News 28th Sep 2020

Above the law: How the FinCEN Files highlight the UK’s outdated corporate liability regime

Rose Zussman

Policy Manager

Rose joined TI-UK in April 2017 as the Advocacy & Campaigns Officer for the UK Anti-Corruption Programme. She is responsible for driving TI-UK’s parliamentary engagement, helping generate high-level support, and coordinating targeted campaigns. Rose previously completed an MSc in Applied Linguistics University of Edinburgh, where she researched political and legal language in various contexts. She is interested in promoting political transparency, open knowledge, and democratic engagement in the US and UK.

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The FinCEN Files, a major leak of banking data which provided a rare insight into the way banks report and act on suspicious activity, raise serious questions about whether and how large corporations can be held to account in the UK for money laundering and other economic crimes.

It is virtually impossible to prosecute complex multinationals for breaking anti-money laundering laws in the UK. This is because prosecutors must prove beyond a reasonable doubt that the ‘directing mind and will’ of the company – which for big corporates typically means senior executives and board members – both knew about and intended for a crime to occur.

 

While this might be relatively easy to prove for a small business, where those who run the company are also closely involved in its day-to-day operations, board members of the largest companies tend not to be directly involved in processing suspicious banking transactions or helping cook the books for anonymous shell companies.

This ultimately leaves large corporations above the law, where they can choose to turn a blind eye to criminal conduct by staff without fear of criminal prosecution. While the employees directly involved may still be charged, convicted and jailed, companies can simply hang them out to dry while continuing business as usual.

The UK’s leading fraud prosecutor has described herself as being “hamstrung” by the UK’s outdated corporate liability regime. As Solicitor General, the current Secretary of State for Justice Robert Buckland QC also decried weaknesses in current law, noting these “result in other jurisdictions holding British companies to account when ours has not”. Meanwhile, new revelations continue to come to light about the role of large corporate actors in the UK facilitating economic crime.

So, what needs to change?

Transparency International UK and other anti-corruption experts are seeking the introduction of a new ‘failure to prevent economic crime’ offence, similar to the current law on failing to prevent bribery, and asking the UK Government to send the issue of corporate liability more generally to the Law Commission for review.

A new criminal offence would:

  • Incentivise good corporate culture, governance and behaviour and prevent economic crime by providing a credible deterrent to wrongdoing.
  • Make it easier for companies of all sizes to be prosecuted for corporate misconduct (not just small ones) and in so doing create a more level playing field for law abiding businesses.
  • Complement the existing ‘tried and tested’ law on failure to prevent bribery.

The burden on business to ensure they do not fall foul of this new offence would neither be costly nor complex: companies are already required to have adequate procedures in place to comply with existing laws and regulations which are proportionate to their size.

In January 2017, the UK Government took a positive step towards making this a reality by launching a call for evidence on corporate liability reform, and invited groups including academics, business leaders, civil society and lawyers to make their case. However, that call for evidence closed in March of the same year. Ever since, Ministers have only publicly commented that they will respond to the call for evidence “in due course”.

As the FinCEN files highlight once more the damage money laundering is doing to the UK’s international reputation, it is high time we hold big corporates to account for turning a blind eye to economic crime.