Regulatory Outlook | Anti-Corruption, Bribery and Financial Crime | July 2018
Published on 24th Jul 2018
Appeal in ENRC privilege litigation
The Court of Appeal decision in the appeal from the High Court decision in SFO v ENRC on the scope of litigation privilege is eagerly awaited. The decision (arising in the context of a significant on-going SFO overseas corruption investigation) may confirm a restrictive approach to litigation privilege and impact on the planning and conduct of internal investigations.
New Director of the SFO
Lisa Osofsky will take over the Directorship of the Serious Fraud Office in September 2018. Ms Osofsky is originally from the US, where she was a former Deputy General Counsel at the FBI. She has since worked at Goldman Sachs, Control Risks and Exiger. Ms Osofsky has indicated that she is committed to ensuring the SFO's independent future, although it remains to be seen how much of the agency's work is "tasked" by or through the National Crime Agency. We may in any event anticipate a more US-style approach to the SFO's work, including increased corporate Deferred Prosecution Agreements alongside the prosecution of senior individuals.
National Economic Crime Centre
Part of the Home Office’s Anti-Corruption Strategy 2017-20 is the creation a multi-agency National Economic Crime Centre, to act as the national authority for the UK’s operational response to economic crime. The NECC will be based in the National Crime Agency and include staff from across government and the private sector. The NECC's aims are to: improve the intelligence picture on economic crime; task and coordinate the overall law enforcement response; and increase the UK’s ability to investigate high-end economic crime.
UK Treasury Committee economic crime inquiry
The Treasury Committee inquiry, launched in March 2018, has two aspects:
- the anti-money laundering and sanctions regime in the UK; and
- how economic crime affects consumers.
As part of this, the inquiry will be looking at the effectiveness of financial institutions in combatting economic crime.
The Committee will examine the scale of money laundering, terrorist financing and sanctions violations in the UK in addition to fraud, in particular through the medium of online banking.
5th Money Laundering Directive
The 5th Money Laundering Directive (MLD5) entered into force on 9 July 2018. EU Member States must bring into force the laws, regulations and administrative provisions necessary to comply with MLD5 by 10 January 2020. Amongst the key changes from MLD4 will be the inclusion of virtual currency exchange platforms and custodian wallet providers within the scope of regulation.
In Focus: Brexit
Is any new EU legislation expected to come into force and effect before the end of the transition period?
The European Commission has issued a proposal for a Directive on countering money laundering by criminal law.
MLD5 is expected to come into force and effect by the end of 2019, so is likely to become part of UK law.
The European Commission has also proposed rules aimed at boosting transparency in order to tackle aggressive cross-border corporate tax avoidance.
Is a new regulator needed, or do additional powers to be given to an existing regulator?
Dependent on what security/law enforcement cooperation provisions remain in force post-withdrawal, relevant UK agencies may need new powers to address any loss of European assistance.
Is there an existing "equivalence" or "recognition" regime for recognising Third Country regulatory regimes?
While laws are set and enforced at a national level, in many cases enforcement will involve cooperation and mutual assistance between authorities in different states. The EU regime on security cooperation facilitates this within the EU.
The position in relation to mutual assistance post-Brexit remains unclear.
Does current UK government policy mean that (subject to the terms of a future trade agreement between the UK and the EU) material changes to regulation or enforcement are likely post-Brexit?
After Brexit, it is unlikely that the UK will choose to lighten regulation, since the UK has been a leader in enacting financial crime regulation.
What should businesses be doing now to prepare for Brexit?
- Now is a good time to review your policies and procedures and consider where revisions may be necessary to comply with existing law.
- Consider MLD5 and whether it may impose additional obligations on your business.
- Keep the position under review, including the progress of proposed EU legislation that may or may not apply in the UK, depending on when it comes into force and effect.
Dates for the Diary
|The FCA is consulting on proposals to add a chapter on insider dealing and market manipulation to the Financial Crime Guide and also to update the guide to reflect a number of recent regulatory changes|
The US withdrew from the Iranian Joint Comprehensive Plan of Action (JCOPA) in May 2018 and announced the re-imposition of Iranian sanctions.
Secondary sanctions in place prior to the JCPOA, affecting non-US financial institutions, will take effect again by 5 November 2018. New US sanctions may also follow.