With the Labour Party’s recent victory on July 4, 2024, a new era in tackling financial crime in the UK may be on the horizon.
Under the leadership of Prime Minister Sir Keir Starmer KC, a former leading criminal defence lawyer and director of public prosecutions, a key component of the Labour Party’s criminal justice system reform is to introduce an “expanded fraud strategy”.
According to the Home Office’s National Fraud Authority, fraud costs the UK economy £73 billion a year. This affects big organisations to vulnerable individuals, with very few victims getting suitable redress. Phillippa Ellis, David Moore, Rachel Forde and Claudia Richardson report below.
Key changes proposed by Labour
Labour has long aimed to strengthen the Serious Fraud Office (SFO). In 2022, whilst Shadow Attorney General, Emily Thornberry, advocated for legal reforms and an overhaul of the SFO’s funding model to combat corporate misconduct. She criticised the UK’s financial penalties as weak compared to the US and proposed a “convictions first” approach for the SFO. Thornberry also suggested that the SFO could retain a portion of revenues from financial settlements to fund its operations.
David Lammy, then shadow foreign secretary (now in the Governmental role), proposed several measures to combat the UK’s involvement in global money laundering just before the election. Speaking at the Institute for Public Policy Research, he advocated for the creation of an international anti-corruption court and new transparency requirements for UK corporate entities, including expanded registration for trusts. A key part of his plan is a whistleblower reward scheme, offering up to £250,000 for information on sanctions breaches and stolen assets.
Nick Ephgrave, director of the SFO, supports such incentives, noting that financial rewards could improve the UK’s corporate crime enforcement, similar to successful US practices. The Competition and Markets Authority could incentivise whistle-blowers for some time, however, the data on how often this has been utilised or the effectiveness of doing so have not been made public.
Those of us working in Business Crime will be keen to see a clear and transparent plan for how the incentivisation of whistle-blowers will work to ensure fairness in any criminal proceedings that follow.
The Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023) introduced a “failure to prevent fraud” offence and revised corporate liability standards. The Labour Government plans to implement guidelines on what constitutes the “reasonable procedures” defence to this failure to prevent fraud offences. We will be providing further updates on this as soon as the guidelines become available.
As a manifesto pledge, the Labour Party also had plans to establish a COVID-19 fraud commissioner to coordinate law enforcement efforts against pandemic-related fraud and misuse of public funds. It was reported by Transparency International UK in 2023 that a fifth of the Covid contracts awarded by the government contained red flags indicating possible corruption. The intention is for this Covid-19 fraud commissioner to work with agencies like the Insolvency Service, NCA, SFO, and CPS. It is early days, and there has been a lot in the Government’s in-tray, though we await to see this appointment and the commissioner’s remit.
Additionally, the Labour Government may revisit the Criminal Justice Bill 2023, which did not progress before the election. The legislation seeks to expand corporate criminal liability beyond economic offences to all types of crime. This could expand the culpability of companies, making it easier to prosecute them for the economic crimes of their senior employees.
Conclusion
Ultimately, Labour’s vision for a One Nation economy and a financial sector that benefits everyone hinges on the foundation of a strong and respected system for prosecuting financial crime. However, fiscal constraints may affect or delay implementation of these measures.
If you have uncovered financial misconduct in your business or are facing an investigation, we can assist you. Our Business Crime & Investigations team are happy to assist you with any query you may have.
