Welcome to the spring 2019 edition of the Osborne Clarke Business Crime Update.
This edition features our first Business Crime video: "responding to dawn raids: seven top tips", which gives key pointers on how to deal with the critical first stages of a search operation conducted by an enforcement agency.
We have (written) contributions from our colleagues in the sanctions team looking at the first monetary penalty imposed in the UK for a sanctions breach, from our health & safety team highlighting when the financial resources of linked companies should be considered when determining health and safety fines, and from our German team analysing a recent decision in the European Court of Justice, which has compliance implications for senior management.
We also include our run-down of likely issues that may shape the world of economic crime enforcement during 2019, which must itself now be looked at in the wake of the Serious Fraud Office's decision not to prosecute any individuals following its long-running investigations involving Rolls-Royce and GSK. This was perhaps particularly surprising in the case of Rolls-Royce, given that the company had previously entered into a Deferred Prosecution Agreement, which saw it pay total sanctions of over £500 million.
Charging decisions are still awaited in other high-profile, but increasingly historic, cases – including: Airbus, BAT and G4S. As Lisa Osofsky approaches her first anniversary at the SFO, the pressure will increase on her to show tangible evidence that she is, in her words, "a new kind of Director".
If you would like to discuss any of the issues raised in this edition, or if we can assist with any business crime related issue, please do not hesitate to contact Jeremy Summers.
Responding to dawn raids: Seven top tips
Businesses across all sectors can be subject to raids or investigations from a variety of enforcement agencies. Ensuring that your business responds effectively to that eventuality, should it ever arise, will be critical.
In this video, Jeremy Summers and Georgia Lythgoe look at some top tips that will help you navigate through the often complex issues that can arise.
Financial sanctions | OFSI imposes its first monetary penalty for breach of financial sanctions
The Office of Financial Sanctions Implementation has since 2017 had the power to impose monetary penalties for breaches of financial sanctions. After a delay of 20 months from those powers coming into force, in January OFSI issued its first fine.
The amount of the fine was small (£5,000), but still represented 5,000% of the size of the relevant transaction. In its 2018 annual report, OFSI stated that penalties will become more common. It remains to be seen whether OFSI's approach will become more like OFAC in the US, which in 2017 alone imposed $119 million in fines for breaches of US sanctions.
Court of Appeal guidance on impact of linked companies' financial resources when considering fines
Two recent Court of Appeal decisions have provided guidance on when the financial resources of linked companies should be considered when determining health and safety fines.
In overturning one first instance decision, the Court of Appeal has confirmed that it is the turnover of the defendant company only that is the basis for categorisation of size within the Sentencing Guidelines. However, as seen in both cases, where the defendant company relies significantly on a linked company for financial support, this will be a material factor in the level of the defendant company's fine overall.
New employers’ obligation to introduce a system recording working hours | what do directors need to know?
A recent CJEU decision will result in obligations on companies to introduce systems to monitor the time worked by employees. Directors should take note of these new requirements to ensure they comply with their supervisory obligations. This is particularly so in countries such as Germany, where executive directors are under a general obligation to ensure that the company complies with its legal obligations.
Economic crime in 2019 | what are we seeing, what can we expect?
Political statements over the past 12 months have reiterated a commitment to combatting economic crime, with particular prominence given to renewed efforts to target money laundering and the professional enablers who facilitate it. However, following the SFO's decision not to prosecute any individuals following a number of long-running investigations, businesses may be thinking more carefully about whether a self-report will ultimately be beneficial.
We also look at what is in store for other agencies, such as the NECC and HMRC, and other trends to look out for.