Unfinished business – legislating to tackle economic crime

Blog by Ruth Chambers and Sue Hawley

In the flurry of activity following the announcement of the 2017 general election, several bills were rushed through before the end of the parliamentary session. One of these was the Criminal Finances Bill, which meant that debates on its contents had to be curtailed.

The bill received Royal Assent on 27 April. The Criminal Finances Act 2017 will give law enforcement agencies further capabilities and powers to recover the proceeds of crime, tackle money laundering, tax evasion and corruption, and combat the financing of terrorism. It creates a welcome new criminal offence for corporations which fail to prevent their staff and associated persons from facilitating tax evasion.

In our briefings to parliamentarians we argued that the ‘failure to prevent’ model, first conceived in the Bribery Act 2010, should be extended to cover other economic crimes such as money laundering and fraud. With startlingly high rates of fraud, and the National Crime Agency indicating that money laundering in the UK could amount to £90 billion every year, the case for change has never been stronger.

We also highlighted the flaws in the UK’s current corporate liability regime, and the need for broader corporate law reform to ensure that companies can be held liable for committing offences as well as failing to prevent them.

While many parliamentarians agreed with us, ultimately time was not on our side.

The government has acknowledged on various occasions that the UK’s corporate liability regime beyond bribery and tax evasion remains in crisis. In January 2017, it issued a call for evidence on the case for reform of the law on corporate liability for economic crime. However, this consultation ran at the same time as the bill was passing through Parliament and this meant the government was reluctant to change the bill as it did not want to “rush into legislation” without first having reviewed the evidence. It did, however, confirm that should the responses received justify changes to the law, the government would then consult on a firm proposal.

During the bill’s passage through Parliament, MPs and peers from all parties called on the government to take more action to tackle corporate economic crime. Supporters of the bill stressed the wider implications of inaction, which could undermine the UK’s global role in leading the fight against corruption.

In response, the government recognised that the damage caused by economic crime perpetrated on behalf of or in the name of companies—to individuals, businesses, the wider economy and the reputation of the United Kingdom as a place to do business—is a very serious matter.

The government also reiterated that all businesses are expected to comply with legislation that comes under the jurisdiction of the UK, including that which relates to human rights, and encouraged businesses to honour the principles of internationally recognised human rights wherever they operate.

But warm words alone will not be enough to tackle this systemic problem. Between 2004 and 2014 the Business and Human Rights Resource Centre received 303 allegations of serious harms made against 127 UK companies, including a number of repeat offenders. Gaps in the UK’s criminal law framework lead to serious corporate crimes not being investigated and human rights abuses going unpunished. Several major recent scandals have resulted in no prosecutions against large companies, including those involved in the 2008 financial crisis and the phone hacking scandal.

Following the general election, we will continue to make the case for reform with the new government.