Continued disagreement in Parliament over the extent of the proposed FTP Fraud offence – and time is running out!
The wrangling over the extent of the envisaged failure to prevent fraud offence goes on with the House of Lords again rejecting the Commons’ position on the limitation of the proposed offence to large organisations.
A revised amendment to the Economic Crime and Corporate Transparency Bill (the Bill) put forward on 18 October 2023 by Lord Garnier, which would exempt only “small organisations” (that is, those with at least two of the following conditions in the year preceding the relevant fraud offence: a turnover of not more than £10.2m, a balance sheet of not more than £5.1m or an average of not more than 50 employees), was put to a division and passed by 245 to 204. However, the government remains adamant that imposing a requirement to prevent fraud on small and medium sized enterprises (SMEs) would stifle business growth, despite arguments that these businesses are not exempt from similar “failure to prevent” liabilities in the context of bribery and tax evasion, and that criminal law should not apply differently to different citizens. The government maintains that it is already comparatively easier to prosecute small businesses for criminal offences and that additional enforcement powers are only needed in the context of larger enterprises, due to their more complex structures. In addition, the government argues that the vast majority of fraud is carried out in the context of larger businesses, certainly by amount.
The Lords also voted to support a reframed amendment relating to the recovery of costs from an enforcement authority in proceedings under Part 5 of the Proceeds of Crime Act 2002 in economic crime cases. Stepping back from its stance that the default position should be that costs should not usually be recoverable in such circumstances, the Lords proposed that instead a court should have to take certain matters into account when assessing costs in these cases, such as “the impact of any order on the enforcement authority and its ability to carry out its enforcement functions”, as well as other matters. Its earlier position had been opposed by the Commons on the basis that English law supports the “loser pays” principle and a fundamental shift in that tenet should only take place after proper consideration. The government highlighted its latest amendment to the Bill, which proposes that a review be carried out on the costs issue and a report produced within 12 months of the Act coming into force, and that this is the appropriate course of action.
The Bill now returns to the Commons on 25 October 2023 when the Lords’ amendments will be debated once more. These are the final sticking points in the Bill, which has been working its way through Parliament for over a year. Time is running out for the Bill to be agreed as this session of Parliament is soon to end, with the King’s Speech formally opening a new session set for 7 November 2023. Bills which have not completed their passage through both Houses of Parliament by the end of a session are lost unless otherwise agreed by the House of Commons and this Bill is not one which it has been agreed can be carried over.
For more information on all aspects of this wide-ranging Bill, please see our UK Economic Crime and Corporate Transparency Hub (linklaters.com).