The arrival of the first criminal prosecution against a bank under Money Laundering Regulations (MLRs) by the UK’s Financial Conduct Authority (FCA) has led to speculation that the FCA is ramping up in terms of electing to prosecute for a criminal offence as opposed to a civil or regulatory breach.
The prosecution in question is being brought under the 2007 MLRs and involve an acceptance by the bank of a large sum in cash and other deposits without, the FCA alleges, appropriate due diligence and ongoing monitoring of the accounts for the purposes of preventing money laundering. The same offence is susceptible to the FCA electing for a criminal rather than a civil prosecution under the 2017 MLRs. While this is the first time the FCA has taken the criminal route against a firm (as opposed to an individual), it has always been available to the regulator and the FCA’s Enforcement Guide sets out clearly the criteria that will be applied when deciding which election to make. However, this recent action has led to speculation that the FCA is embarking on a slew of similarly criminal prosecutions.
The statistics do not necessarily bear out the conclusion that this is the path the regulator is pursuing. Figures from the FCA’s Enforcement Annual Performance Report for 2019/20 show that out of 217 enforcement ‘outcomes’, 208 were civil or regulatory in nature, and 9 (4.2%) criminal. The Report also shows that no criminal cases were closed in that period, and that the average length or criminal cases in the same 2018/19 period was 75.9 months in contrast with that for civil cases of 17.5 months. Costs of prosecution were similarly greater.
While clearly the cost and sheer time involved in bringing a criminal prosecution, as well as the greater burden of proof incumbent on the prosecuting regulator, do militate against a steep uptick in such prosecutions by the FCA, this first foray against a bank should encourage firms to reexamine their policies and procedures. At the very least, the FCA has shown that it is prepared and willing to engage its statutory powers to act as a prosecutor of offences that can be criminal.