White-Collar Crime 2019

Last Updated October 21, 2019

UK

Law and Practice

Authors



Mishcon de Reya LLP understands that the legal and regulatory aspects of business are becoming ever more complex. The grey area where civil fraud, regulatory obligations and criminal investigation overlap is increasing. Individuals and businesses can be either victims of crime or on the wrong side of the law, without knowing they were even at risk. Having different sets of lawyers that specialise in the various areas of bribery and corruption, tax, cartels and competition, fraud, sanctions-related issues, market abuse, directors' disqualification and beyond can be a complex, inefficient and costly process, which can add to the strain of dealing with the issues. The white-collar crime & investigations group offers a comprehensive but streamlined approach for clients who may find themselves with a portfolio of problems. Whether an individual has been accused of improper financial conduct or is the victim of fraud, the firm can address all aspects of the case – civil, regulatory and criminal – within a single team.

In England and Wales criminal offences are categorised, for procedural purposes, according to their seriousness. There are three main types: summary offences, indictable-only offences and offences triable either way.

Summary offences are triable only in the Magistrates' Courts. They are all created by statute and tried without a jury. Magistrates' Courts have limited sentencing powers and the maximum sentence that they may impose is twelve months' imprisonment.

Indictable-only offences are only triable in the Crown Courts. This category encompasses the most serious offences as well as offences which are considered to be unsuitable for summary trial, for example owing to the complexity of the issues involved. Trials in the Crown Court are generally heard by a jury.

Offences triable either way are triable either summarily or on indictment. Save in exceptional cases, the defendant may opt for either a summary trial in the Magistrates' Court or a trial on indictment in the Crown Court. The Magistrates' Court may override the defendant's choice of a summary trial and impose a trial on indictment but may not insist on a summary trial.

The general rule is that a person cannot be convicted of a criminal offence in England and Wales unless the prosecution can prove, beyond reasonable doubt, that they carried out the requisite act (actus reus) with the necessary state of mind (mens rea). There are exceptions to the general rule where the prosecution do not have to prove mens rea. These types of offences are known as offences of strict liability. In the white-collar crime context, there are corporate "failure to prevent" offences which are strict liability offences (see 3.3 Anti-bribery Regulation and 3.5 Tax Fraud). It is also possible for a person to be convicted of attempting, conspiring, assisting or encouraging a criminal offence (collectively known as "inchoate offences"). A person may also be convicted as an accessory where they aided, abetted, counselled or procured the commission of a criminal offence by the principal offender.

With the exception of summary offences, for which a prosecution must be brought within six months of the commission of the offence, there are no general statutory limits on the prosecution of criminal offences in England and Wales. Parliament has stipulated that proceedings for certain offences must be brought within a certain period. For example, a prosecution for an indictable offence under the Customs and Excise Management Act 1979 must be brought before the end of the period of 20 years, beginning on the day upon which the offence was committed.

In general, a criminal offence will only be triable in England and Wales where it takes place within the jurisdiction, unless there is a specific provision within the relevant legislation that enables the courts to exercise extra-territorial jurisdiction.

However, the increasingly extra-territorial nature of white-collar crime has lead to an increase in legislation by which the UK authorities can bring prosecutions in England and Wales even though all of the relevant criminal conduct occurred overseas. Key white-collar offences with extra-territorial effect include offences under the Bribery Act 2010, the Fraud Act 2006 and money-laundering offences under the Proceeds of Crime Act 2002 (POCA).

By way of example, under the Bribery Act 2010, the authorities may prosecute domestically certain offences, including bribing another person and being bribed, regardless of whether the act or omission forming part of that offence took place within the UK but merely if the act or omission that occurred outside of the UK would have been an offence if it had occurred here and the subject of the prosecution has a "close connection with the United Kingdom." The definition of "close connection" includes British citizens and UK companies. Similarly, companies that carry on even a part of a business in the UK can be prosecuted for failing to prevent bribery that has taken place anywhere in the world.

In R (on the application of KBR Inc.) v Director of the Serious Fraud Office [2018] EWHC 2368 (Admin) the High Court held that a notice requiring the recipient to provide certain information, issued by the Serious Fraud Office (SFO) under Section 2 of the Criminal Justice Act 1988, can have extra-territorial effect where issued to an overseas company with a "sufficient connection" to England and Wales. An appeal to the Supreme Court was pending at the time of writing.

The law in England and Wales treats most corporations, including public and private limited companies and limited liability partnerships, as having a separate legal identity distinct from the natural persons involved in their management.

In the absence of legislation which expressly creates criminal liability for companies, corporate liability may be established in two ways: non-vicariously via the "identification principle", or vicariously

The identification principle functions so as to attribute criminal liability to a corporate via the natural persons considered to embody its "directing mind and will". If a person is convicted of an offence and they can be said to be sufficiently senior so that their state of mind represents the state of mind of the corporation itself then the company too will be guilty. The identification principle applies to all types of offences, including fraud, money laundering and other white-collar crimes.

Vicarious liability arises where a corporate is held liable for the acts of its employees or agents in circumstances where a natural person would similarly be liable for those acts. This type of liability is common for road traffic and health and safety offences.

The UK prosecuting authorities are clear that the prosecution of a corporate entity should not be viewed a substitute for the prosecution of criminally culpable individuals. Corporates can be tried alongside individuals in England and Wales.

Criminal courts must consider making a compensation order in any case where personal injury, loss or damage has resulted from an offence. The court must give reasons if it decides not to order compensation (Powers of Criminal Courts (Sentencing) Act 2000, Section 130).

There is no statutory limit on the amount of compensation that may be imposed in respect of offences committed by an adult offender or by a corporate entity. Where the means of the offender are limited the court will give priority to the payment of compensation over a financial penalty or confiscation.

It is increasingly likely that companies in England and Wales will face a new corporate criminal offence of failure to prevent economic crime akin to the existing crime of failure to prevent offences aimed at bribery and tax evasion. There has been support for such an offence from Parliament in 2019 as well as from Lisa Osofsky, the new SFO Director. The Government is expected to publish a response to its January 2017 call for evidence on the case for reform of the law on corporate criminal liability for economic crime in 2019. 

Since taking up her post in September 2018, Lisa Osofsky has prioritised international co-operation as a tool for tackling cross-border crime. More recently, the SFO has published guidance on what it expects from corporate entities seeking to demonstrate "co-operation" within the context of a criminal investigation. The guidance goes some way to providing a roadmap for corporates navigating the Deferred Prosecution Agreements (DPAs) Code of Practice, which specifically lists "co-operation" as a factor that the SFO will weigh in the balance when considering whether a DPA is in the public interest.

Since its launch at the end of 2018 the National Economic Crime Centre has in part been responsible for the increasing use of new enforcement powers. In February 2018, the National Crime Agency (NCA) successfully obtained the first Unexplained Wealth Orders (UWOs) against two London properties and has gone on to obtain a number of UWOs since.

Some clarity was brought to the law of legal professional privilege following the decision of the Court of Appeal in Director of the Serious Fraud Office v Eurasian Natural Resources Limited (Law Society intervening) [2018] EWCA Civ 2006, which overturned the first-instance decision that notes of interviews, conducted by external lawyers during the course of an internal investigation into bribery and corruption, were not privileged.

As uncertainty over Brexit continues the focus of many white-collar criminal lawyers will be the legislative impact of Brexit when the UK exits the European Union. The UK has already committed to implementation of the EU's Fifth Money Laundering Directive in January 2020 but its role in the international fight against economic crime thereafter remains unclear.

In England and Wales the main authorities charged with the investigation and/or prosecution of white-collar offences are the SFO, the NCA and the Financial Conduct Authority (FCA). The Crown Prosecution Service (CPS) (assisted by the police) also prosecutes white-collar crime and will pursue cases that do not fall within the remit of the specialised agencies.

The SFO is responsible for investigating the most serious cases of fraud, bribery and corruption. Many of the most high profile white-collar prosecutions in England and Wales are prosecuted by the SFO.

Formerly the Serious Organised Crime Agency, the NCA is a non-ministerial governmental department tasked with fighting organised crime. As part of its role the NCA receives and processes suspicious activity reports made under POCA and is the UK's point of contact for Interpol.

The FCA is the UK's financial services regulator. It has both criminal and civil powers and is responsible for regulating the financial markets.

All of the above agencies also have the power to apply to the High Court for a Civil Recovery Order under Part 5 of POCA. In essence, that legislation enables the High Court to make an order against property where it is satisfied that it represents the proceeds of crime. The order requires the individual to forfeit their interest in the property to the State. The claim is civil in nature and the burden of proof is therefore the balance of probabilities. The police do not have the power to apply for a Civil Recovery Order although they may apply to the magistrates' court for authority to seize cash that is suspected to be the proceeds of crime.

The police and other investigators (including SFO investigators) are responsible for conducting enquiries into any alleged crime and for deciding how to deploy their resources. This includes decisions to start or continue an investigation and on the scope of the investigation.

The SFO receives information about suspected criminal offences from a variety of sources, including whistle-blowers (employees or competitors), victims, other law enforcement agencies, the media and self-reports from companies. Upon receipt of such information the SFO Director will consider a number of factors in deciding whether to authorise a formal investigation. These include the actual or intended harm that may be caused to the public, the reputation and integrity of the UK as an international financial centre, and whether the complexity and nature of the suspected offence warrants the application of the SFO's specialist skills and powers.

The SFO Director can accept a case for criminal investigation if it meets her Statement of Principle and if she considers there are reasonable grounds to suspect serious or complex fraud. This formal acceptance of a fraud matter for criminal investigation enables the SFO to use its compulsory powers (as to which see 2.3 Powers of Investigation). These powers cannot be used earlier in respect of fraud, although they can be used at a pre-investigation stage in bribery and corruption cases.

Where the SFO determines that a case does not fall within its specialist remit it may refer it to another agency, such as the FCA, which will apply its own principles to determine whether or not to accept the case for investigation. The strategic objective of the FCA is to ensure the integrity and proper functioning of the UK financial markets and to this end, it has statutory powers to detect and prosecute financial crime. 

Where an investigation is carried out by the police the CPS will advise about possible reasonable lines of inquiry, evidential requirements, pre-charge procedures, disclosure management and the overall investigation strategy.

The Director of the SFO has specialist investigative powers, including a range of compulsory powers under Section 2 of the Criminal Justice Act 1987 (the 1987 Act). In summary, these include:

  • the power to require any person to answer any relevant questions, including questions about confidential matters (the interviewee can refuse to answer some questions on the grounds of legal professional privilege); and
  • the power to require any person to produce and explain relevant documentation, including confidential documents (but not those covered by legal professional privilege).

A person who fails to comply, without reasonable excuse, with a request made under Section 2 is guilty of a criminal offence. There is some protection for interviewees compelled to answer questions by the SFO under pain of prosecution. Section 2(8) of the 1987 Act provides that a statement made by a person in response to a requirement under Section 2 can only be used in evidence against him or her in certain limited circumstances. These circumstances include where he or she knowingly or recklessly makes a false statement or later provides a contradictory statement.

The SFO may also apply to the court for an order entitling a constable to enter (using such force as is reasonably necessary for the purpose) and search named premises and to take possession of any documents appearing to be the documents specified in the information or to take, in relation to any documents so appearing, any other steps which may appear to be necessary for preserving them and preventing interference with them.

The FCA also has the power to compel information and/or documents from persons authorised by it to carry out regulated activities (Section 165 of the Financial Services and Markets Act 2000). Failure to comply without reasonable excuse with a request under Section 165 is an offence and the defaulter is treated as though they were in contempt of court (Section 177). Statements made to the FCA under compulsion are not admissible against their maker in any subsequent criminal proceedings (Section 174 of the 2000 Act).

Other prosecuting agencies in England and Wales may similarly apply to the court for a search warrant or production order and have powers similar to the investigatory powers of the police available to them. 

In recent years there has been an increased emphasis in England and Wales on the investigation and prosecution of corporate wrongdoing. This has given rise to an increase in internal investigations. Although there are no rules relating to the conduct of internal investigations, how a company has conducted such an investigation, and what it does with the product of that investigation, will be subject to scrutiny by the authorities and courts, particularly when it comes to an assessment of the quality of that company's co-operation in any criminal investigation.

Under the previous Director, the SFO was unequivocal that it wished to avoid companies "trampling on the crime scene" by conducting their own investigations. However, the Director has made it clear that she understands the need for companies to conduct their own investigations on discovery of a potential issue. Indeed, the SFO's Corporate Co-operation Guidance issued in August 2019 specifically refers to a company having conducted its own internal investigation, making it clear that to be considered co-operative the company must provide relevant material gathered during the investigation, including witness accounts and notes of any interviews which have taken place with witnesses.

The main UK legislation on cross-border legal co-operation is the Crime (International Co-operation) Act 2003 (the 2003 Act). The UK is also party to a number of bilateral and multilateral mutual legal assistance (MLA) treaties.

As a matter of domestic law it is not necessary for an MLA treaty to exist between the United Kingdom and the requesting country in order to make a request under the 2003 Act, although requests are more likely to be successful where a treaty exists.

Under the 2003 Act, a request for assistance in obtaining evidence can be made by a prosecuting authority in any country outside of the United Kingdom. Requests must be made by a formal letter of request. All letters of request to England and Wales must be directed to the Secretary of State for the Home Office. In practice the Secretary of State's functions are exercised by the UK Central Authority, which is part of the Home Office. Letters of request are generally treated confidentially as a matter of international law and it is the general practice of the UK authorities to neither confirm nor deny the existence of a request.

The UK has discretion in deciding whether or not to grant assistance, although in reality there is a presumption that the UK will provide assistance, particularly where there is a treaty relationship with the requesting State (see R (on the application of JP Morgan) v Director of the Serious Fraud Office [2012] EWHC 1674).

The United Kingdom may also make an MLA request to another jurisdiction. Sections 7 to 9 of the 2003 Act set out the provisions relating to requests to obtain evidence from abroad in relation to prosecutions or investigations taking place in the UK. The appropriate mechanism to be used to obtain evidence from overseas generally depends on the type of assistance being sought and the domestic legislation of the country from which the assistance is sought in addition to any underlying treaty relationship.

Extradition requests to the United Kingdom are governed by the Extradition Act 2003. The United Kingdom will consider requests for extradition from overseas territories in accordance with this Act which sets out the procedure for extradition to both European Union and non-European Union countries. There are separate regimes for requests from the EU and requests from other countries. Where the request is from a non-EU country the requesting state must establish a prima facie case against the requested person. Part 3 of the Extradition Act governs the making of outgoing extradition requests from the UK to EU territories. UK requests to non-EU territories are governed by the underlying country-specific treaty arrangements.

In more serious or complex cases, including white-collar crime offences, prosecutors (as opposed to the police) will decide whether a person should be charged with an offence and, if so, what that offence should be. This decision is made on the basis of the "Full Code Test" as set out in the Code for Crown Prosecutors. The Full Code Test is comprised of two stages: the evidential stage and the public interest stage.

The evidential stage requires that the prosecutor must be satisfied that there is sufficient evidence to provide a realistic prospect of conviction against each suspect on each charge. The prosecutor must consider what the defence case may be and how it is likely to affect the prospects of conviction. In particular, the prosecutor must consider the admissibility of any evidence obtained. A case which does not pass the evidential stage must not proceed, no matter how serious or sensitive it may be.

Once the requirements of the evidential stage are met a prosecution will usually take place unless the prosecutor is satisfied that there are public interest factors tending against prosecution which outweigh those tending in favour. In deciding if a prosecution is in the public interest, prosecutors will consider the following factors:

  • the seriousness of the offence;
  • the culpability of the offender;
  • the harm caused to the victim;
  • the suspect's age and maturity at the time of the offence;
  • the impact on the community;
  • the proportionality of a prosecution; and
  • whether any sources of information require protection.

Deferred Prosecution Agreements (DPAs) were introduced in England and Wales in February 2014 under the Crime and Courts Act 2013. They are currently only available to the CPS and SFO and apply only to companies rather than individuals. There have been five DPAs since their introduction; three primarily for bribery offences and two for fraud/false accounting offences. All five have been agreed with the SFO.

A company will only be invited to enter into DPA negotiations by the SFO if they have co-operated with the SFO's investigation and the SFO is satisfied that a two stage test, which is a slightly diluted version of the Full Code Test, referred to above in 2.6 Prosecution, has been met. In terms of the test, the first stage is either that the evidential test of the Full Code Test has been met or, if not met, there is at least a reasonable suspicion. based upon some admissible evidence. that the company has committed an offence and there are reasonable grounds for believing that a continued investigation would provide further admissible evidence within a reasonable period of time. In terms of the public interest stage, the DPA Code of Practice sets out a number of specific public interest factors, including co-operation and whether there is a history of similar conduct.

Once negotiations are underway, the parties will agree terms (such as the size of a financial penalty, the payment of any compensation and the detail of any future compliance programme) and a statement of facts. It is important to note that DPAs must be approved by the court and will only be granted if a judge considers that resolution by deferred prosecution is in the interests of justice. There will usually be two hearings before a court in relation to the proposed DPA; the first held in private and the second in public. Once approved, charges against a company are automatically suspended for a fixed period during which the company must comply with the agreed terms. On expiry of the term, providing the company has complied with its obligations, the proceedings against it will be discontinued.

Plea agreements are available under Sections 71 to 74 of the Serious Organised Crime and Police Act 2005 (SOCPA) however, their use is very rare, particularly in a white-collar crime context. There may be an increase in the use of SOCPA agreements by the SFO as the new Director has spoken of her desire to "flip defendants".

Under SOCPA, prosecutors can offer:

  • complete immunity from prosecution (Section 71); or
  • a co-operation agreement, under which an assisting offender will receive a reduction on their sentence in exchange for their co-operation (Section 73).

The general rule is that where there is sufficient evidence to provide a realistic prospect of conviction, then the public interest requires that accomplices should be prosecuted. If the SFO is to start "flipping defendants" then this militates in favour of an increase in Section 73 agreements in white-collar cases and the SFO have used these agreements in the past. CPS guidance on the use of SOCPA agreements makes clear that full immunity should only be offered in the most exceptional cases.

The prosecutor has the sole discretion as to whether to offer a Section 73 agreement under SOCPA. In reaching its decision it will have regard to whether it is more valuable to have the individual as a witness rather than a defendant; whether obtaining information about the extent and nature of the criminal activities is more important than the possible conviction of that individual; and the likelihood of obtaining the information from elsewhere. 

If SOCPA negotiations begin, the individual must first attend a scoping interview in order to identify the areas with which the offender can assist and to disclose any unprosecuted criminal activity. If the offender passes this stage then they must enter a "cleansing" process under which they must fully admit their involvement in the conduct under investigation; provide investigators with all available information and agree to continuous and complete co-operation, including giving evidence in any future trial. The written agreement is not entered into until after the cleansing process. Once the agreement has been entered into, the prosecutor will prepare a report for the court setting out the value of the assistance given.

There is no specific offence of corporate fraud in England and Wales. However, as set out in 1.4 Corporate Liability and Personal Liability, corporate criminal liability for white-collar crime offences is established through the identification principle. Therefore, if a directing mind and will of the company is convicted of a fraud offence then the company will also be guilty.

The main fraud offences in England and Wales are set out in the Fraud Act 2006. There is a general offence of fraud set out in Section 1 with three further sections setting out the ways of committing it. These are:

  • fraud by false representation (Section 2) where an individual made a false representation dishonestly and knowing that that representation was or might be untrue or misleading with intent to make a gain for himself, herself or another, to cause loss to another or to expose another to risk of loss;
  • fraud by failure to disclosure information where there was a legal duty to do so (Section 3) where an individual failed to disclose information to another person when he or she was under a legal duty to disclose that information, dishonestly intending by that failure to make a gain or cause a loss.; and
  • fraud by abuse of position (Section 4) where a person occupies a position in which he or she is expected to safeguard, or not to act against, the financial interests of another person and abused that position, dishonestly intending by that abuse to make a gain/cause a loss.

The maximum penalty for a company convicted of one of these offences is an unlimited fine.

The main bribery offences are set out in the Bribery Act 2010, which entered into force on 1 July 2011, and which applies to bribery in both the public and private sectors.

Under the Bribery Act, it is an offence to offer, promise or give a financial or other advantage to another person intending that advantage:

  • to induce a person to perform improperly a relevant function or activity, or
  • to reward a person for the improper performance of such a function or activity (Section 1).       

An offence is also committed where a person offers, promises or gives a financial or other advantage to another person knowing or believing that the acceptance of the advantage would, of itself, constitute the improper performance of a relevant function or activity (Section 1) or where a person requests, agrees to receive or accepts a financial or other advantage intending that, in consequence, a relevant function or activity should be performed improperly by the giver or another person (Section 2).

Further offences are created for officers or directors who consent to, or connive in, a bribery committed under Sections 1 or 2 by a corporate entity.

There is a specific offence of bribery of a foreign public official (Section 6) although conduct amounting to bribery of a foreign public official can also be charged under Section 1. The making of facilitation payments is illegal under the Bribery Act; there is no exemption for these payments.

The maximum sentence for a natural person guilty of an offence under Sections 1, 2 or 6 is ten years' imprisonment and/or a fine. Where a corporate entity commits an offence the maximum sentence is an unlimited fine.

For offences which pre-date July 2011, prosecuting agencies tend to brings charges under the now repealed Prevention of Corruption Act 1906.

There is also a corporate offence of failure to prevent bribery which is addressed in more detail in 3.3 Anti-bribery Regulation.

Under Section 7 of the Bribery Act 2010, a commercial organisation is guilty of failing to prevent bribery where a person associated with it (including a third-party agent) bribes another person, either to obtain or retain business for the company or to obtain or retain an advantage in the conduct of business for the company. It is a defence for the company to prove that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct. While it is not a specific offence to not implement a compliance programme, many companies have implemented such programmes in order that they might be able to avail themselves of the adequate-procedures defence in the event that bribery is committed within their organisation.

The consent of the Director of Public Prosecutions or the Director of the SFO is required before a prosecution can be commenced under Section 7 of the Bribery Act 2010.

The maximum sentence for an offence under Section 7 is an unlimited fine. For companies operating in the public sector there is a discretionary ban from bidding for government contracts across the EU if the company is convicted of an offence under Section 7. The ban is mandatory if one of the company directors (or any person who has powers of representation, decision or control of the company) is involved and is also convicted under Sections 1 or 6 of the Bribery Act 2010.

Insider dealing is criminalised in England and Wales by virtue of Part 5 of the Criminal Justice Act 1993, which implemented the EU Insider Dealing Directive (89/592/EEC). Under Section 52, it is an offence for a person to deal in price-affected securities when in possession of inside information, encourage another to deal in price-affected securities when in possession of inside information, or disclose inside information otherwise than in the proper performance of employment, office or profession.

The above offences can only be committed by an individual and only if he or she holds inside information as an "insider". An individual holds information as an insider if the information is, and he or she knows that it is, inside information and he or she has it, and knows that he or she has it, from an inside source (Section 57(1)). A person has information from an inside source if:

  • he or she has it through being a director, employee or shareholder of an issuer of securities (not necessarily the company whose securities are the subject of the insider dealing);
  • he or she has access to the information by virtue of his or her employment, office or profession; or
  • the direct or indirect source of his or her information is a person within the previous two categories (Section 57(2)).

An individual found guilty of insider dealing is liable to a maximum penalty of seven years' imprisonment and/or a fine following conviction on indictment (Section 61).

Under Part 7 of the Financial Services Act 2012 it is an offence to make a misleading statement, create a misleading impression, or make misleading statements in relation to benchmarks. A person guilty of an offence under Part 7 is liable to seven years' imprisonment and/or an unlimited fine following conviction on indictment.

There is also a range of civil penalties for market abuse.

There are a range of offences aimed at tackling tax evasion in England and Wales. Common to most of these is a requirement for the fraudulent act to have been committed dishonestly.

Tax offences are regularly prosecuted under the Fraud Act 2006 where the substantive offences carry a maximum penalty of seven years' imprisonment and/or a fine following conviction on indictment. Other specific offences include false accounting contrary to Section 17 of the Theft Act 1968, fraudulent evasion of VAT contrary to Section 72(1) of the VAT Act 1994 and making a false statement for VAT purposes contrary to Section 72(3) of the VAT Act 1994.

In the most serious cases of tax evasion a prosecution may be brought for cheating the public revenue. This common law offence encompasses any form of fraudulent conduct that results in HM Revenue and Customs (HMRC) being deprived of money to which it is entitled. It carries a maximum penalty of life imprisonment and is indictable only.

The Criminal Finances Act 2017 introduced two new criminal offences:

  • failure to prevent the facilitation of a UK tax evasion offence (Section 45); and
  • failure to prevent the facilitation of a foreign tax evasion offence (Section 46).

These offences can only be committed by a "relevant body", which includes bodies corporate and partnerships (not individuals). There is a defence to this corporate offence if the company can demonstrate that it had reasonable procedures in place to prevent tax evasion.

Section 386 of the Companies Act 2006 requires companies to keep adequate accounting records that show and explain the company's transactions and disclose, with reasonable accuracy, the financial position of the company at any time. Except where a company is exempt or dormant, a company's financial records must be available for inspection by an independent auditor.

Failure to comply with either of the requirements in Section 386 of the Companies Act 2006 is a criminal offence, which is also committed by every officer of the company who is in default.

It is a defence for a person charged under Section 386 to show that he or she acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.

Section 389 of the Companies Act 2006 makes it an offence for a company to fail to preserve accounting records for the statutory periods prescribed in Section 388 or to fail to preserve them in the company's registered office or a suitable alternative place. As under Section 386, all officers in default under Section 389 will be liable to prosecution.

A person guilty of an offence under Sections 387 or 389 is liable to a maximum penalty of two years' imprisonment and/or a fine following conviction on indictment.

Where a person dishonestly, and with a view to personal gain or intending to cause loss to another,destroys, defaces, conceals or falsifies (inter alia) any record or document made for accounting purposes he or she will be liable to conviction for false accounting under Section 17 of the Theft Act 1968. The maximum sentence for false accounting is seven years' imprisonment and/or a fine following trial on indictment.

Anti-competitive conduct in the UK is principally monitored by the Competition and Markets Authority (CMA). There are civil penalties under the Competition Act 1998 which prohibit any agreement or concerted practice that has the object of effecting the prevention, restriction or distortion of competition within the United Kingdom or the European Union. Companies found to have breached these rules are liable to a fine up to a maximum of 10% of their worldwide turnover. Directors also face disqualification for a period of up to 15 years.

The Enterprise Act 2002 introduced criminal offences for individuals involved in cartels. Under Section 188, an individual is guilty of an offence if he or she enters into an agreement with one or more other persons to make or implement, or cause to be made or implemented, arrangements whereby at least two undertakings will engage in one or more "prohibited cartel activit[ies]." A "prohibited cartel activity" includes direct or indirect price fixing, limitation of production or supply, sharing customers or markets and bid-rigging. Section 188 originally required that such arrangements be agreed "dishonestly", but this requirement was removed by an amendment effective from April 2014.

Proceedings under Section 188 of the Enterprise Act 2002 may only be instituted by the Director of the SFO or by or with the consent of the CMA (Section 190(2)). The maximum sentence following conviction on indictment is five years' imprisonment and/or an unlimited fine.

The Consumer Protection from Unfair Trading Regulations 2008 seeks to protect consumer rights. Under these Regulations, a trader will be guilty of an offence if he or she knowingly or recklessly engages in a commercial practice which contravenes the requirements of professional diligence and the practice materially distorts, or is likely to materially distort, the economic behaviour of the average consumer with regard to the product (Regulation 8).

A trader will also be guilty of an offence if he or she:

  • engages in a commercial practice which is a misleading action (Regulation 9);
  • engages in a commercial practice which is a misleading omission (Regulation 10); or
  • engages in a commercial practice which is aggressive.

It is a defence to an offence under the Regulations to show that the offence was committed by mistake, in reliance on information given by another, due to default by another, due to another cause outside of the defendant's control, or on the basis that all reasonable precautions were exercised to avoid the commission of the offence.

An individual or company found guilty of committing an offence under the Regulations is liable to two years' imprisonment and/or a fine following trial on indictment.

Proceedings cannot be commenced after the end of the period of three years beginning with the date of the commission of the offence, or the end of the period of one year beginning with the date of discovery of the offence by the prosecutor, whichever is earlier (Section 14).

Trading Standards is the governmental organisation responsible for protecting consumers within England and Wales. Trading Standards officers investigate consumer complaints and conduct routine inspections of businesses for compliance with legislation. Officers have a range of powers, including criminal powers.

The Computer Misuse Act 1990 is the main piece of UK legislation relating to offences or attacks against computer systems such as hacking or denial of service. The Act criminalises the following behaviours:

  • unauthorised access to computer material (Section 1), which carries a maximum sentence of two years' imprisonment and/or a fine;
  • unauthorised access to computer material with intent to commit or facilitate commission of further offences (Section 2), which carries a maximum sentence of five years' imprisonment and/or a fine;
  • unauthorised acts with intent to impair the operation of a computer (Section 3), which carries a maximum sentence of ten years' imprisonment and/or a fine; 
  • unauthorised acts causing, or creating risk of, serious damage to, for example, human welfare, the environment, the economy or national security (Section 3ZA), which carries either a maximum sentence of 14 years' imprisonment or life imprisonment depending on whether the risk is to human welfare and/or national security; and
  • making, supplying or obtaining articles for use in offences contrary to Sections 1, 3 or 3ZA (Section 3A), which carries a maximum sentence of two years' imprisonment.

In England and Wales, the Theft Act 1968 does not define "property" to include confidential information. As such, there can be no charge of theft of company secrets unless, for example, such information is recorded on a laptop or memory stick which is also stolen.

The United Kingdom enforces sanctions in line with United Nations and European Union regulations. Sanctions are grouped into two categories:

  • financial sanctions, which are used to restrict dealings in money and the provision of financial services; and
  • trade sanctions/embargoes, which restrict trade and business with certain countries and impose either a prohibition or a licensing requirement on the sale, supply, transfer, export or import of specified items to or from a specified country.

HM Treasury, via the Office of Financial Sanctions Implementation, is responsible for monitoring compliance with financial sanctions within the United Kingdom. It publishes a consolidated list of the individuals, organisations and businesses subject to financial sanctions, known as "designated persons". All UK and non-UK individuals, businesses and charities must comply with financial sanctions when carrying out activities within the United Kingdom’s territory, or if they are established under United Kingdom law and operating overseas, or if they are a citizen of the United Kingdom (wherever they are in the world).

It is a criminal offence to breach a financial sanction without an appropriate license or authorisation. The penalties for breaching sanctions vary across the various country-specific regimes. Generally, any individual found guilty of an offence shall be liable on conviction to a term of imprisonment not exceeding seven years and/or an unlimited fine. Corporate entities acting in breach of financial sanctions will also commit a criminal offence and be liable to a fine in the value of 50% of the total breach or up to GBP1 million (whichever is the greatest).

Trade sanctions are administered in the United Kingdom by the Export Control Joint Unit and the Import Licensing Branch, which are part of the Department for International Trade. The Department is responsible for publishing Strategic Export Control Lists, which provide the information necessary to determine whether any products, software or technology intended for export are "controlled" and therefore require an export licence.

It is a criminal offence to import or export strategic or controlled goods that are subject to sanction and embargo regimes without a specific licence. The import or export of some goods is banned outright. Penalties vary depending on the nature of the offence, but include revocation of a license, seizure of goods, fines and imprisonment for individuals.

The Sanctions and Anti-Money Laundering Act 2018, which contains a power to impose unilateral sanctions and create sanctions offences within the UK, was brought into force on 22 November 2018 and introduces a new framework for the implementation and enforcement of international sanctions in the United Kingdom post-Brexit.

There is no stand alone offence of concealment under the law of England and Wales. Concealment does however form an element of some white-collar criminal offences. For example, it is a money-laundering offence under Section 327 of POCA for an individual to conceal, disguise, convert, transfer, or remove criminal property from the United Kingdom. Concealment of criminal property includes concealing or disguising the nature, source, location, disposition, movement or ownership of that property or any rights connected with it (Section 327).

Specific common law and statutory rules govern whether a person is liable as an accessory to a crime. These rules apply to all offences unless expressly or impliedly excluded.

Section 8 of the Accessories and Abettors Act 1861 specifies the procedure and punishment for persons found guilty of aiding, abetting, counselling or procuring the commission of an indictable offence. Similar provisions apply to summary offences by virtue of Section 44 of the Magistrates' Courts Act 1980.

"Aiding" can be satisfied by any act of assistance before, or at the time of, the offence (see Coney (1882) 8 QBD 534). "Abetting" is defined in terms of encouraging the commission of the offence. "Counsel" means to advise, solicit or encourage. For both abetting and counselling it is not necessary to establish a causal link between the encouragement and the commission of the offence. "Procure" means to produce by endeavour (see A-G's Reference (No. 1 of 1975) [1975] 2 All ER. 

Secondary parties found guilty of aiding, abetting, counselling or procuring an offence are sentenced in the same way as the principal offender.

The principle money-laundering offences in England and Wales are contained in Part 7 of POCA. Under that Act it is an offence to:

  • conceal, disguise, convert, transfer or remove criminal property from the United Kingdom (Section 327);
  • enter into, or become concerned in, an arrangement while knowing or suspecting that it facilitates (by whatever means) the acquisition, retention, use or control of criminal property by, or on behalf of, another person (Section 328); or
  • acquire, use or have possession of criminal property (Section 329).

"Criminal property" is defined in Section 340 of POCA as property that constitutes a person's benefit from criminal conduct. "Criminal conduct" is all conduct which constitutes an offence in any part of the United Kingdom or, if committed abroad, would also constitute an offence in any part of the United Kingdom if it occurred here.

Offences under Sections 327 to 329 of POCA are triable either-way and the maximum sentence following trial on indictment is 14 years' imprisonment and/or a fine.

POCA also creates a number of secondary offences. For example, it is an offence under Section 333 to make a disclosure likely to prejudice a money-laundering investigation being undertaken by law enforcement authorities. This offence is triable either-way and carries a maximum penalty of five year's imprisonment and/or a fine.

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which entered into force on 26 June 2017, implemented the provisions of the Fourth Money Laundering Directive (EU) 2015/849 and contain further offences applying to those operating within the "regulated sector".

The general defences available under the criminal law of England and Wales, for example duress, are equally applicable to white-collar offences. There are also a number of special or partial defences which apply to particular white-collar offences. The defences to corporate "failure to prevent" offences (so-called adequate-procedures defences), under which an effective compliance programme may give rise to a defence of adequate or reasonable procedures, are adressed in 3.3 Anti-bribery Regulation and 3.5 Tax Fraud.

A further example of a specific defence can be found in POCA. Under that Act, it is a defence for a person charged with a money-laundering offence under Sections 327, 328 or 329 to show that they made an authorised disclosure and obtained consent prior to undertaking the prohibited act. Section 338 of POCA sets out the circumstances under which a disclosure is "authorised". They relate to the identity of the person to whom the disclosure is made and the timing of the disclosure. 

There are no general de minimisexceptions for white-collar offences. Where, however, the amount of money concerned in a financial offence is minimal this will be a relevant factor for the prosecutor in deciding whether a prosecution is in the public interest.

Self-reporting and co-operation are both key considerations for the SFO and the courts when it comes to deciding whether a DPA is in the interests of justice and also when determining the level of financial penalty. The DPA Code of Practice makes clear that a self-report is one of the factors tending against the prosecution of a corporate, stating that the prosecutor will consider how early the self-report was made. Similarly, the Code of Practice states that considerable weight may be given to a genuinely proactive approach to co-operation. The SFO has expanded on what co-operation means in its recent guidance on corporate co-operation stating that it includes identifying suspected wrongdoing and criminal conduct together with those responsible, reporting that to the SFO within a reasonable time of the suspicions coming to light, preserving evidence and providing it promptly and in an evidentially sound format. 

Of the five DPAs that have taken place so far, the judgments make plain that those companies who give exceptional co-operation can expect a greater reduction on the financial penalty, up to a 50% discount rather than the 33% discount envisaged in the DPA Code of Practice.

Even if a company self-reports and co-operates and this does not lead to a DPA, it will still be considered a mitigating factor if the company is later sentenced. The Definitive Guideline on Fraud, Bribery and Money Laundering Offences sets out sentencing guidelines for corporate offenders in respect of those offenders. Co-operation with the investigation, the making of early admissions and/or the voluntary reporting of offending are mitigating factors in the sentencing of a corporate.

Whistle-blowers are primarily given workplace protection under the Public Interest Disclosure Act 1998 (PIDA). Through the PIDA, an employee is protected where they make a qualifying disclosure. This includes a disclosure to the SFO, FCA, CMA and HMRC relating to a failure (including the commission of a criminal offence or the breach of a legal obligation) where they believe that the failure has taken place and that the disclosure is in the public interest. If an employee who makes a qualifying disclosure is dismissed then that dismissal will automatically be unfair. Equally, if they suffer detriment after making a qualifying disclosure, that is unlawful. Any compensation sought could potentially be unlimited.

Generally, there are no financial incentives for whistle-blowers in England and Wales. The exception is the CMA which offers financial rewards of up to GBP100,000 for information about cartel activity. Whether to pay a reward, and the value of that reward, is entirely at the discretion of the CMA.

Guidance issued in relation to the adequate or reasonable procedures necessary for the defence to the existing "failure to prevent" offences (see 3.3 Anti-bribery Regulation and 3.5 Tax Fraud) recommends the adoption of whistle-blowing processes by companies. Firms regulated by the FCA (and the Purudential Regulation Authority (PRA)) are required to implement and maintain effective whistle-blowing procedures.

The general rule in English criminal law is that the prosecution must prove each element of the offence in question beyond reasonable doubt.

For statutory offences the maximum sentence available is generally set out in the provisions of the creating legislation. The Sentencing Council for England and Wales is also responsible for producing guidelines on sentencing for the judiciary and criminal justice professionals.

Sentencing guidelines are available for most of the significant offences sentenced in the Magistrates’ Court and for a wide range of offences sentenced in the Crown Court. The Coroners and Justice Act 2009 provides that, when sentencing an offender for an offence committed on or after 6 April 2010, a court must follow any relevant sentencing guidelines, unless it is contrary to the interests of justice to do so. When sentencing an offender for an offence committed before 6 April 2010 the courts must have regard to any relevant sentencing guidelines.

In respect of the key white-collar offences, the Sentencing Council has issued the Definitive Guideline on Fraud, Bribery and Money Laundering Offences. This includes a section which specifically relates to the sentencing of corporate offenders for these offences.

For each offence the Definitive Guideline set out a range of sentences available. The judge will begin by determining the starting point by reference to the seriousness of the offence, the harm caused to any victims and the offender's level of blame. Once the starting point has been established the judge will adjust the sentence according to other relevant factors, including the offender's personal circumstances and whether he or she pleaded guilty at the earliest opportunity which usually results in a reduction of a third.

In the context of DPAs the level of any financial penalty will be set by reference to the Sentencing Guidelines and will be broadly comparable to the fine which the court would have imposed following a guilty plea (ie, a one third reduction). In practice, in determining the level of financial penalty, the Court's have, more often than not, given a 50% reduction to reflect exceptional corporate co-operation. 

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Mishcon de Reya LLP understands that the legal and regulatory aspects of business are becoming ever more complex. The grey area where civil fraud, regulatory obligations and criminal investigation overlap is increasing. Individuals and businesses can be either victims of crime or on the wrong side of the law, without knowing they were even at risk. Having different sets of lawyers that specialise in the various areas of bribery and corruption, tax, cartels and competition, fraud, sanctions-related issues, market abuse, directors' disqualification and beyond can be a complex, inefficient and costly process, which can add to the strain of dealing with the issues. The white-collar crime & investigations group offers a comprehensive but streamlined approach for clients who may find themselves with a portfolio of problems. Whether an individual has been accused of improper financial conduct or is the victim of fraud, the firm can address all aspects of the case – civil, regulatory and criminal – within a single team.

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