Further new amendments to the much-awaited final version of the Economic Crime and Transparency Bill (the Bill)

The Government’s April 2023 amendment to the Bill, introducing a “failure to prevent fraud” offence, which will if unchallenged, make an organisation liable if it does not have reasonable procedures1 in place to prevent fraud, where a [specific] fraud offence is committed by an employee or agent, which results in, or is intended to result in a benefit for the organisation.

Whilst the offence will apply to all sectors, it will only be large organisations within every sector that are in scope, (an organisation must meet two out of three of the following criteria to be considered large: more than 250 employees, more than £36 million turnover and more than £18 million in total assets).

But wait, there is more. On 15 June 2023, the Government presented another amendment that will make companies criminally liable if “senior managers” commit fraud, money laundering or other economic crimes.

Under the current suite of UK laws, save for certain exceptions such as failure to prevent bribery, companies in England can only be held criminally liable for the actions of those individuals representing it in very specific circumstances, and charges/prosecutions for such are few and far between, and with varying degrees of success.

This latest amendment to the Bill proposes that if a “senior manager”2 of a body corporate or partnership (an organisation) whilst acting within the actual or expected scope of their authority commits a relevant offence, the actions of that “senior manager” will make the organisation also guilty of the offence.

The purpose of the amendment is to try and ease the burden of identifying who the actual key decision makers are within an organisation (particularly large organisations), and often ones which have complex management structures which can be manufactured to conceal who the key decision makers are. A test3 will be applied to consider the decision-making power of a senior manager who has committed an economic crime, rather than the authorities relying just on their job title. So this will require a much deeper dive into the actual responsibilities of senior management, with no doubt a consequential impact on the way that senior management responsibility maps are currently crafted by organisations to comply with SMCR requirements.

If the amendment goes through unchallenged or altered, no doubt there will be a great deal of deliberation and thought given by the Government, courts, regulators and boardrooms alike as to what is a significant role and who actually are senior managers and who are the decision makers within organisations. This will be coupled with new and increased compliance responsibilities for firms getting to grips with understanding the legislation and revising internal system and controls to protect themselves and their employees from new, extended criminal liabilities.

1 Guidance on reasonable fraud prevention procedures is expected to be published prior to the new offence coming into force.
2 A “senior manager” is defined as “an individual who plays a significant role in (a) the making of decisions about how the whole or a substantial part of the activities of the body corporate or (as the case may be) partnership are to be managed or organised, or (b) the actual managing or organising of the whole or a substantial part of those activities.”
3 Details to be announced by the Government