Category Archives: UK Liability and Enforcement

UK Law Commission Recommends Reforms to Money Laundering Suspicious Activity Reports

by Karolos Seeger, Aisling Cowell, Andrew Lee, and Natasha McCarthy

The Law Commission has published an extensive report examining the UK’s current Suspicious Activity Report (“SAR”) regime for notifying suspected money laundering to the National Crime Agency (“NCA”) and outlining 19 recommendations for reform.[1] These include both legislative and non-legislative mechanisms designed to improve the efficiency and effectiveness of the consent regime. This report follows a July 2018 consultation paper, which was discussed in a previous client update.[2] Interestingly, the Law Commission reviewed a sample of hundreds of SARs to help it analyse the potential impact of the various proposals and lend support to its final recommendations.

In short, the existing SAR regime will be largely retained, with the recommendations having limited practical effect, especially for organisations outside the regulated sector. We summarise below the key recommendations and consider their likely impact. Continue reading

UK Senior Managers Regime Encourages SEC Whistleblowing

by Richard Pike

Nearly 12% of tips received by the Securities and Exchange Commission (SEC) in FY 2018 were from international whistleblowers and the second largest source of these tips was the United Kingdom[1]. The frequency of tips from the UK should come as no surprise because London is, of course, an important global financial center and many large firms operating in London are listed on US exchanges. We believe, however, that there may be another factor affecting the number of tips and one which is likely to play a much stronger role in the future. Continue reading

How are non-trial enforcement mechanisms facilitating the resolution of foreign bribery cases?

by Sandrine Hannedouche-Leric, Elisabeth Danon, and Brooks Hickman

A new Study on Resolving Foreign Bribery Cases with Non-Trial Resolutions builds a typology of non-trial resolutions available to the Parties to the OECD Anti-Bribery Convention and takes stock of how these resolutions have been used to resolve foreign bribery cases in recent years.

The Study focuses on key legal, procedural and institutional challenges attached to the use of non-trial resolutions to conclude foreign bribery cases. It provides data demonstrating a clear trend to resolve these cases outside the court room. In particular, it shows that nearly 80% of foreign bribery cases concluded since the OECD Anti-Bribery Convention entered into force 20 years ago have been resolved with a non-trial enforcement vehicle. Relying on data and case examples, it analyses how these instruments have driven the enforcement of foreign bribery laws. In some countries, non-trial resolutions have provided the exclusive means for sanctioning legal persons, while other countries have used non-trial resolutions to impose sanctions in their first-ever foreign bribery resolutions. Continue reading

The Enforcement of Financial Market Crimes: A Comparative Case Study of Canada and the United Kingdom

by Anita Indira Anand

Strong enforcement of the law governing financial markets improves investment, reduces information asymmetries among corporations and investors, and prevents adverse selection. It has proven to be a deterrent, signaling to potential wrongdoers that criminal activity has serious consequences. It can also provide victims of crime with compensation for their losses. Despite these benefits, developed market economies struggle to develop comprehensive systems which allow for the successful prosecution of financial crimes. Indeed, the law of financial market crime is perhaps the most poorly-enforced branch of criminal law.

While there is no universally-accepted definition of “financial market crime,” the term typically refers to “any non-violent crime that generally results in a financial loss.”[1] In my comparative analysis of the enforcement of financial market crimes in Canada and the United Kingdom (UK), I argue that financial market crimes have low enforcement rates for a multiplicity of reasons common to both jurisdictions. To begin, financial market crimes have historically been relatively low priority for law enforcement officials who are required to devote increasing resources to violent crimes. In addition, and perhaps relatedly, law enforcement infrastructure lacks financial resources, which undermines the investigation and prosecution of financial market crime and fraud cases. Furthermore, technology, especially the prevalence of social media, has allowed new types of fraud to develop, with insufficient tools and financial resources to deal with them. Finally, past treatment of financial market criminals as pillars of the community who have merely had a fall from grace has weakened public perceptions of the harm caused by these crimes.

In both the UK and Canada, there is a lack of coordination among enforcement agencies when these crimes are investigated and prosecuted. While market regulation is more centralized in the UK, both countries rely on multiple agencies – and require those agencies to work together for the system to properly function. Theoretically, this integrated approach to financial market crime enforcement should work. Yet, in both countries, problems have arisen as regulators struggle to determine which agency (or agencies) should be responsible for tackling a specific financial crime, and handle issues of information sharing between national and local law enforcement teams. This lack of proper coordination has hampered officials in both countries as they attempt to prosecute and prevent financial market crime. In light of these issues, I propose three main reforms. Continue reading

UK Treasury Publishes First Post-Brexit UK Sanctions Regulations and Guidance

 by Jane Shvets, Konstantin Bureiko, Tom Cornell, and Satish M. Kini

On 31 January 2019, the UK’s HM Treasury published the first set of regulations (the “Regulations”) under the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”).[1] The Regulations are due to come into force on “exit day”—29 March 2019 at 11.00pm—if the UK leaves the European Union without a deal. The UK Office of Financial Sanctions Implementation (“OFSI”) has also published new guidance on post-Brexit financial sanctions, which should be read in tandem with the Regulations.[2] In many respects, the Regulations mirror sanctions measures currently in force in the UK under EU regulations and merely give them an independent statutory footing in the UK. But the Regulations do diverge from established EU sanctions practice in certain places and may require companies in the UK to change their sanctions compliance practices. Continue reading

Director of the Serious Fraud Office Lisa Osofsky Keynote on Future SFO Enforcement

by Lisa Osofsky

Thank you.

I have just completed my first month as Director of the Serious Fraud Office.

As a new director, I have spent my first weeks meeting the talented and hardworking SFO team – from lawyers to investigators to accountants to computer experts to the administrative team who are the backbone of every government agency all around the globe.   I have come to an office with strong values and a commitment to justice, a dedication for searching for the truth.  Continue reading

KBR Inc.: Foreign Companies Can Now Be Compelled to Produce Documents to the UK Serious Fraud Office

by Christine Braamskamp and Kelly Hagedorn

On 6 September 2018, following hot on the heels of the important decision on the application of litigation privilege in internal investigations in ENRC v Serious Fraud Office[1] (read our recent summary here), the Administrative Court handed down its judgment in R (KBR Inc.) v Serious Fraud Office[2] concerning the Serious Fraud Office’s (SFO) powers to compel the production of documents held outside of the United Kingdom by companies incorporated outside of the  United Kingdom.  The Administrative Court held that where there is a “sufficient connection” to the United Kingdom, the SFO can compel the production of such documents. Continue reading

Court Of Appeal In London Overturns Widely Criticised High Court Judgment In SFO V ENRC

by Patrick Doris, Sacha Harber-Kelly, Richard Grime, and Steve Melrose

I. Introduction

Today the Court of Appeal of England and Wales issued its judgment in The Director of the Serious Fraud Office and Eurasian Natural Resources Corporation Limited[1] regarding the privileged nature of documents created in the context of an internal investigation.

The Court of Appeal reversed the High Court’s decision and found that all of the interviews conducted by ENRC’s external lawyers were covered by litigation privilege, and so too was the work conducted by the forensic accountancy advisors for the books and records review. The Court of Appeal found that ENRC did in fact reasonably contemplate prosecution when the documents were created. Moreover, while determining that it did not have to decide the issue, the Court of Appeal also stated that it may also have departed from the existing narrow definition of “client” for legal advice privilege purposes in the context of corporate investigations. Continue reading

UK Law Commission Proposes Reforms to Suspicious Activity Reports for Money Laundering

by Karolos Seeger, Andrew Lee, and Natasha McCarthy

The Law Commission has published an extensive consultation paper examining the UK’s current Suspicious Activity Report (“SAR”) regime for reporting suspected money laundering to the National Crime Agency (“NCA”) and outlining provisional reform proposals.[1] The consultation runs until 5 October 2018, after which the Law Commission will present its final recommendations to the Government. This is the first step in a process that could result in significant changes to Part 7 of the Proceeds of Crime Act 2002 (“POCA”), affecting all organisations that deal with money laundering issues.

We summarise below the key views expressed and changes proposed in the consultation paper, and analyse the likely practical effect if the reforms are implemented. Continue reading

Are U.K. Courts Pushing Back Against DOJ’s Global Reach?

by Evan Norris and Alma M. Mozetic

On July 31, 2018, the High Court of England and Wales denied the U.S. Justice Department’s request for the extradition of Stuart Scott, a British foreign exchange trader indicted in 2016 as part of the DOJ Fraud Section’s multi-year effort to investigate and prosecute foreign currency market manipulation.  The decision in Scott v. Government of the United States of America marks the second time in 2018 that DOJ has lost an extradition fight in London.  The Department has reportedly indicated that it will appeal.  If the decision stands, Scott will join a handful of U.S. court cases that have the potential to impact DOJ’s ability to reach across the globe to pursue foreign nationals for violations of the FCPA and other financial fraud statutes. Continue reading