The UK government has proposed an amendment to the Economic Crime and Corporate Transparency Bill, which would create a new offence of failure to prevent fraud. The amendment requires organisations to demonstrate that they had ‘reasonable measures in place to deter the offending’ or face an unlimited fine if fraud has been committed within their organisation.
Alongside this measure, the amendment also creates a ‘proactive information request power’ for the Solicitors Regulation Authority (SRA) in relation to economic crime. With the recent crisis in Ukraine exposing professional services sectors to potential economic crime, the government believes it is necessary to ensure that the SRA has the necessary powers in this space.
The Home Office said that overall, the proposed legislation will protect the public from a wide range of harms, including false accounting and hiding important information from consumers or investors. Security minister Tom Tugendhat MP said,
‘Our new failure to prevent fraud offence will protect consumers from dishonest and misleading sales practices, and level the playing field for the majority of businesses that behave responsibly’.
The move follows recommendations made by the Law Commission’s 2022 review of corporate criminal liability.
The Economic Crime and Corporate Transparency Bill is currently at committee stage in the House of Lords. The government said it will publish guidance on ‘reasonable prevention measures’ in due course. The offence will not be enforced until the guidance is published. Read our previous article, The Economic Crime Bill – Ensure You are Meeting Requirements
How Confident Are You About Compliance
Considering the upcoming changes, firms are urged to take their responsibilities seriously, dedicating adequate resources to ensuring they meet their regulatory obligations. Key areas firms should be reviewing include:
- Conduct expected risk assessments
- Ensure you are meeting regulatory requirements to carry out a Regulation 21 Independent Audit – Anti Money Laundering Regulations (MLR) 2017
- Ensure all policies, controls and procedures (PCPs) are up to date
- Ensure all PCPs are tailored to match how the firm operates
- Establish robust file review programmes
- Establish robust training programmes
Firms are already required to produce risk assessments to prevent money laundering, and several firms have been fined in the past year for failing to carry these out properly. The SRA has also prosecuted firms that wrongly declared they had a compliant risk assessment.
Our goal is to ensure the firms we work with have and retain a compliant structure enabling the firms, their managers, and owners to focus on running their businesses and servicing their clients.
If you believe your firm may be at risk or wish to confirm your firm is achieving the required standard, we offer a range of solutions at The Strategic Partner, including:
- Regulation 21 AML 2017 Independent Audit – A review of the firm’s approach to regulation and compliance to include AML procedures with the audit meeting the requirements of Regulation 21 of the AML 2017. The output of which provides the firm with a written gap analysis and solutions to remedy any issues that rise and ensure the firm is compliant, find out more
- Training – Our typical AML Training includes:
- AML Training for ALL staff to meet the firm’s obligation to provide annual training.
- 1-2-1 training for the MLRO and MLCO on their obligations and requirements.
- Practical training for those involved in client onboarding to ensure their ID and AML checks are correctly completed.
- File Revies/Auditing – At TSP, we engage with firms undertaking file reviews where we consider your procedure, staff, systems and files to ensure the procedures are up to the required standard and being implemented at case level with a report of the outcome.
Our packaged risk and compliance solutions provide guidance and support to firms on a range of topics and include: –
- Our Risk, Regulation and Compliance Service (including AML), provides firms with the necessary Policies Control and Procedures (PCP’s) – that are in line with CQS requirements and the standard of the relevant quality mark – alongside training, supervision structure, an annual independent assessment and reporting. This solution ensures that firms and their staff are compliant and remain so. It also clarifies what to do in the event of a mistake and/or a breach occurs.
- Our extended service, Risk, Compliance, AML Guidance and Register Administration, provides an outsource solution for firms where The Strategic Partner not only manages and maintains the risk registers and provides guidance to all staff (inc. Partners), we also produce monthly risk and compliance reports.
The combination of these two solutions provides a law firm with a robust and cost-effective risk and compliance strategy that ensures staff have access to expert guidance as it is needed.
About The Strategic Partner
The Strategic Partner is a law firm knowledge hub. We work with law firms and professional indemnity insurers, advising and guiding on compliance and risk management techniques to assist and reduce instances of claims or regulatory breaches.
We offer a range of services and consultancy tailored to the Legal sector. We have gained a wealth of knowledge and experience in the overall management of law firms and work with them to achieve profitability, stability, and efficiency. Our goal is to become a valued and respected partner to our member law firms, consistently providing high-quality services and solutions.