The economic crime and corporate transparency bill promises to be one of the most significant pieces of legislation in the economic crime arena in more than 20 years.
This bill encompasses a vast array of provisions to combat economic crime, ranging from comprehensive Companies House reforms to additional powers for law enforcement to recover criminal crypto assets.
Nevertheless, what truly sets this legislation apart is the inclusion of a new 'failure to prevent fraud' offence and the expansion of corporate liability for all economic crimes perpetrated by senior executives.
The government had hoped that the bill would receive Royal Assent and come into force by the end of this year. However, that is now in doubt. The legislation has been ping ponging between the House of Commons and House of Lords since the start of September and following the latest debate, the Houses remain divided on two points.
The government’s view is that the failure to prevent fraud offence should only apply to large organisations; small and medium enterprises should be exempted due to the costs of compliance.
The Lords’ view, led by Lord Garnier, is that the offence should apply equally to all businesses, pointing out that large organisations only account for 0.5 per cent of businesses.
The Lords have however made two concessions, first to exempt micro-businesses and now to exempt small businesses – that is businesses who meet two or more of the following conditions: turnover not more than £10.2mn; balance sheet not more than £5.1mn; and no more than 50 employees.
The second point is whether law enforcement should be protected against costs orders if they lose a civil recovery claim.
The Lords believe that they should have complete protection due to the imbalance that exists between the resources available to law enforcement and those of the fraudsters. The government’s view is that this is a significant departure from the loser pays principle and needs further consideration.
Again, the Lords have sought to compromise by dropping complete protection for law enforcement and instead to aligning to the position under unexplained wealth orders, where the court considers whether the authority acted reasonably in bringing proceedings when deciding whether to award costs against it.
These two points will be back before the House of Commons on October 25 to see if there is any movement from the government. If not, we are in danger of royal assent not being granted this year.
The government stressed to the Lords that time is running out in the current session to get the bill agreed, but Lord Garnier was not moved by this, responding: “I think we all ought to agree that it is better that, if we are to give this bill a route through to royal assent, it should be a good bill.”
What remains clear is, despite the potential delay, the Houses are united on the importance of the bill in the fight against economic crime and so it is still expected to come into force at some point in 2024.
