Welcome to the Comsure UK August 2017 corporate crime update – our round up of developments in relation to corruption, money laundering, fraud, sanctions and related matters.

• New sanctions reporting requirements for non-financial sector businesses
• Failure to Prevent the Facilitation of Tax Evasion offences to be implemented from 30 September 2017 – Criminal Finances Act 2017
• FCA annual reports and accounts 2016/2017
• FCA publishes new cyber security guide
• SFO opens investigation into pension schemes totalling £120 million
• Anti-money laundering reforms not implemented in majority of EU countries
• Consultation on Codes of Practice of POCA and ATCSA
• FCA to establish new AML body

New sanctions reporting requirements for non-financial sector businesses

1. With effect from 8 August, the Government has introduced significant new reporting requirements in relation to EU asset freeze regimes. Previously, only businesses in the financial sector were subject to the obligations, found in UK financial sanctions instruments, to report specified information to the Office of Financial Sanctions Implementation (“OFSI”) in Her Majesty’s Treasury (“HMT”). From 8 August, further sectors, including auditors, external accountants, tax advisers and lawyers, have been brought within the scope of these obligations and may commit a criminal offence if they fail to comply with the relevant reporting requirements.
2. The European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017 (the “Regulation”) implements this change, and applies in respect of information received on or after 8 August.
3. OFSI has updated its guidance (the “Guidance”) on financial sanctions to take account of this change. A number of other amendments have also been made to the Guidance, and we will report on these in a separate briefing.

Failure to Prevent the Facilitation of Tax Evasion offences to be implemented from 30 September 2017 – Criminal Finances Act 2017

1. The Criminal Finances Act 2017 (Commencement No. 1) Regulations 2017 were introduced on 13 July 2017 and put into effect the two new corporate criminal offences of “failure to prevent” the facilitation of UK and foreign tax evasion, included in Part 3 of the Criminal Finances Act 2017 (“the Act”), from 30 September 2017.
2. The Act creates two new criminal offences for corporates which fail to prevent the facilitation of tax evasion, either in the UK (section 45) or abroad (section 46), by a person associated with the corporate. The foreign tax evasion offence requires dual criminality, in that the tax evasion and facilitation offences in the foreign jurisdiction must involve conduct that would also be an offence under English law if it had taken place here. The corporate will have a defence to both offences if it has ‘reasonable procedures’ in place to prevent the offence.

FCA annual reports and accounts 2016/2017

1. The FCA has published its annual report and accounts for 2016/2017. The report states that there were over 3,000 Suspicious Transaction and Order Reports (“STORs”) in 2016, nearly double the amount of STRS in 2015, although the FCA highlights that direct comparisons cannot be made because of the changes in reporting requirements under the Market Abuse Regulation.
2. The report also provides an update on the FCA’s financial crime and anti-money laundering (AML) work, which is one of the cross-sector priorities identified in its Business Plan. The FCA notes that, in addition to its systematic AML programme (covering fourteen banks) it has confirmed its AML reviews of smaller, higher risk firms, and aims to extend this programme from 75 to 150 firms.  A new programme of proactive visits to randomly selected lower risk firms has also been introduced.
3. The report also includes comment on de-risking, the use of new technology for streamlining AML processes, and the FCA’s proliferation in intelligence groups, amongst other matters.

FCA publishes new cyber security guide

1. The FCA has published a new cyber security guide to assist firms to become more resilient to the number, scale and sophistication of cyber-attacks. The guide helps firms review their approach to cyber security and provides a number of questions to allow firms to identify effective practices. It also details what steps firms need to take to report a cyber-incident. The FCA notes that since 2014, there has been a 1,700% increase in cyber-attacks reported to the organisation.

SFO opens investigation into pension schemes totaling £120 million

1. The Serious Fraud Office (“SFO”) has opened an investigation into a number of pension schemes which allegedly have been affected by fraud between 2011 and 2017.
2. The investigations have been opened into the Capita Oak Pension and Henley Retirement Benefit schemes, Self-Invested Personal Pensions (“SIPPS”) as well as other storage pod investment schemes.
3. The investigation includes the Westminster Pension Scheme and Trafalgar Multi Asset Fund which invested in other products.
4. Over a thousand individual investors are thought to have been affected by alleged fraud, including those who invested their pension funds. The amounts invested total over £120 million.

Anti-money laundering reforms not implemented in majority of EU countries

1. An EU Commissioner has expressed concern that the majority of EU countries have failed to meet the deadline for implementing new laws designed to combat money laundering and the financing of terrorism. Seventeen EU countries have been written to over their failure to fully implement the EU’s 4th Anti-Money Laundering Directive (“4MLD”). EU countries were required to transpose 4MLD, which came into force June 2015, by 26 June this year.
2. According to Justice Commissioner Vera Jourová, fourteen of the seventeen countries that have been written to have not introduced any new legislation to implement the reforms; while three countries have only partly transposed the Directive into national law.

Consultation on Codes of Practice of POCA and ATCSA

1. The UK government has launched a consultation on Codes of Practice affecting the Proceeds of Crime Act 2002 (“POCA”) and Anti-Terrorism, Crime and Security Act 2001 (“ATCSA”), which were both amended by the Criminal Finances Act 2017.
2. The Codes on which the consultation is open include:
   1. powers to seize and detain property;
   2. exercising investigation powers under POCA;
   3. the use of search powers for recovering criminal cash;
   4. powers to seize certain listed assets;
   5. guidance for prosecutors on the operation of POCA investigation powers; and
   6. the exercise of various new seizure, detention and forfeiture powers created by the Criminal Finances Act 2017.
3. Comments in response to the consultation must be submitted by 25 August 2017.

FCA to establish new AML body

1. The FCA is to take on new supervisory powers on anti-money laundering compliance by professional body supervisors and will supervise 22 such supervisors through a new body, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), which sits within the regulator. The FCA has published guidance (GC17/7) setting out its views on the approach to be taken by OPBAS. The consultation proposes text for a specialist Sourcebook for professional body AML supervisors and sets out expectations in relation to AML supervision. Comments must be submitted by 23 October 2017.
2. FCA PEPs evidence
3. Following consultation in March 2017, the FCA has published finalised guidance for how financial services firms should treat customers who are politically exposed persons (PEPs) when meeting their anti-money laundering (AML) obligations.
4. Implementation of 4MLD
5. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) came into force on 26 June 2017 which implements the EU’s 4th Directive on Money Laundering (4MLD). The MLR 2017 was subject to two rounds of consultation with the final instrument not substantially changed from the most recent consultation draft. The UK money laundering regulations have not been updated since 2007 and so 4MLD better reflects the current business environment and implements the 40 recommendations of the Financial Action Task Force (“FATF).