Criminal law insights: December 2020

FinCen files leak: an update

At a recent speech, the Director of FinCEN, Kenneth Blanco, announced the release of a new section 314(b) Fact Sheet which encourages information sharing between financial institutions ("FIs"). FinCEN's information sharing program is permitted under section 314(b) USA PATRIOT Act which allows FIs (upon notifying FinCEN) to share information between each other in order to combat money laundering and terrorist financing, and receive protections from liability for that sharing.

The speech identified three clarifications in the new guidance:

1. FIs can share information even where they don't have conclusive proof or knowledge of related wrongdoing or that the assets involved are the proceeds of crime. An FI doesn't even need to have itself concluded that that the activity is suspicious. Information regarding activities, other than a transaction, may also be shared. The information may also be personally identifiable information and can be transmitted by any means (including verbally).

2. An entity that is not itself an FI may form and operate an association of FIs whose members can use section 314(b).  Notably, this includes compliance service providers.

3. An unincorporated association of FIs, governed by a contract between its FI members, may engage in information sharing under section 314(b).

Please see our article on the UK position on information sharing within the regulated sector, together with the Government's Circular on the same.

Reform to the law on misconduct in public office

On 4 December 2020 the Law Commission published its final report of recommendations to reform the UKs common-law offence of misconduct in the public office. The replacement statutory offences of "corruption in public office" and "breach of duty in public office" would criminalise officials who use their position to "benefit themselves or cause a benefit or detriment to someone else". These amends form part of the UK government's 2012 -- 2022 Anti-Corruption Strategy, which identified the public sector as one if its key priorities, and are expected to come into force in late 2022. As a result, UK officials who act corruptly would face a higher risk of prosecution under a new statutory offence with a maximum penalty of 10 to 14 years' imprisonment. Officials who neglect their duty could also be faced with a charge of "breach of duty in public office".

The reforms will bring some clarity to the notoriously ambiguous offence, which the Law Commission stated was prone to changing interpretations defined by the courts and not by statute. The reform will also further clarify overlaps with the current offence in section 26 Criminal Justice and Courts Act 2015, namely in relation to "undue gains, deliberate infliction of detriment, conflict of interest and similar behaviour which may be regarded as reflecting a wrong of either abuse of position or positive misgovernment". The Law Commission has stated that the new statutory offence could cause the current section 26 offence to become redundant. The accountability of the most prominent members of our public sector has rested on a common-law offence that dates back hundreds of years leaving the terms of the offence convoluted and subject to abuse. This new statutory reform is a necessary and welcome change to deal with modern forms of misconduct.   

The SFO's Operational Handbook Chapter on DPAs

In October 2020, the SFO made public a chapter from its internal "Operational Handbook" regarding various aspects of the Deferred Prosecution Agreement process. The document (which has been published in the interests of transparency), outlines the process and requirements applicable at each stage, broken down as follows:

• Evidential and public interest tests
• DPA negotiation process
• Parallel investigations
• Invitation to enter DPA negotiations
• Terms of negotiations
• DPA disclosure
• Statement of Facts and Agreement
• DPA terms
• Financial penalty
• Court application
• After a DPA

We take a look at the release of this internal-facing document, and what it means for practitioners in our article.

Insights on corporate criminal liability reform

The Law Commission has been charged with the not-so-small task of reviewing and making recommendations to address corporate criminal liability laws in the UK. While many agree that some reform is needed, there is still much debate over what form it should take. This review follows a Call for Evidence on the subject in 2017, which received input from numerous stakeholders but was inconclusive. The different views may be due to how the existing framework affects large businesses versus SMEs. SMEs tend to find themselves disproportionately at risk of criminal liability under current laws, and the spectre of change means that they might also have to shoulder costs disproportionately to meet legal requirements. We examine the scope of the Law Commission's review, the perceived problems with the current position and the potential solutions available in our article.

Insights from the SFO's third DPA in 2020

On 30 October 2020, Mrs. Justice May approved a Deferred Prosecution Agreement ("DPA") between the Serious Fraud Office and Airline Services Limited ("ASL") - the SFO's third DPA in 2020 and ninth DPA overall. It brings to a close the SFO's lengthy criminal investigation into ASL which began in December 2015 following a self-report made by the Company in respect of concerns that had come to light during an internal investigation (on an unrelated matter). Although the SFO's initial investigation extended across multiple jurisdictions, charges were ultimately brought in respect of one agent based in Germany.

Pursuant to section 7 of the UK Bribery Act 2010 ("UKBA"), ASL accepted responsibility for three counts of failing to prevent bribery arising from the company's use of an agent to win three contracts worth over £7.3m to refit commercial airliners for Lufthansa. The DPA required ASL to pay £2,979,685.76, consisting of a financial penalty of £1,238,714.31, disgorgement of profits representing the gain of the criminal conduct of £990,971.45, and a contribution to the SFO's costs of £750,000.   In our article we examine ASL's exposure to the section 7 UKBA charges and analyse its cooperation with the SFO.