Failure to Prevent Economic Crime

Dated: 30 January 2018 Author: Allan Maund, Director of Counter Fraud

In 2018 the latest instalment of legislative changes impacting on most business will likely be the inception of the new corporate offence(s) of Failing to Prevent Economic Crime. Further likely, the six guiding principles:

  • Risk assessment
  • Proportionality of risk-based prevention procedures
  • Top level commitment
  • Due diligence
  • Communication
  • Monitoring and review,

Initially introduced for the Bribery Act and near replicated in the 2017 Criminal Finances Act, the six guiding principles is expected to complement the new proposed Act and hopefully, as previously provided, give guidance to businesses of what the government expectation for them is.

Failing to prevent the facilitation of tax evasion

As a recap, the Bribery Act introduced a corporate offence of failing to prevent bribery. The Criminal Finances Act, for the purposes of this article, included two new offences: a UK only offence and an overseas offence of failing to prevent the facilitation of tax evasion.

Not a tick box exercise

"You must be able to
provide evidence that you
are fulfulling the 6 guiding
principles in order to
have a statutory defence."
The existing Act(s) require business to assess the legislation against their business operations and of the activities of their employees and associated persons, and where impacted, proportionally apply the six guiding principles. The Act(s) is clear, the assessment of the six guiding principles is not a tick box exercise of the steps a business has taken to prevent a corporate failure of bribery, or tax evasion. The decision-making process, rationale, etc needs to be evidenced.

What’s your defence?

The six guiding principles are self-policed, there is no reviewing body, and should an offence occur in relation to either Act, adequately applying and evidencing the six guiding principles to ‘prevent’ could be the difference between a statutory defence to the corporate offence(s), or where the above has not been undertaken or evidenced, no defence at all. 

The legislation

The new offence of the Failure to Prevent Economic Crime must complete the legislative requirements before it can be enacted. But it is likely the new Act will be implemented as early as this Autumn. There are still question marks of what element of economic crime will be included in the Act, it would be no surprise if this included a failure to prevent fraud, theft and possibly cybercrime. Until the proposed Act completes its journey, we won’t know for sure.

However, if the Failure to Prevent Economic Crime Act is implemented as envisaged, this will likely impact on significantly more businesses than the two preceding Acts. Not at least with the six guiding principles which will likely be replicated for the proposed new Act as this approach appears to be in favour with the Government. This could result in a substantial review of working practices by business before the implementation of Act and of evidencing and demonstrating how a business has applied the six guiding principles.

As more information about the new Act is received, further updates will be provided. 

Need further assistance?

For further information please contact us on 0800 298 3899 or email: Email Allan Maund.