You can go to jail for committing fraud. But MPs are now seeking reforms that would send company directors to prison for failing to prevent fraud or money laundering.
Members of two all-party committees are set to table an amendment to the economic crime and corporate transparency bill passing through Parliament.
The bill, launched by former home secretary Priti Patel in response to the Russian invasion of Ukraine, includes new powers to seize crypto assets and new intelligence-gathering powers.
However, MPs—on the all-party banking and anti-corruption and responsible tax committees— want to see stiff penalties for company directors that fail to prevent fraud in their organisations. They will table an amendment to the bill within the next week, they say.
This should come as no surprise. When the two committees launched a strategy document—Economic Crime Manifesto—in May this year, they made specific mention of concerns about directors. It said that the UK used “outdated and ineffective” criminal liability laws, making it “very difficult” to hold large companies to account for economic crime. This, they argued, was unfair to small and medium-sized companies, which can be prosecuted.
“The government should legislate to introduce new ‘failure to prevent’ offences for economic crimes, including money laundering and fraud,” the document says.
The strategy is explicit that both companies and directors should be “held liable” for criminal activities.
Filthy lucre
The precise scale of money laundering in the UK is unknown, though a House of Commons library document says it “could run to tens or hundreds of billions of pounds per year”.
There are also indicators. Transparency International, a campaign body, estimates there could be more than 2,000 companies registered in the UK, or connected tax havens, used in 48 Russian money laundering and corruption cases. It also says that about £6.7bn in “questionable funds” has been invested from around the world in UK property. Some £1.5bn’s worth of property, it says, was bought by Russians accused of corruption or with links to the Kremlin.
The MPs say the intention of the amendment is to “hold corporate directors to account” and create a deterrent. Fines, they argue, are viewed as the “cost of doing business”.
Margaret Hodge, chair of the all-party anti-corruption and responsible tax committee, says directors who turn a “blind eye” to fraud and money laundering are being “let off the hook,” while the reform of corporate Britain needs deterrents.
“The bill’s failure to properly address corporate crime, in its current form, is a crushing disappointment,” she says, “particularly in light of the regular drumbeat of scandals in which major banks are found to have been complicit in laundering dirty money from the very worst origins.”