Anti-money laundering proposals ‘thundering disappointment’, say MPs

Law Commission proposals to make directors more accountable for economic crimes at the companies they oversee have been condemned as a “thundering disappointment”.

MPs from the all-party parliamentary group (APPG) on anti-corruption and responsible tax criticised the proposals for England and Wales, published on Friday, as “unambitious, uninspired and insipid”, saying the Law Commission had excluded essential changes that would have made it easier to punish companies and directors for failing to prevent money laundering.

The review was also criticised for concluding that the rules could be left in their current state, listing it as one of the “10 options for reform”.

“It would be a travesty if the government were to take this report as a green light to do nothing,” the campaign group Spotlight on Corruption said.

The Commission’s role is to recommend updates to the law, ensuring that it remains fair, modern and simple. The review of corporate criminal liability was commissioned in November 2020, but was originally part of pledges made by the former prime minister David Cameron after his anti-corruption summit in 2016.

Prof Sarah Green, the law commissioner for commercial and common law, said the recommendations were designed to avoid putting undue burdens on companies. “Our options for reforming the law on corporate criminal liability are designed to strike a balance between ensuring that the law works well to punish corporate entities when misconduct is committed on their behalf, whilst avoiding a new suite of burdensome administrative requirements for businesses,” Green said.

However, Margaret Hodge, the Labour MP who chairs the APPG on anti-corruption and responsible tax, said the review was a “thundering disappointment” that let “corporate criminals and the enablers of economic crimes off the hook. What was couched as a once-in-a-generation chance for reform has instead left the door open for yet further inaction on tackling the scourge of dirty money.”

She said investigations including the FinCEN Files had demonstrated how large banks had been “complicit in washing dirty money from the very worst origins”, adding: “It beggars belief that money laundering has been excluded from the new ‘failure to prevent’ offence.”

Similar reviews of corporate liabilities had led to radical overhauls of company law, Hodge said. “Yet here in Britain we have another sorry fudge that will do little to correct our reputation as a safe haven for economic criminals.”

The UK had never prosecuted a bank for money laundering or sanctions busting, the APPG noted, and while regulators had imposed £260m worth of fines on banks in 2019, it said the figure was far lower than the $3bn (£2.4bn) worth of criminal fines US regulators issued the same year on top of $6bn for non-criminal misconduct.

Hodge said: “We will never truly reform corporate culture in Britain until there is a real deterrent against bad behaviour – that means prosecutions against those at the top and the threat of going to prison.”

While Spotlight and the APPG both cautiously welcomed recommendation to make it a criminal offence to fail to prevent fraud, its introduction would not retrospectively apply to Covid business loans, from which nearly £5bn was lost to fraud. However, if adopted, the offence could prevent similar problems in future schemes.

The recommendations also include making companies liable for failing to prevent human rights abuses. It comes after a recent report by the Business and Human Rights Resource Centre, an international NGO, found 123 attacks on human rights defenders were connected to UK business activities between 2015 and 2021. One in five of those attacks resulted in human rights defenders being killed.

The review will now be passed to government, which will decide which, if any, of the recommendations will be adopted.