Failure to prevent fraud offence debated in Economic Crime Bill

A clause has been introduced for debate in the Economic Crime Bill, which is now on its third reading in Parliament, to create an offence of “failure to prevent fraud, false accounting or money laundering”. The offence would apply to a “relevant commercial organisation” (with the same meaning as given in the Bribery Act), and would mean that organisation would commit an offence where a person associated with it commits fraud, false accounting or an act of money laundering, or aids and abets such an offence, where they intend to confer a business advantage on that organisation or to confer a benefit on a person to whom the associated person provides services on behalf of the organisation, and the organisation fails to prevent that person from doing so.

There would be a defence if the organisation had in place reasonable procedures designed to prevent the activity, and there would be no offence if the conduct was designed to be harmful to the organisation rather than to benefit it.

Also, the scope of “relevant commercial organisation” is narrowed in respect of the offence as it relates to money laundering, so that it covers only those operating in the AML “regulated sector”.

The amendment would clarify that a body corporate will commit the offence if it is committed with the consent, connivance or neglect of a senior manager – who is the CEO, CFO and any other person who plays a significant role in the management of relevant business, and where a number of senior managers engage in conduct that would be an offence and the management fail to take all reasonable steps to prevent the offence being committed.

A further amendment proposes that an individual who is a senior manager or corporate officer of a corporate body will commit an offence if they agree to a decision and fail to take any steps that could have prevented it, where the individual is aware of a risk that the implementation of the decision may lead to an offence of money laundering, fraud, false accounting, bribery or tax evasion and implementing the decision does cause the organisation to commit the offence.  The maximum punishment for this individual offence would be 7 years’ imprisonment and an unlimited fine.