New Law to prevent fraud, false accounting or money laundering The Economic Crime and Corporate Transparency Bill 2022 that is currently travelling through Parliament signals a new appetite on the part of the government to make a concentrated effort to crack down on misconduct in organisations and businesses by introducing a powerful new game-changing legal regime to eliminate fraud, false accounting and money laundering.
The new offence of “failure to prevent fraud” is intended to have the maximum impact on any organisation that allows poor governance to go unchecked and to make it easier to prosecute and convict businesses that breach the new provisions and impose punitive sanctions on the offending organisations.
Vincenzo Senatore, senior partner, commented “the new law will apply to the organisations and corporate bodies and not to individual directors or managers. However, they may still find themselves in a position where they could be separately prosecuted for any offences.” Vincenzo continued “the offences are defined as when a person associated with the organisation commits, aids or abets a fraud, false accounting or any act of money laundering with the objective of gaining a business advantage for the organisation or a commercial gain for a third party that provides services on behalf of the organisation or fails to prevent such activity. Furthermore, an offence is also triggered where bribery and tax evasion take place with the consent, connivance or neglect of a senior manager; as well as any decisions taken by senior managers on behalf of the organisation that fails to prevent any or all of the above offences.”
The new offence applies to any large organisation that meets two out of the following three factors:
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- 250 employees or more
- A turnover in excess of £36 million
- A balance sheet that exceeds £18 million
Giambrone & Partners’ well regarded corporate and commercial lawyers point out that there is a defence to any accusations under the new law if an organisation can convincingly demonstrate that all possible steps were taken to prevent wrongdoing on the part of their staff and third parties associated with the company.
In any large organisation the risk of wrongdoing by people within the organisation is always present and it is to be expected that there are existing measures to prevent such activity in all corporate bodies. However, the penalties that the new offence attracts where there are contraventions of the new provision in the Economic Crime and Corporate Transparency Bill 2022 are significant:
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- Confiscation of profits
- An unlimited fine.
- The organisation may be barred from tendering for government contracts.
Our expert lawyers strongly advise that all organisations that fell that they could be exposed should further add to the existing policies by introducing new checks and procedures expressly to limit the potential of collaboration between colleagues and third party suppliers in an attempt to overcome anti-fraud systems. An organisation that fails to meet the required criteria will be held liable regardless of whether the senior management and directors were aware of any malpractice.
Giambrone & Partners has extensive experience in assisting international corporations with regulatory issues in many jurisdictions and can offer guidance as to the new law and the provisions required to comply to ensure that the risk of rogue employees or third party associates is removed as far as possible.