Smiting Goliath – Assessing Westminster’s Strategy Against Corruption and Complex Fraud
janinestone.com
Eaton Square, nicknamed ‘Red Square’ due to its high number of Russian billionaire owners.
The one-year anniversary of Putin’s invasion of Ukraine brings with it a critical opportunity for introspection, not only for the UK government, but also for the wider corporate sphere. It is no controversial opinion that the UK’s fight against illicit finance is heavily one-sided: ‘Londongrad’, the infamous regime which acts as a figurehead for the £100bn of corrupt funds that circulate the United Kingdom each year, exists as a consequence of the “asymmetric methods” of kleptocratic players, ranging from penetration into the UK property market to the abuse of legal institutions in order to evade necessary public scrutiny. Conversely, UK law enforcement struggles to keep up with their combatant’s budgets, and the government has increasingly been viewed as non-committal in its approach to corruption, with the Security Minister Tom Tugendhat recently being dubbed the “Minister for mañana” in response to his concession that absolute legislation against corruption may not arrive as quickly as hoped. But where does the fight against dirty money really stand?
Scorching the earth
In a bid to make the UK an inhospitable environment for fraudsters, government policy has strived to deprive criminals of the resources that have allowed them to exert influence in the UK; the Economic Crime and Corporate Transparency (ECCT) bill, currently being read in the House of Lords, is the newest iteration of that strategy. Akin to the similarly named Economic Crime (Transparency and Enforcement) Act 2022 - notable for its more powerful Unexplained Wealth Order provision - the new bill hopes to reform Companies House by institutionalising in law its commitment to promoting and certifying legitimate business operation; this will be achieved by requiring all new and existing company directors, People with Significant Control or PSCs (normally those with 25% of shares or voting rights within a company) and those who interact with the Companies House Registrar, to verify their identities on Companies House’s public register, thereby ousting anonymous (implicitly fraudulent) executives.
In tandem with this are the “failure to prevent” provisions of the bill, a continuation of the precedent set by the Bribery Act 2010 and the Criminal Finances Act 2017. Such measures, targeted at law firms, tax advisers, and even casinos, unburden prosecutors from the flawed constraints of the “directing mind” principle, which has proved wanting against complex business hierarchies. Given the massive financial resources available to criminal gangs and fraudsters, the government’s strategy of making ordinary commercial organisations criminally liable for not imposing proper measures against fraud, false accounting, or money laundering, will, in theory, allow them to level the playing field for law enforcement by blockading criminals’ access to crucial financial and legal services.
Short arm of the law?
The campaign against Russian aggression and dirty money has elicited a rare spirit of unity across the green benches, but this is not to say that the government’s response to corruption has been entirely without criticism. Issues have been raised concerning the timetable for anti-corruption legislation, with opposition MPs interpreting the fast-tracking of the EC(TE) Act last year as proof not of the government’s zeal to oust corruption, but rather as the latest piece of evidence of Westminster’s reactionism and absence of political will. In a similar vein, Stephen Kinnock, currently the Shadow Minister for Immigration, criticised Westminster’s continued postponement of further measures against corruption, suggesting that the government’s “sluggish” approach to strategic lawsuits against public participation (SLAPPs) stemmed from the Conservative Party’s active use of said lawsuits, most notably in the cases of Nadhim Zahawi and Brandon Lewis, both of whom served as Chairman of the Conservative Party.
Be that as it may, experts and law enforcement agents have also argued that legislation alone cannot be the silver bullet against complex fraud. While kleptocrats and organised gangs are able to use their laundered finances to retain top private lawyers, departments such as the Serious Fraud Office face a litany of setbacks in combatting corruption: from vying to stop the exodus of overworked specialists moving from public to private practice, to stymying the structural flaws and “culture of distrust” which has hindered and even reversed convictions against fraudsters, the underinvestment and mismanagement of the UK’s law enforcement bodies has been a key object of scrutiny for lawmakers, and calls for both increased funding and revived political and departmental leadership have been made on both sides of Parliament; with department head Lisa Osofsky set to leave the SFO this summer, it will be interesting to see what managerial and fiscal measures are imposed to make the SFO a competitive force against corruption.
Westminster’s strategy so far has consisted of drafting in the corporate sector in its fight against Goliath, and the likely passing of the ECCT bill will continue in this trend, compelling companies to review their internal governance provisions, anti-bribery policies, and perhaps even their long-term business models. Legislation can, however, only make up one part of the UK’s arsenal against illicit funds and improper influence, and the question remains whether the government is prepared to diversify its campaign now, or whether it will cling on to mañana.
by Jonathan Akpakpavi