IN THE QUEEN’S SPEECH, the government announced a crackdown on organised crime targeting its “support services”, with accountants and lawyers now falling under the spotlight.
The Serious Crime Bill will create a new offence of participation in an organised crime group, and courts will have the power to prosecute white-collar criminals who “knowingly participate in an organised crime group”. The mental element of the new offence will be low: reasonable grounds to suspect will be sufficient. The maximum penalty will be five years in prison and a civil order that restricts travel and associates.
It is estimated that there are 5,500 active organised crime groups, comprising 37,000 people in the UK and costing more than £24bn a year. Though the ‘conspiracy’ offence is used to prosecute those associated is organised crime, the mental elements of knowledge and belief, required for a successful ‘conspiracy’ prosecution, are difficult prove against those who ask no questions and support organised crime at an arm’s length.
A Home Office spokesman said that “these associates can currently adopt a ‘no questions asked’ approach and then can claim in court they were unaware of the precise nature of the criminality they were involved in.” The purpose of the new offence is to close the gap so that the government can target a wider group that provides the materials, services, infrastructure and information which enable organised crime groups to function. The offence will enable prosecution of the full spectrum of criminality engaged in organised crime.
Implications and cost
So, what will the new Bill mean for the accountancy profession?
It is surprising that the Home Office, within the Impact Assessment documentation, has said that “there are no expected costs to business”.
The practical implications and cost could be significant. Depending on how the offence is crafted it is likely that accountants will need to put even more emphasis on client acceptance and ensuring that they understand and consider reasonable their clients’ businesses. How deep they will have to inquire into their client’s activities is not clear. For example, will they need to go so far as checking that it is logical that the restaurant that has ‘x’ number of customers makes a profit of ‘y’? Will they need to actively investigate the affairs of their clients or just be aware of the information that is brought to their attention?
It is not yet clear how the offence will work, practically. For example, what is an “active relationship”? The examples given are that the individual will have delivered packages, rented warehouse space or written a contract. But what about giving advice? For example, the leader of a drugs cartel also owns a number of legitimate businesses in clubs, pubs and restaurants which are used to launder the profits of his cartel. Has his accountant, who gave advice to the restaurant group as to how to structure its finances committed the offence?
And what is “organised criminality”? The impact assessment, prepared by the Home Office, says that the criminal activity in question must attract a sentence of at least seven years’ imprisonment for the participation offence to be applicable. The idea being that this captures offences that organised criminals are engaged in, for example, drug trafficking, firearms offences, fraud and cybercrime. It is not clear though what level of evidence will be necessary to show the criminal activity. Will a prior conviction be necessary?
What is clear is that the government is anticipating this will by a high impact offence. Though difficult to predict and highly uncertain, it estimates an additional 100 – 200 prosecutions a year for the participation offence.
In any event, accountants and professional services firms generally will need to take heed. Whether practically drafted or not, we will all need to understand the impact of the offence on our businesses as it is directed at us all, even if the government are selling it as a means of curtailing the activities of the corrupt few. As Home Office minister Karen Bradley sees it “nobody is above the law. But for too long corrupt lawyers, accountants and other professionals have tried to evade justice by hiding behind a veneer of respectability. This new offence sends out a clear message to those individuals: if you are helping to oil the wheels of organised crime, you will be prosecuted and face being jailed.”
David De Ferrars is head of fraud and Alexa Segal is an associate in Taylor Wessing’s disputes and investigations team
Fraser Nicol joins the firm from EY, bringing experience in cyber security, data analytics and business technology
Rowan Williams will be responsible for growing the firm’s presence in the Gatwick Diamond and across the south east
Kevin Humphreys joins the insolvency and restructuring firm from the National Crime Agency (NCA) Economic Crime Command
Ann Pomfret joins the Manchester office from BDO