New ‘failure to prevent’ fraud offence in the UK moves closer

In considering amendments to the Economic Crime and Corporate Transparency Bill that were endorsed in the House of Lords earlier this year, the MPs decided that the ‘failure to prevent’ fraud offence should only apply to ‘large organisations’ – as the Home Office had originally proposed in April – and not all UK-incorporated bodies or foreign-incorporated bodies that carry on a business or part of a business in the UK too, as the peers had proposed. They also determined that there is no need to make specific provision for a new failure to prevent money laundering offence “because the law already makes sufficient provision in relation to the prevention of money laundering”.

The MPs also rejected amendments (20-page / 186KB PDF) that would cap costs for law enforcement pursuing civil cases; close loopholes that let people hide ownership of companies via “nominee” shareholdings; and make public the beneficial ownership of UK properties held via overseas trusts.

A committee has been established to report on the reasons why the House of Lords amendments were rejected. The House of Lords is due to consider the amendments made by MPs on Monday – the Bill will pass back and forth between the House of Commons and the Lords until final agreement on the wording of the proposed new legislation is reached. 

Andrew Sackey of Pinsent Masons, who specialises in running internal investigations and advising businesses relating to suspicions of bribery, money laundering, and tax and white collar frauds, said: “Campaigners have long sought an expansion of the failure to prevent offence and limitation to large corporates only arguably just introduces a layer of complexity and uncertainty not seen, or felt necessary, in respect of the existing offences of failure to prevent bribery or tax evasion.”