Economic crime UK legislative reforms: impact for businesses | Allen & Overy LLP
Among the legislative reform proposals presented by the British government inventory on its plan to fight economic crime, here are some highlights for large companies.
A consultation is underway to establish a new information sharing gateway to enable businesses to better share information and intelligence to prevent and detect more crime. It seems that this exercise will focus on the sharing of information between companies in the same sector and between companies and public authorities. The program aims to enable businesses to better understand and mitigate the risks of financial crime (for example by preventing criminals who have been denied access to services on suspicion of financial crime from moving between different competitors in the same industry. ) and improve the quality of information provided to enforcement authorities.
Some voluntary sharing of information is already permitted between actors in the regulated sector, for example as part of the amendments to the Proceeds of Crime Act 2002 (POCA) by the Criminal Finances Act 2017 and also under the auspices of the Joint Money Laundering Intelligence Taskforce (JMLIT). In May 2020, the UK government released its statement on information sharing within business groups.
It appears that this new gateway is intended to expand information sharing, especially within the private sector. Businesses will need to understand how the new gateway provisions will interact with their data privacy obligations and disclosure provisions, as well as whistleblower and “investigative harm” offenses, under the POCA. Businesses are also likely to want to see improved information flows from the public sector to the private sector in order to refine their own money laundering systems and controls.
Timeline: The consultation should be completed by fall 2021.
Revision of the Money Laundering Regulations 2017
A consultation will seek advice on how the UK’s regulatory and supervisory regimes can tackle money laundering and terrorist financing, while reducing unnecessary burdens on businesses. This will include a comparison of the UK’s existing legislative framework with the Financial Action Task Force’s international standards on Money Laundering and Terrorist Financing, and examine new features of economic crime, such as brokerage. crypto assets and the role of social media in investing. frauds.
Businesses covered by money laundering regulations (MLRs) should now be accustomed to the need to keep abreast of changes. For example, over the past four years, they have been amended following the Fifth EU Money Laundering Directive to take into account changing risks (e.g. adding crypto asset exchange providers and custodian wallet providers in the scope). Brexit also required a series of largely minor changes. This revision is likely to offer an additional update and will probably keep in mind any changes at EU level, motivated by equivalence considerations. The 2017 Money Laundering Regulations have never been so high on the minds of the regulated industry, with both the FCA and HMRC having imposed heavy penalties on companies for breaches, and recent news from the FCA’s first lawsuit against a bank. Companies falling within the scope (or those that may fall within the scope) of MLRs will need to be agile to meet regulatory expectations.
Timetable: revision which should start “soon”.
Reform of Suspicious Activity Reports (SAR)
The reform of the SAR reporting regime has been widely followed, but the state of play refers to a new feature: an exemption for “ineffective DAML reporting”. There aren’t more details on this, but the label perhaps suggests that an “ineffective” DAML would not be a defense against money laundering. If so, it would not be surprising given the government’s objective of ensuring that the SAR regime provides useful information. However, businesses would need to know when this exemption could apply.
Regarding SAR confidentiality, the statement simply states that the Home Office continues to consult with law enforcement and private sector partners to develop guidelines regarding SAR confidentiality in civil litigation. . This is an area of particular interest to those in the regulated industry. In 2018 a bank has been ordered to disclose a SAR to a client in the context of civil litigation.
Timetable: legislative proposals expected in autumn 2021.
Prevention of listing on the market for reasons of national security
The government has announced its intention to advance the introduction of a power to freeze stock quotes for reasons of national security. The move aims to stem the flow of dirty money into the London stock markets and has been requested by MPs and analysts since EN + was listed in 2017. The consultation is now closed and the Treasury is expected to present the details of the proposals shortly. This will be of great interest to potential listing targets and their advisers, who could find themselves in the crosshairs of geopolitics.
Timeline: the publication of the consultation was scheduled for early 2021.
Strengthen corporate transparency
The government released its response to the consultation on the reform of Companies House last September. Aimed at tackling abuse of UK corporate structures and improving the accuracy of information held on companies, proposed reforms include the introduction of digital identity checks on directors, presenters and those exercising control. important, and increased powers for the Registrar of Companies to request information and share it with other agencies. The government is also considering moving forward to ban corporate directors.
Calendar: update scheduled for September 2021.
There was nothing in the progress on corporate criminal liability or on changes to the market abuse regime. The state of play simply notes that the FCA’s internal review of the Criminal Market Abuse Regime is currently being reviewed by a QC. The Law Commission is currently studying corporate criminal liability.
The private sector is at the forefront of the UK government’s fight against economic crime. After Brexit and after Covid, the government is keen to promote Global Britain as a safe and clean place to do business. Economic crime does not fit well into this brand proposition.
The UK government’s legislative agenda is based on increased collaboration with the private sector to fund and strengthen the UK’s response to economic crime. The Treasury seeks to raise around £ 100million per year from regulated entities for anti-money laundering purposes to fund anti-money laundering capabilities (an ‘economic crime levy’) ). At the same time, many reforms will inevitably increase the administrative burden (and therefore costs) on the regulated sector.
It is recognized in the progress statement that the private sector needs to be supported to better understand and manage the risks of financial crime. The majority of the proposals are expected to be finalized by the end of the year, when there will inevitably be new challenges for large companies in economic crime as the UK emerges from lockdown and adjusts to a new way of life.
Adapting to stricter AML requirements, staying abreast of changes in corporate criminal liability and navigating geopolitics were three of the nine key challenges for in-house lawyers that were identified in 2021. Allen & Overy Cross-Border White Collar Crime and Investigation Review.