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Economic Crime And Corporate Transparency Act 2023

Contents

Part 5 – Miscellaneous

Money laundering and terrorist financing

Section 182: Money laundering: exiting and paying away exemptions

  1. Section 182(2), (3) and (4) inserts exemptions from the specified principal money laundering offences in POCA sections 327 and 328. They enable a person carrying on business in the regulated sector to transfer or hand over money or other property owed to a customer or client, in order to end their business relationship, without requiring submission of a DAML.
  2. The value of the criminal property transferred or handed over must be less than the threshold amount specified in section 339A. The threshold amount can be amended by order made by the Secretary of State.
  3. Before transferring or handing over the money or other property, the business must have complied with their existing customer due diligence duties under the Money Laundering Regulations 2017. The subsections insert the definition of "customer due diligence duties". For the purposes of sections 327(2D)(d), 328(6)(d) and s329(2D)(d), compliance with customer due diligence duties in practice refers to the business applying due diligence measures to the customer or client as required by regulation 27(1)(a) of the Money Laundering Regulations 2017 and nothing in sections 327(2E)(c), 328(7)(c) and 329(2E)(c) sets any expectations as to the nature, level, standard, or completeness of any due diligence undertaken."
  4. The exemptions cannot be used by any type of business that has been excluded by regulations made by the Secretary of State.
  5. Section 182(5) amends section 339A (threshold amounts) to specify that the value below which property can be transferred or handed over is £1,000.
  6. Section 182(6) inserts the definition of "business relationship" into section 340.

Section 183: Money laundering: exemptions for mixed-property transactions

  1. Section 183(2), (3) and (4) inserts exemptions from the specified principal money laundering offences in POCA sections 327 and 328. The exemption enables a person carrying on business in the regulated sector to act on behalf of a customer or client in operating an account or accounts held, when the business knows or suspects that part, but not all, of the money or property held for the customer or client is criminal property. This may include for example allowing a customer or client access to money or other property.
  2. The exemption applies where the person holds funds or other property for the customer or client and cannot identify the specific elements of the funds or other property that are criminal in origin.
  3. Where the value of funds or other property would fall below the value known or suspected to be criminal as a result of an action, the exemption would not apply. In this case the person would submit an authorised disclosure for the value of criminal funds or property.
  4. For example, an individual may receive a legitimate monthly salary from their employer and have £2,000 from this salary in their bank account. The individual then makes what the bank suspects to be a fraudulent loan application and receives a further £3,000. The account now contains £5,000. Using the exemption, the bank can allow the customer access to up to £2,000 of their funds without submitting a DAML, as long as a minimum of £3,000 (the value of the suspected criminal funds) is maintained by the bank. If the customer wanted to withdraw £2,500, taking the balance to £2,500, an authorised disclosure would be required on the £500 that would take the balance below £3,000.
  5. There is no threshold value limit on the use of the exemptions.
  6. The exemptions cannot be used by any type of business that has been excluded by regulations made by the Secretary of State.

Section 184: Money laundering: offences of failing to disclose

  1. This section creates a defence for people who fail to report money laundering if their knowledge or suspicion is based on information supplied under a status check or immigration check required by the Immigration Act 2014.
  2. The defence applies where, but for that information, the person would not have reasonable grounds to know or suspect money laundering.

Section 185: Money laundering: information orders

  1. This section amends section 339ZH of POCA, which allow the relevant court to make an IO.
  2. Section 185(7) inserts new subsections (6A), (6B) and (6C). Subsections (6A) and (6B) set out 3 new conditions for application for an IO which do not require the information required to be given under the order to relate to a matter arising from either a disclosure under Part 7 of POCA or from a corresponding disclosure requirement where the information to which the order relates has been requested by a foreign authority. The information sought must be to assist the NCA or a foreign FIU to conduct its operational or strategic analysis functions relevant to money laundering. Operational analysis enables FIUs to identify specific targets to follow the trail of particular activities of transactions to determine links between those targets and possible proceeds of crime. Strategic analysis enables FIUs to identify money laundering trends and patterns, this information will be used to determine money laundering related threats and vulnerabilities. Subsection (6B) stipulates that the information provided by the National Crime Agency to the foreign FIU must be for the purposes of the criminal intelligence function of the National Crime Agency, so far as it relates to money laundering. Subsection (6C) sets out the meaning of "money laundering" in subsections (6A) and (6B).
  3. Section 185(10) amends subsection 12 of section 339ZH, inserting the definition of an "authorised NCA officer", "the criminal intelligence function" and "foreign FIU".
  4. Section 185(12) inserts section 339ZL into POCA. It creates a duty on the Secretary of State to make a code of practice in relation to conditions 3 and 4. The code of practice must provide guidance to assist authorised NCA officers (and the Director General of the NCA) in connection with the making of applications for an IO in reliance on those conditions. In the case of applications made to the sheriff, the guidance must assist those officers with the making of requests for such to a procurator fiscal. A court may only make an IO if it is satisfied that the relevant NCA officer has had regard to the code of practice before he or she has made the application (or, in Scotland, before he or she has made a request for such to a procurator fiscal). Subsections (3) to (9) of section 339ZL set out various procedural requirements for the making and bringing into force of the code of practice, as well as supplementary provision in relation to failures to comply with the code, admissibility of the code as evidence in other proceedings and definitions.

Section 186: Terrorist financing: information orders

  1. This section amends section 22B of TACT, which allows the relevant court to make an IO.
  2. Section 173(8) inserts 2 new conditions for application of an order which do not require the information required to be given under the order to relate to a matter arising from either a disclosure under section 21A of TACT or from a corresponding disclosure requirement where an external request has been made by a foreign authority. The information sought must be to assist the NCA or a foreign FIU to conduct its operational or strategic analysis functions relevant to terrorist financing. Operational analysis enables FIUs to identify specific targets to follow the trail of particular activities or transactions to determine links between those targets and possible terrorist financing. Strategic analysis enables FIUs to identify terrorist financing trends and patterns, this information will be used to determine any terrorist financing related threats and vulnerabilities. The provision of the information by the National Crime Agency to the foreign FIU must be for the purposes of the criminal intelligence function of the National Crime Agency, so far as it relates to terrorist financing.
  3. Section 186(12) inserts the definition of an "authorised NCA officer", "criminal intelligence function", "foreign FIU" and "terrorist financing".
  4. Section 186(13) inserts section 22F into TACT. It creates a duty on the Secretary of State to make a code of practice in relation to conditions 3 and 4. The code of practice must provide guidance to assist authorised NCA officers (and the Director General of the NCA) in connection with the making of applications for an IO in relation to those conditions. In the case of applications made to the sheriff, the guidance must assist those officers with the making of requests for such to a procurator fiscal. A court may only make an IO if it is satisfied that the relevant NCA officer has had regard to the code of practice before he or she has made the application (or, in Scotland, before he or she has made a request for such to a procurator fiscal). Subsections (3) to (9) of section 22F set out various procedural requirements for the making and bringing into force of the code of practice, as well as supplementary provisions in relation to failures to comply with the code, admissibility of the code as evidence in other proceedings and definitions.

Section 187: Enhanced due diligence: designation of high-risk countries

  1. This section amends Schedule 2 (money laundering and terrorist financing etc) and section 55 (parliamentary procedure for regulations) of the Sanctions and Anti-Money Laundering Act 2018 so as to provide for the Treasury to publish and amend the list of high-risk countries from time to time.

Disclosures to prevent, detect, or investigate economic crime etc

Section 188: Direct disclosures of information: restrictions on civil liability

  1. This section disapplies any duty of confidence owed by a business to its customer, or any civil liability relating to a disclosure about that customer, where the business making the disclosure knows the identity of the recipient (a "direct disclosure") and certain conditions are satisfied. An example is where a bank identifies a transaction that it is part of as irregular and wants further information from the other party involved in the transaction on, for instance, the identity of the payer or the source of funds.
  2. Section 188(1) sets out the conditions where a person ‘A’ making a direct disclosure to another person ‘B’ does not breach confidentiality obligations A may owe and is protected from civil liability. These conditions are:
    1. That A is carrying on a business of a kind set out in section 188(3).
    2. That B is also a business to which section 188(3) applies.
    3. That the person whose data is being shared is a customer or former customer of A.
    4. That either the "request condition" or "warning condition" is met (these are defined by section 188(4) and (5)).
    5. That A is satisfied that the disclosure will or may assist B in carrying out relevant actions of B. "Relevant action" is defined at section 191 and includes:
      1. determining whether it is appropriate to carry out customer due diligence (CDD) or other similar measures;
      2. identity verification; and
      3. determining whether it is appropriate to decline or restrict services to a customer for the purposes of preventing or detecting economic crime.
    6. That the disclosure is not a privileged disclosure as defined by section 190.
  3. Section 188(2) sets out the protections that are applied by the sections: that the disclosure does not- (a) give rise to a breach of any obligation of confidence owed by A, or (b) give rise to any civil liability, on the part of A, to the person to whom the disclosed information relates
  4. Section 188(3) sets out the sectors that this section applies to. This covers businesses in the AML regulated sector (as defined in Part 1 of Schedule 9 to POCA) or those prescribed in regulations made by the Secretary of State.
  5. Section 188(4) sets out one of the conditions that must be met in order to satisfy limb (d) of the test above. This, the request condition, is designed to facilitate sharing where B has made a request to A for disclosure of information.
  6. Section 188(5) creates the alternative condition that may be relied on to satisfy limb (d) as referenced above. This, the warning condition, is designed to facilitate sharing in cases where A wishes, due to concerns about risks of economic crime, to warn B about a customer. The condition for A providing such a warning is that A must have taken safeguarding action against their customer or would have taken such action in the case of a former customer.
  7. Section 188(6) defines what a safeguarding action consists of.
  8. Section 188(7) ensures that should B, upon receipt of a disclosure under subsection (1), use the disclosed information for the purposes of any of B’s relevant actions (as defined in section 191), B does not breach any obligation of confidence B may owe.
  9. Section 188(8) ensures that a person carrying on a business to which section 188(2) applies does not breach any duty of confidentiality owed or make themselves civilly liable when disclosing information to another person for the purpose of making a disclosure request, provided it is reasonably believed that the person to whom the disclosure is made is carrying on business to which section 188(2) applies and has information that may assist the requestor in conducting their relevant actions.
  10. Section 188(9) sets out the protections that apply to section 188(8).
  11. Section 188(11) makes clear that the disclosure of information must still be compliant with data protection legislation, the UK GDPR, and the Data Protection Act 2018, and that the protection from civil liability offered by these sections do not include those that arise under these acts.

Section 189: Indirect disclosure of information: no breach of obligation of confidence

  1. This section disapplies duties of confidentiality and civil liabilities where information is shared via a third-party intermediary (TPI) who may hold information on, for instance, a database or platform, such as one akin to the National Fraud Database. This type of information sharing will occur where, for instance, Bank ‘A’ has information about a customer that is relevant to other banks for preventing, detecting, or investigating economic crime, but it does not know specifically which banks would benefit from the information. An example would be where a bank has terminated a relationship with a customer due to economic crime concerns and wants to inform other banks of its decision to inform their own risk-assessments about the customer.
  2. Section 189(1) creates the conditions that must be met in order for a disclosure made by a person A to another (TPI) not to breach any obligation of confidence A may owe. These include:
    1. That A is a business to which Section 189(3) applies, namely a business in the regulated sector as: a deposit taking body; electronic money institution; a payment institution; a cryptoasset exchange provider; a custodian wallet provider; a legal, accountancy, audit, tax or insolvency practitioner whose revenues exceed the amount specified in subsection (11); or a business prescribed by regulations made by the Secretary of State;
    2. That the person whose data is being shared is a customer or former customer of A;
    3. That A has taken specified safeguarding action against the customer;
    4. That A is satisfied that the information disclosed, if disclosed by B to another C who is carrying on a business to which subsection (3) applies will or may assist the eventual recipient C in carrying out its relevant actions;
    5. That the UK GDPR applies to the disclosure; and
    6. That A and the TPI are parties to an agreement that ensures that to the extent the information is personal data any processing or disclosure by the TPI will only take place in circumstances where the UK GDPR applies to that processing or disclosure.
  3. That the disclosure is not a privileged disclosure as defined in Section 190.
  4. Section 189(2) sets out the protections that are applied by the sections: that the disclosure does not- (a) give rise to a breach of any obligation of confidence owed by A, or (b) give rise to any civil liability, on the part of A, to the person to whom the disclosed information relates.
  5. Section 189(4) is designed to ensure the TPI qualifies for the protections where the TPI discloses information to another business C and the condition of section 189(5) is met, covered by the provisions for the purposes of preventing, investigating, or detecting economic crime.
  6. Section 189(6) is designed to ensure that the use of the disclosed information by the eventual recipient C, for their relevant actions does not breach any obligation of confidence owed by C.
  7. Section 189(7) ensures that a person, carrying on a business to which subsection (3) applies, who makes a disclosure of information to another for the purposes of making a request for disclosure does not breach any duty of confidentiality owed or give rise to civil liability when doing so in specified circumstances.
  8. Section 189(10) makes clear that the disclosure of information must still be compliant with data protection legislation, the UK GDPR, and the Data Protection Act 2018, and that the protection from civil liability offered by these sections do not include those that arise under these acts.
  9. Section 189(11) provides the definition of relevant financial year, and the revenue threshold to qualify as a large firm under section 189(3).

Section 190: Meaning of "privileged disclosure"

  1. This section defines the meaning of "privileged disclosure" for the purpose of the information sharing Sections 188 and 189. Section 190(1) defines a privileged disclosure i.e., a disclosure of information made by a professional legal adviser or relevant professional adviser in circumstances where the information disclosed came to the adviser in privileged circumstances.
  2. Section 190(2) defines "privileged circumstances".
  3. Section 190(3) defines a "relevant professional adviser" for the purposes of this provision.

Section 191: Meaning of "relevant actions"

  1. This section defines the term "relevant actions" referred to in Sections 188 and 189.

Section 192: Meaning of "business relationship"

  1. This section defines the term "business relationship" referred to in Sections 188 and 189.

Section 193: Other defined terms in sections 188 to 191

  1. This section defines the other terms used in sections 188 and 191, including the definitions of "economic crime" which refers to acts which constitute offences listed in Schedule 11. Whilst the list does not expressly include aiding, abetting, counselling, or procuring commission of one of those listed offences, this is because such acts are considered to be covered by a reference to the primary offence and a person found guilty of aiding, abetting, counselling or procuring would be convicted of that primary offence.
  2. Express provision is made for the offences of encouraging or assisting the commission of one of those listed offences in England and Wales, and incitement to commit a listed offence in Scotland.
  3. Section 193(3) enables the Secretary of State, via secondary legislation, to add or remove offences to or from the list in Schedule 11.

Power to strike out certain claims

Section 194: Strategic litigation against public participation: requirement to make rules of court

  1. This section sets out the mandatory requirement for Civil Procedure Rules to tackle SLAPPs.
  2. Subsection (1) contains the dismissal test to be applied by courts in determining whether to strike out SLAPP claims, being whether the claimant can show they are more likely than not to succeed at trial and the requirement that the claimant must satisfy the court of the likelihood of success for the claim to proceed.
  3. Subsections (2), (3) and (4) contain the duty on the Civil Procedure Rule Committee to make the corresponding rules, including rules that provide the costs protection for the defendants.
  4. Subsection (5) contains the power for the Lord Chancellor by regulations to require corresponding provisions in other rules of court which, when exercised, will entail amendment to the Act specifying those rules of court.

Section 195: Meaning of "SLAPP" claim

  1. This section contains the definition of a SLAPP claim that applies to Section 194. That definition, set out in subsection (1), requires that the claim is with respect to the exercise by the defendant of their right to freedom of speech on a matter related to economic crime and with the purpose of combating it and that the claimant has sought to misuse the justice system.
  2. Subsection 1(d) defines the misuse of the justice system as behaviour intended to cause harassment, alarm, distress, expense, or any other harm or inconvenience, beyond that which would ordinarily be encountered in properly conducted litigation. Subsections (4) and (5) set out matters relevant to the consideration of such behaviour.
  3. Subsection (2) excludes limitations of law with respect to the exercise of freedom of speech in consideration of the matters in subsections (1)(a) and (c) so as to avoid inadvertently frustrating the operation of the early dismissal procedure in Section 193
  4. Subsection (3) defines where the defendant’s exercise of their right to freedom of speech will have to do with economic crime for the purpose of subsection (1).
  5. Subsection (6) defines the meaning of economic crime for the purpose of Section 194.

Attributing criminal liability for economic crimes to certain bodies

Section 196: Attributing criminal liability for economic crimes to certain bodies

  1. Sections 196 to 198 enable a corporate body or partnership to be held criminally liable where a senior manager commits a relevant offence while acting within the actual or apparent authority granted by the organisation.
  2. At present, for most offences, whether a corporate body will be criminally liable relies on the application of the "identification doctrine", under which the offence must be carried out by a person representing the "directing mind and will" of the corporate body. This amendment does not replace or amend the common law identification doctrine but provides a new statutory route to corporate liability for offences listed in Schedule 12.
  3. Section 196(1) provides that the corporate body or partnership will be guilty of an offence if the offence is carried out by a "senior manager". A senior manager is an individual who plays a significant role in the making of decisions about how the whole or a substantial part of the activities of the body are to be managed or organised, or the actual managing or organising of the whole or a substantial part of those activities. This covers both those in the direct chain of management as well as those in, for example, strategic or regulatory compliance roles. "Substantial part of the business" relates to the importance of the activity over the operations of a business as a whole.
  4. "Senior management" would normally include a company’s directors and other senior officers such as a Chief Financial Officer or Chief Operating Officer, whether or not they are members of the Board. This would include organisations such as charities where, because of restrictions on trustees receiving benefits from the charity, the organisation’s salaried chief officers are not usually members of the Board. Other individuals who have significant roles in relation to a substantial part of the organisation’s activity, such as its human resources function, would also be included. However, "senior management" is not limited to individuals who perform an executive function or are board members, it covers any person who falls within the definition irrespective of their title, remuneration, qualifications or employment status.
  5. The senior manager must be acting within the actual or apparent scope of their authority. This does not mean that the senior manager must have been authorised to carry out a criminal offence. It would be enough that the act was of a type that the senior manager was authorised to undertake or which would ordinarily be undertaken by a person in that position. For instance, if a Chief Financial Officer commits fraud by deliberately making false statements about a company’s financial position, the company would be liable since the act of making statements about the company’s financial position is within the scope of that person’s authority.
  6. Subsection (2) and Schedule 12 define which offences the new rule will apply to. An offence in Schedule 12 is a "listed offence". The rule will also apply to attempts and conspiracies to commit a listed offence; to aiding, abetting, counselling or procuring the commission of a listed offence; in England, Wales and Northern Ireland, to offences of encouraging or assisting a listed offence; and in Scotland to inciting the commission of a listed offence.
  7. Subsection (3) ensures criminal liability will not attach to an organisation based and operating overseas for conduct carried out wholly overseas, simply because the senior manager concerned was subject to the UK’s extraterritorial jurisdiction: for instance, because that manager is a British citizen. Domestic law does not generally apply to conduct carried out wholly overseas unless the offence has some connection with the UK. This is an important matter of international legal comity. However, certain offences, regardless of where they are committed, can be prosecuted against individuals or organisations who have certain close connections to the UK. Subsection (3) makes sure that any such test will still apply to organisations when the new rule applies.

Section 197: Power to amend list of economic crimes

  1. Section 197 provides a power to amend the list of offences in Schedule 12. The power is generally exercisable by the Secretary of State. Where it would be within the legislative competence of the Scottish Parliament or the Northern Ireland Assembly to make the amendment by primary legislation, the power is exercisable by the Scottish Ministers or the Northern Ireland Department of Justice (and not by the Secretary of State).

Section 198: Offences under section 196 committed by partnerships

  1. Section 198 makes procedural provision for prosecutions of partnerships under the new rule and applies laws applying to the prosecution of companies to such cases. It requires any fine imposed for an offence committed by the partnership to be paid from partnership assets.

Failure to prevent fraud

Section 199: Failure to prevent fraud

  1. Sections 199 to 206 create a new offence of failure to prevent fraud. The offence will be committed by a large organisation when a relevant fraud offence is committed by an associated person such as an employee or agent, acting to benefit the organisation. It will also be possible to prosecute a parent company where the offence is committed by an associated person of a subsidiary, with the intention of benefitting the parent company and where the group headed by the parent company exceeds the thresholds for a large organisation.
  2. Section 199 deals with the substantive elements of the offence.
  3. Subsection (1) provides that a relevant large organisation is guilty of an offence where an associated person commits a relevant fraud offence with intent to benefit either the body itself, or a person to whom the associate provides services on behalf of the relevant body. Thus, the offence would be committed where, for example, an employee of a company engages in fraud with intent to benefit the company, or engages in fraud with intent to benefit a client for whom the employee provides services on behalf of the company. Benefit is not defined, but is not restricted to financial benefit.
  4. The requirement for an intent to benefit the organisation, or a person to whom the associated person provides services on behalf of the organisation, is broader than the requirement in the offence of failure to prevent bribery in the Bribery Act 2010, section 7, that the associated person intends thereby to "obtain or retain business" or to "obtain or retain a business advantage" for the body.
  5. It is only necessary that the associate "commits" the offence. There is no need for the associate to be prosecuted for or convicted of the offence. Where the associate has been convicted of a fraud offence, that would be proof of the fact that they had committed the offence in later proceedings against the body, unless the body could prove otherwise (Police and Criminal Evidence Act 1984, s 75). Otherwise, the prosecution would need to be able to prove to the criminal standard that the fraud offence had been committed, and that it had been committed by an associate.
  6. The offence must take place during a financial year of the relevant body in which it (or the groups of which it is a part) meets the definition of a large organisation.
  7. Subsection (2) provides that a relevant body will be in scope of the offence, even if it is not itself a large organisation, provided that it is a subsidiary of a large organisation.
  8. Subsection (3) provides that the relevant body is not guilty of an offence if it was an intended victim of the fraud offence. Where the relevant body is an intended victim of the offence it is unlikely that the condition in section 199(1)(a) (that the fraud is intended to benefit the body) will be made out, so this condition is likely only to apply to prosecutions under section 199(1)(b), where the offence is intended to benefit a person to whom the associate provides services on behalf of a body – for instance, where an employee conspires with a client of a company to defraud their employer.
  9. An organisation would be the intended victim of the fraud offence if it would have suffered the intended loss that the fraud offence would result in. However, the term "intended victim" is not defined. An organisation could be the intended victim if the purpose of the offence was to cause some other harm to the organisation.
  10. Subsections (4) and (5) provide a defence where the organisation had put in place procedures to prevent associated persons from committing fraud with intent to benefit it or a client. The section is broadly the same as in the offence of failure to prevent facilitation of tax evasion. The burden of proof is on the defendant to show that it had put in place such procedures as it was reasonable in the circumstances to have put in place, or that it was reasonable in all the circumstances not to have any prevention procedures in place. This would have to be proved on the balance of probabilities.
  11. Subsection (5) defines a fraud offence as an offence in Schedule 13, or an offence of aiding, abetting, counselling or procuring the commission of an offence in Schedule 13. Offences of conspiring to commit an offence, and offences of encouraging or assisting crime in the Serious Crime Act 2007, sections 44-46 are not covered, since these offences can be committed even if the substantive fraud is never carried out.
  12. However, if the associate conspires to carry out a fraud, and it is carried out, then they would be guilty of the substantive offence of fraud, whether as a primary offender or as an accessory, and therefore the condition in (1) would be made out, even if they were prosecuted for, and convicted of, conspiracy.
  13. Likewise, if the associate encourages or assists someone to carry out a fraud offence and that person does carry out the fraud offence, then – even if the associate were prosecuted under the Serious Crime Act 2007 – they would, in fact, have also committed a substantive offence and therefore the company could be prosecuted for failure to prevent fraud.
  14. Subsection (7) defines who is to be considered an associated person of a relevant body, and are broadly similar in effect to those in the offences of failure to prevent bribery and facilitation of tax evasion.
  15. Subsection (8) provides that a person is also associated with a body if they are an employee of a subsidiary of that body. This would enable proceedings to be brought against a parent company where the parent company is a large organisation and a fraud offence is committed by an employee of a subsidiary, and is intended to benefit the parent company.
  16. Subsection (9) provides that whether a person performs services for or on behalf of a relevant body is a question to be determined by reference to all the circumstances and not merely the legal relationship between the person and the body.
  17. Subsection (10) allows proceedings to take place in any part of the UK. This would, for instance, enable a company to be prosecuted in Scotland because that is where the company is based, even though some of the fraudulent activity took place in Northern Ireland. It is envisaged that the prosecuting authorities in the three jurisdictions will develop working arrangements as to which body should prosecute offences with a cross-border element. Subsection (11) makes provision for prosecutions in Scotland in such circumstances are not subject to the normal jurisdictional restrictions on the sheriff court where proceedings are brought.
  18. Subsection (12) sets the maximum penalty for the offence as an unlimited fine following conviction on indictment or in summary proceedings in England and Wales; and as the statutory maximum for summary proceedings in Scotland and Northern Ireland. Subsection (12) provides for the relevant body to be fined. In England and Wales, unlimited fines are available upon summary conviction. In Scotland and Northern Ireland, a fine upon summary conviction is limited to the statutory maximum.
  19. Subsections (13) and (14) are interpretative provisions.

Section 200: Fraud offences: supplementary

  1. Section 200 allows the Secretary of State to amend the list of fraud offences to which the new offence applies. The power is exercisable by the Scottish Ministers or the Northern Ireland Department of Justice if the amendment could be made by primary legislation in the Scottish Parliament or Northern Ireland Assembly.
  2. Subsection (4) requires that any offence added must be one of dishonesty or otherwise of a similar character to those already in the Schedule. The intention of this section is to allow cognate offences to be added if, for instance, new or replacement offences are created, or to remedy a gap in the law.
  3. Subsection (4), with subsection (7), also allows a money laundering offence under sections 327-329 of the Proceeds of Crime Act 2002 to be added.
  4. Subsection (6) makes provision for situations where the fraud offence takes place over a period of time crossing more than one financial year of the body: the offence is treated as having been committed on the last day that it was committed.

Section 201: Section 199: large organisations

  1. Section 201 defines "large organisation". The test is modelled on tests in section 465 of the Companies Act, with provision for it to apply in the same way, subject to any necessary changes, to large organisations which are not subject to section 465. An organisation will be a large organisation if two of its (i) turnover, (ii) balance sheet total or (iii) employee numbers exceed the relevant threshold in section 201. Where the body is a "parent undertaking", section 202 applies.

Section 202: Large organisations: parent undertakings

  1. Under Section 202, where the organisation is a "parent undertaking" of one or more companies, the thresholds will apply to the aggregate turnover, balance sheet total or employee numbers aggregated across the group. This is relevant both for the liability of the parent undertaking for fraud committed by its own associated persons (including employees of a subsidiary, under section 199(8) and application of the offence under section 199(2) to a subsidiary which is part of a group which passes the "large organisation" threshold.

Section 203: Offences under section 198 committed by partnerships

  1. Section 203 makes provision where proceedings are brought against a partnership, ensuring that the proceedings are brought against the partnership collectively, and not against individual partners; provides for rules of court applying to bodies corporate to apply in a similar way to partnerships; and provides for any fine to be imposed against partnership assets.

Section 204: Guidance about preventing fraud offences

  1. Section 204 requires the Secretary of State to publish guidance on the procedures bodies can put in place to prevent associated persons from committing relevant fraud offences. Before issuing the guidance, the Secretary of State must consult the Scottish Ministers and the Northern Ireland Department of Justice. This section reflects similar requirement in the failure to prevent bribery and failure to prevent facilitation of tax evasion offences.

Section 205: Failure to prevent fraud: minor definitions

  1. Section 205 defines certain terms used in the foregoing provisions.

Section 206: Failure to prevent fraud: miscellaneous

  1. Section 206 contains consequential amendments to existing legislation to include the new failure to prevent fraud offence in the groups of offence to which certain powers apply.

Regulatory and investigatory powers

Section 207: Law Society: powers to fine in cases relating to economic crime

  1. This section amends the Solicitors Act 1974 and the Administration of Justice Act 1985 to remove the existing statutory cap on the Law Society’s, as delegated to the SRA, power to direct a person to pay a penalty in relation to disciplinary matters relating to economic crime offences, for ‘recognised bodies’ (traditional law firms and sole solicitor's’ practices) and regulated individuals.
  2. This section removes the statutory fining limit to allow the SRA to set its own limits on financial penalties imposed for economic crime disciplinary matters. The LSB is still required to consider any changes to the regulatory arrangements "Economic crime" is defined with reference to section 193 of this Act. It includes offences listed in Schedule 11, ancillary offences and equivalent offences overseas. The offences include fraud, money laundering and terrorist financing and an offence under regulations made under section 1 of the Sanctions and Anti-Money Laundering Act 2018.

Section 208: Scottish Solicitors’ Discipline Tribunal: powers to fine in cases relating to economic crime

  1. This section amends section 53 of the Solicitors (Scotland) Act 1980, to remove the SSDT’s financial penalty limit for disciplinary matters relating to economic crime.
  2. "Economic crime" is defined with reference to Section 193 of the Act. It includes offences listed in Schedule 11, ancillary offences and equivalent offences overseas. The offences include fraud, money laundering and terrorist financing and an offence under regulations made under section 1 of the Sanctions and Anti-Money Laundering Act 2018.

Section 209: Regulators of legal services: objective relating to economic crime

  1. This section inserts a new regulatory objective into section 1(1) of the Legal Services Act 2007 ("the 2007 Act") focusing on promoting the prevention and detection of economic crime.
  2. This new objective does not affect the right to access legal advice and representation.
  3. The Legal Services Board (LSB), the approved regulators and the Office for Legal Complaints are under a duty to act in a way which is compatible and most appropriate to meet this additional regulatory objective when exercising their functions.
  4. The section also enables the LSB to take into account regulatory action related to meeting this objective in their performance management of frontline regulators.
  5. "Economic crime" is defined with reference to section 193 of this Act. It includes offences listed in Schedule 11, ancillary offences, and equivalent offences overseas.
  6. As with the other regulatory objectives, as set out in sections 3(3)a, 28(2) and 28(3) of the 2007 Act, the LSB and approved regulators should act in a proportionate and targeted manner when discharging their functions.
  7. The offences that are most relevant in the context of legal sector compliance with economic crime rules include fraud, money laundering and terrorist financing and an offence under regulations made under section 1 of the Sanctions and Anti-Money Laundering Act 2018.
  8. To act in a way which is compatible with the objective, the LSB and the approved regulators will need to give consideration to which of these offences their regulated communities may be exposed to, on the basis of available evidence, when exercising their functions.

Section 210: SRA Information request power

  1. This section inserts new sections 111A to 111E into the Legal Services Act 2007, which is a power that will allow the SRA to request information and documents from both recognised bodies (as defined by section 9 of the Administration of Justice Act 1985) and licensed bodies (as defined by section 72 of the 2007 Act) for the purpose of monitoring compliance with and detecting breaches of the rules and legislation related to economic crime, which for example includes offences relating to money laundering, terrorist financing and sanctions.
  2. The power includes safeguards and limits on how it can be exercised by the SRA. For instance, information cannot be requested from third parties unless the SRA obtains a High Court order. Also, importantly, any information requested must be for the purpose of the fulfilment of the SRA’s regulatory function and duty to ensure that its regulated community upholds the economic crime regime.
  3. The exercise of this power is subject to the oversight of the Legal Services Board. The LSB will ensure that necessary regulatory action is effective, but also proportionate to the size, nature, and exposure to risk of the regulated communities, and as such not disproportionately burdensome to businesses.
  4. The power will create a delegated power so that it is possible to designate other regulators, in addition to the SRA, to exercise the information request power. The delegated power would be exercisable by the Lord Chancellor making an order, which as per section 204(1) of the 2007 Act must be made by statutory instrument.
  5. "Economic crime" is defined with reference to section 193 of this Act. It includes offences listed in Schedule 11, ancillary offences, and equivalent offences overseas. 
  6. The SRA will need to give consideration to which of these offences its regulated community may be exposed to and should act in a proportionate and targeted manner when discharging its functions.
  7. The offences that are most relevant in the context of legal sector compliance with economic crime rules include fraud, money laundering and terrorist financing, and an offence under regulations made under section 1 of the Sanctions and Anti-Money Laundering Act 2018. 

Section 211: Serious Fraud Office: pre-investigation powers

  1. This section amends section 2A of the Criminal Justice Act 1987 ("CJA") to allow the Director of the Serious Fraud Office ("SFO") to exercise their investigation powers in order to determine whether to start an investigation. This will enable the SFO to require a person to answer questions, furnish information, or produce documents at a pre-investigation stage of any of its cases, whether they relate to suspected fraud, bribery, or corruption.
  2. Subsections (2) to (4) remove references in section 2A of the CJA to international bribery and corruption, which currently restrict the use of the Director’s powers at a pre-investigation stage to cases involving such conduct.
  3. Subsection (5) is a consequential amendment to omit paragraph 2 of Schedule 1 to the Bribery Act 2010, which amended section 2A of the CJA to insert those references.

Reports on payments to governments

Section 212: Reports on payments to governments regulations: false statement offence

  1. The Reports on Payments to Governments Regulations (SI 2014/3209) require large businesses in the UK extractive industries to make annual reports on payments they make to overseas governments related to these activities. Section 212 amends these Regulations to update and bring their structure of false statement offences into line with the Section 102 amendments to section 1112 of the Companies Act 2006. The objective is to provide consistency and clarity to businesses. Accordingly, Section 212 substitutes Regulation 16 of the Reports on Payments to Governments Regulations with new regulations 16 and 16A, which amend the false statement offence to change the threshold to be met for its commission, by splitting it into two separate offences.
  2. The new regulation 16, "False Statements: basic offence" of the Reports on Payments to Governments Regulations introduces a new offence, called the "basic offence" which is committed when a person, without reasonable excuse, makes a materially false, misleading or deceptive statement in the course of reporting for the purposes of these regulations. The new regulation 16A, "False Statements Aggravated Offence" introduces a second new offence, called the "aggravated offence", which is committed when a person knowingly makes a materially false statement in the course of reporting.
  3. The new regulations 16 and 16A paragraphs (2) – (4) confirm that, where these are committed by a firm, every officer of the firm which is in default be liable; that the definition of "firm" matches Companies Act 2006 Section 1173(1); and that this provision is operated according to the Companies Act 2006 Sections 1121 to 1123 (liability of officers default: interpretation etc.).
  4. The new regulations 16 and 16A of the Reports on Payments to Governments Regulations set new graduated penalties across the "basic" and "aggravated offences". The penalties are more severe for the latter offence and reflect the level of offences introduced in amended section 1112 and 1112A.
  5. The new regulation 16 paragraph (5) and 16A paragraph (5) set out the level of penalties for each of the offences, which are stiffer for persons guilty of the "aggravated offence" in regulation 16A.
  6. The Reports on Payments to Governments Regulations, as they are drafted, provide that that no prosecutions should be brought for an offence under these regulations in England and Wales except with the consent of the Secretary of State or the Director of Public Prosecution, or in Northern Ireland except with the consent of the Secretary of State or the Director of Public Prosecutions for Northern Ireland. These arrangements are to ensure that any prosecutions mounted are in the public interest. The new regulations 16 and 16A (paragraph (6) in both cases) confirm that this arrangement is unchanged in relation to any proceedings mounted either in relation to either of the new offences.

Reports on implementation

Section 213: Reports on the implementation and operation of Parts 1 to 3

  1. Section 213(1) requires the Secretary of State to prepare a report on the implementation and operation of Parts 1-3 of this Act, and to lay the report in Parliament.
  2. Section 213(2) requires that the first report be laid within six months of the passing of the Act.
  3. Section 213(3) requires that subsequent reports be laid within twelve months of laying the previous one.
  4. Section 213(4) ends the duty to report following the laying of the first report on or after 1 January 2030.

Sanctions enforcement: monetary penalties

Section 214: Sanctions enforcement: monetary penalties

  1. The section will amend the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) to provide expressly that provision for enforcement made in sanctions regulations made under section 1 of SAMLA may include the imposition of civil monetary penalties (CMPs) in relation to the contravention of prohibitions or requirements imposed by sanctions regulations. The new section 17A of SAMLA clarifies and reinforces the broad enforcement powers.
  2. The section also strengthens the basis for CMPs to be imposed by HM Treasury under the Policing and Crime Act 2017 (PCA) for offences that are supplemental to financial sanctions and that regulations made under section 1 of SAMLA can include provision conferring power to impose CMPs. The section also provides for the PCA 2017 to be disapplied where HM Treasury has the power under both sanctions regulations and the PCA to impose CMPs in respect of prohibitions or requirements.

Report on costs orders for proceedings for civil recovery

Section 215: Report on costs orders for proceedings for civil recovery

  1. This section provides a statutory commitment for the Secretary of State to review the payment of costs in civil recovery cases in England and Wales by enforcement authorities, and to publish a report on its findings before Parliament within 12 months.

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