Government Crackdown on Corruption and Unexplained Wealth

Over the past year the Government has increasingly taken a stand against corruption and associated economic crimes.  Earlier this year, at an international anti-corruption summit hosted in London, David Cameron signalled that his administration was planning an extension of 'failure to prevent' offences for companies.

The issue has now re-appeared in Theresa May's administration, which also plans to introduce a new "unexplained wealth order". As corruption and financial compliance is at the forefront of the Government's minds, it should also be in the mind of businesses and directors.

Failure to prevent offences

A "failure to prevent offence" occurs when a company is found liable as a result of its employees' or agents'  own personal offence. These offences can occur if a company has not put reasonable provisions in place to stop employees committing specific crimes. Currently the major "failure to prevent" offence exists under the Bribery Act 2010, which has seen a concurrent rise in the prevalence of Anti-Bribery policies, training and employee monitoring.

Ultimately, this type of offence places a duty on companies to police themselves or face the consequences, with the aim of reinforcing a culture of corporate responsibility.

The Criminal Finances Bill, which is due for a further reading in the House of Commons will extend this type of offence to include the failure to prevent tax evasion.

The Government has also considered extending 'failure to prevent offences' to other forms of economic crimes such as money laundering, false accounting and fraud. If this form of offence continues to be introduced, directors and senior staff would be placed under an even greater onus to ensure the compliance of their companies.

Unexplained Wealth Orders ("UWO")

The Government also plans to tackle corruption through UWOs. Individuals with "suspicious" sums in their bank account can be issued with an UWO and asked to explain the legitimate source of their wealth. If no satisfactory explanation is given their assets could be seized.

In their draft form, the orders will apply to any asset including property, art and jewellery worth over £100,000.

UWOs as drafted will target not only those suspected of money laundering, drug and trafficking offences but also 'politically exposed persons'. This would include politicians and public officials who may be accused of having obtained funds from bribes, illicit political contributions, embezzled funds and loans, fraud and tax evasion.

Controversially the law shifts the burden of proof to the Defendant and orders can be made where there is limited evidence that the funds are connected to criminal activity.

If you require advice or assistance on failure to prevent offences or unexplained wealth orders please contact a member of the Business Risk and Regulation Team.