Law Commission’s anti-money laundering approach could spark conflict with Europe

He added: “This argument is not without merit, since the MLR2017 scheme is clearly broader than the model for attributing companies from ‘failure to prevent’. Under MLR2017, for example, the prosecution would not need to establish the predicate offense of money laundering, but would simply need to point out deficiencies in the company’s AML procedures in relation to those prescribed by MLR2017. Significantly, the regulations already impose personal criminal liability on any officer found guilty of having “assented to or been an accomplice” to a violation of the regulations, or whose negligence caused a violation to the company. The Commission certainly seems to have been persuaded by this argument, proposing that any extension of the “failure to prevent” model should be limited to a restricted framework of basic fraud offences. »

Hamilton said that, despite criticism, the Commission had “not closed the door” on reforming corporate liability for money laundering. “At the launch event for its latest report, it confirmed that it had decided to take a phased approach to AML reform. In the Commission’s view, the initial focus on fraud will give legislators and law enforcement agencies time to learn lessons before getting into other forms of financial crime like money laundering,” he added.

But the Law Commission’s decision not to include a new offense for failing to prevent money laundering among the currently proposed reforms could draw criticism from the Council of Europe, Hamilton warned. Although no longer an EU member state, the UK remains a signatory to the 2005 Warsaw Convention which, among other things, requires governments to introduce national legislation that makes companies liable for criminal offenses caused by a director’s “lack of supervision or control”.

Hamilton said: “A step-by-step approach to reform may not sit comfortably with the Council of Europe’s assessment in January 2022 that the UK is falling short of international anti-money laundering standards. silver.” The Council’s comments came several months after the Sixth Money Laundering Directive (6MLD) implementation deadline.

“Although the UK has not adopted the 6MLD on the grounds that its existing laws comply with or go further than the provisions of the 6MLD, the directive has underlined the direction of the legislative journey by extending criminal liability to companies in the ‘regulated industry’ that fail to prevent a ‘directing mind’ within the company from laundering money,” Hamilton said.

He added: “Interestingly, the Council indicated in January that the UK government was seeking to address its critics by introducing new money laundering laws. However, it seems that the Commission’s proposals have put the issue on the back burner for the time being. It will be interesting to see the reaction.

The Commission’s report also comes amid criticism from the Council of Europe and others that the existing general rule of attribution of liability to companies under English criminal law, known as the “principle of identification”, prevents large companies from taking responsibility for economic crimes committed in their names by senior executives.

The rule states that a business can only be held criminally liable for certain offenses – including money laundering – if its “directing mind and will” can be proven to be guilty of the wrongdoing. Concretely, this amounts to proving that senior management figures, whose actions and omissions are assimilated to those of the company, are guilty. Critics have argued that this technicality makes it much easier to hold a small business accountable for wrongdoing than a large corporation, where it is more difficult to identify decision-making responsibility.

Improvements suggested in the report included new rules attributing conduct to a company if a member of its senior management – including chief executives and chief financial officers – engaged in, consented to or connived at the violation, and a new offense for failing to prevent fraud. by an employee or agent.

He also proposed a regime of administratively imposed financial penalties and civil actions in the High Court, based on Serious Crime Prevention Orders, with the power to impose financial penalties. Another option could see ministers introduce a reporting requirement for big companies to disclose their anti-fraud procedures.

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