Economic Crime and Corporate Transparency Bill Amendments

The Economic Crime and Corporate Transparency Bill (the Bill) which was published on 22 September 2022 had its last committee debate in the Commons on 29 November 2022 and has now moved into the Report Stage. As mentioned in our previous alert on the Economic Crime (Transparency and Enforcement) Act 2022 (the ECTE Act), the Bill provides a second package of reforms supplementing the ECTE Act which received Royal Assent on 15 March 2022. In particular, we had previously noted the proposals for Companies House to play a more active role in tackling economic crime and promoting corporate transparency. The Bill has included provisions to this effect along with other reforms to combat economic crime. Since being published, amendments have been tabled and debated in committee meetings.

Corporate Criminal Liability

As we had previously discussed in June, the Law Commission had proposed options to reform corporate criminal liability due to the difficulty of prosecuting companies for criminal offences under the current framework which states that companies are only liable for actions by persons with the status and authority to be the “directing mind or will” of the company.

One of their proposals was for the introduction of “failure to prevent” offences for economic crimes.

In the Notices of Amendments as at 18 November 2022, “failure to prevent” offences were proposed for fraud, false accounting or money laundering. An additional provision was proposed which would have meant that officers of a company (defined as a director, manager, associate, secretary or other similar officer or person purporting to act in any such capacity), will also have committed an offence if the company commits an offence with the consent of the officer or due to the negligence of the officer.

However, as of the final committee debate on 29 November 2022, Dame Margaret Hodge MP who had proposed the introduction of “failure to prevent” offences asked leave to withdraw the motion and did not put the matter to vote. Despite having withdrawn the motion, she emphasised that it was an important issue and she would hope to debate it further during the passage of the Bill. She hoped that ministers would be successful in getting the amendment approved by Parliament.

In this committee debate, Tom Tugendhat MP (Minister of State for Security) in response to the proposal, noted that further work needed to be done on how the proposal could be made to work but he accepted that the Bill was an opportunity to introduce reforms and he would make sure that any opportunity is fulfilled as quickly as possible.

We believe that it is likely that some form of these “failure to prevent” offences will be re-introduced into the Bill due to the necessity of tackling economic crimes such as fraud and the difficulty of securing convictions against companies under the current legal framework.

Crypto-assets

Part 4 of the Bill had proposed to amend the Proceeds of Crime Act 2002 (POCA) to introduce confiscation orders and the civil recovery of crypto-assets. As the use of crypto-assets to transfer criminal proceeds from illicit activities (such as fraud, money-laundering and drugs) has grown in recent years, it will be invaluable for law enforcement to be able to seize and recover crypto-assets from criminals.

In addition to the amendments to POCA, further amendments were tabled to amend the Anti-Terrorism, Crime and Security Act 2001 to allow authorities to seize and detain terrorist crypto-assets.

Furthermore, the Bill proposed to amend the Terrorism Act 2000 (TA) to add “crypto-asset exchange providers” and “custodian wallet providers” to the definition of financial institutions for the purpose of the TA. It was also proposed to amend the TA to explicitly define “crypto-asset exchange providers” and “custodian wallet providers”.  

Next Steps

These proposals may be further amended or removed during its passage through both Houses of Parliament. The Bill will now be reviewed in the Report Stage. As of 1 December 2022, no timeline for the Report Stage has yet been published.