Catherine Lewis (www.reedsmith....) and Emma Shafton (www.reedsmith....) team up to discuss the UK's Economic Crime and Corporate Transparency Act of 2023 and its potential impact on directors and officers (D&O) insurance coverage. Both based in London, the lawyers discuss important steps that policyholders can take to mitigate risks.
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Transcript:
Intro: Hello and welcome to Insured Success, a podcast brought to you by Reed Smith's insurance recovery lawyers from around the globe. In this podcast series, we explore trends, issues and topics of interest affecting commercial policyholders. If you have any questions about the topics discussed in this podcast, please contact our speakers at insuredsuccess@reedsmith.com. We'll be happy to assist.
Catherine: Welcome back to Insured Success. My name is Catherine Lewis. I'm a senior associate in our London office. I am joined today by my colleague Emma Shafton, who is a senior associate in our global regulatory enforcement group who specializes in white collar crime and investigations. Today, Emma is going to talk to us about the two new corporate criminal offenses contained in the Economic Crime and Corporate Transparency Act 2023 which came into force in the UK at the end of 2023. And we are going to share our insights on what this means for policyholders operating in the UK. The potential impact on your directors and officers and other insurance cover and some of the steps that policyholders can take to mitigate risks. Emma, could you give us an overview of this new legislation?
Emma: Sure. So the Act, ECCTA I'll refer to it as, came about as part of the UK government's response to Russia's invasion of Ukraine in February 2022. By this time, there was an increasing understanding that London had become um a dumping ground really for dirty money by foreign elites, Kleptocrats and other bad actors and that the UK's economy was being abused. So the act represents a complete overhaul of the UK government's framework for tackling economic crime. The act itself covers a very broad range of issues. You know, beyond the scope of this podcast, including companies house reforms, but today, we're going to focus on two significant changes to corporate criminal law. The first is the new senior manager's offense and the second is the new failure to prevent fraud offense. So let's deal with the first offense first. So that's the senior manager's offense and that's under section 196 of ECCTA. Uh This came into force very quietly on boxing day last year actually. Um and a lot of Corporates have been caught by surprise by it and it's worth flagging at the outset that this is completely separate to the FCA's existing senior managers and certification regime. These are different things. It's perhaps unfortunate that the draftsman of a decided to use the same language because the definitions unhelpfully do not correlate. Um So I just wanted to flag that at the beginning, we're dealing with a completely new corporate criminal offense here. What the offense means basically for corporates is that if a senior manager of the organization acting within the actual or apparent scope of their authority commits a relevant criminal offense and those offenses are economic crimes. So things like theft, bribery, fraud, false accounting money laundering, and also certain tax offenses. If that senior manager commits one of those specified offenses, the corporate can be criminally liable. Now, what the repercussions of that would be, is a very large fine. Essentially. Now, this offense um can apply to senior managers of a body corporate or partnership and there's no size criteria or threshold. So that means that all organizations um of any size could be liable so long as the jurisdictional requirements are met, you know, this is a UK act and we'll come on to that um, Later.
Catherine: Interesting, this seems like a really big shift from the previous regime. Is, is that right?
Emma: It is. So the new senior manager's offense is one of the biggest changes really in corporate criminal liability in over 100 years. So under previous law, uh which was, you know, Victorian law, um, corporates could only be prosecuted and criminally liable for the offenses of its employees if it could be shown that that individual was acting as the directing mind or will of the corporate and you know, they had the necessary state of mind for the offense in question. So with a lot of the economic crimes, usually that involves dishonesty. So historically, this made it very challenging for authorities to prosecute corporate successfully. Um because there's just a very small group of people who would meet that criteria of directing mind and will. And this is particularly so in large corporates, with complex management systems became very difficult to identify whether an individual belonged to that group. S...
20 сен 2024
