Under the new UK Economic Crime and Corporate Transparency Act 2023, organisations that are bodies corporate or partnerships will become criminally liable for the economic crimes of their senior managers. They will also have a new liability (albeit subject to an important defence) for failure to prevent their employees and associates from committing fraud.
Expanded Identification Doctrine
Corporates and partnerships in the UK can already be held criminally liable for the actions of an individual who is the organisation’s “directing mind and will” under the identification doctrine. From 26 December 2023, these organisations will be guilty of any economic crimes committed by their senior managers acting within the actual or apparent scope of their authority. A senior manager is, in summary, someone with a significant role in decision making or management with respect to the whole or a substantial part of the organisation. It is not limited to senior managers under the FCA/PRA Senior Managers Regime. Relevant economic crimes include fraud, bribery, tax evasion, money laundering offences and sanctions offences.
Failure to Prevent Fraud Offence
Large organisations and their subsidiaries will commit this offence if an employee or associate (i.e. a person who performs services for it or on its behalf) commits a fraud offence (broadly, tax evasion or fraud) intending to benefit the organisation. Large organisations are those satisfying two of the following three criteria: (i) >250 employees, (ii) >£36m turnover, or (iii) >£18m total assets. The organisation will, however, have a complete defence if, at the time the fraud offence was committed, it had reasonable fraud prevention procedures in place. This offence will become effective on a date to be appointed after the Government has published guidance on fraud prevention procedures.