail held at Companies House and on the People with Significant Control Register.
For more detail, see our Insight on the new regulations.
Airbus penalty confirms upward direction of travel for financial crime sanctions
On 31 January 2020, Airbus SE entered into the UK’s seventh Deferred Prosecution Agreement (DPA), agreeing to a total sanction being paid in the UK of €990. This was part of a global settlement of €3.6bn also involving France and the USA. The underlying conduct leading to the UK DPA related to a failure to prevent bribery within Airbus’s Commercial and Defence and Space divisions occurring across five jurisdictions between 2011 and 2015. In addition to the financial sanction, an enhanced compliance programme was required to be adopted.
The process by which the court arrived at the DPA followed that seen in previous DPAs, most notably Rolls-Royce. The decision underscores the seriousness with which courts will approach offending of this nature whilst making it clear that significant reduction in sanctions are available for organisations that self-report and cooperate fully with the authorities. (We look at DPAs as part of our Straight to the Point video series).
In Focus | Responsible business
Which aspects of responsible business are driving the regulatory agenda?
In the financial crime space, ethical business practices along with the continuing need to tackle terrorist and other illicit financing remain of paramount importance. The Fifth Money Laundering Directive (discussed above) reflects these imperatives. In the UK, difficulties with proving corporate criminal liability continue to exercise enforcement agencies, in particular the SFO.
The corporate failure to prevent offences (presently relating to bribery and the facilitation of tax evasion) have been enacted to try and address this issue, and we expect that the offence will be extended to cover all forms of economic crime, including money laundering, in the next two to three years.
Are responsible business considerations having an impact on the tools that regulators are using?
As the corporate compliance guidance (discussed above) issued by the SFO reflects, the UK agencies, in particular the Financial Conduct Authority, issue guidance to assist business. However, by comparison with the US, such guidance might be viewed as being less detailed and therefore potentially less helpful.
For example, no further guidance has yet been issued to assist in determining what would constitute adequate procedure for the purposes of establishing the statutory defence to the corporate offence of failing to prevent bribery, beyond that issued by the Ministry of Justice in 2011, when the Bribery Act 2010 first came into force.
Which of the recent or upcoming developments are based on international consensus or agreements?
Supranational organisations such as the G20 and the OECD play a significant role in shaping national policy agendas in relation to anti-bribery and corruption. The G20’s Anti-Corruption Working Group, for example, has produced high-level principles that are intended to form the basis for national legislation. As a result, other countries, such as France, have been introducing or strengthening their anti-bribery and corruption regimes.
In relation to enforcement, multi-jurisdictional investigations have been common for some time, and often require difficult tactical decision to be made, as ultimately each jurisdiction involved can follow its own path, and impose its own sanction. A number of jurisdictions are, however, following broadly similar processes when it comes to Deferred Prosecution Agreements and in this respect the SFO has indicated it will look to work closely with Australia, France and the US among others.
The SFO, under its new director, Lisa Osofsky, has repeatedly indicated that it will look to progress its investigation leveraging increased co-operation from other international enforcement agencies.
What are the main challenges for businesses in complying with these developments?
As with all areas of compliance, the pace with which new laws are adopted, both in the UK and internationally, can be challenging. As the UK moves forward post-Brexit and looks to develop new trading partnerships, those challenges may only increase, and countries with whom the UK seeks extensive trading relationships may in due course seek to impose additional compliance burdens that mirror those in place in their respective jurisdictions.
It remains imperative that businesses understand the financial crime risks that they face wherever they undertake business, and then take proportionate steps to mitigate those risks.
Dates for the diary
|Throughout 2020||A number of developments in high-profile SFO cases including Amec, BAT, De La Rue, ENRC and G4S are expected this year that could provide informative pointers as to future enforcement trends.|
|2020/21||Changes to the UK’s Suspicious Activity Report process aimed at improving the system and the quality of intelligence it produces, are hoped to come into effect|
|Read the full Regulatory Outlook here >|