Al Capone lives...
The Serious Crime Bill progressed unscathed through one of its final stages (House of Commons Report Stage/Third Reading) this week and should receive Royal Assent before the current Parliament is dissolved on 30 March. What is of particular interest to all those working within professional services - both in professional services firms and those working in-house - is the participation or "Al Capone" clause. Although this clause was debated to a degree in the Lords, following some lobbying by the ICAEW and Law Society, it was not debated at all in the Commons last year. It relates to participation in serious organised crime and is seen as an important part of the criminal authorities' tools to combat serious organised crime, which includes fraud, and bribery and corruption.
As first drafted, the purpose of the legislation was to capture professionals wittingly and unwittingly assisting organised crime groups. However, an amendment from "has reasonable cause to suspect" to "reasonably suspects" was made to ensure that it captured "active participation". There will remain concern as to exactly how reasonableness will be tested when one looks at the day to day activities of a professional and what a Jury may regard as the level of suspicion (or actual knowledge) that a professional has or does not have especially in transactional work. In applying the test as now set down in the Bill, the prosecutor should (we stress "should") use this piece of legislation to capture only those professionals who let the profession down and need to be driven out in any event.
Overlap with other legislation has been considered during the progress of the Bill (e.g. Proceeds of Crime Act (POCA)) but we remain of the view that there is significant overlap with "facilitating an arrangement" under s.328 of POCA which brings with it a maximum 14 year custodial sentence. It needs to be stressed that s.328 of POCA requires some form of active involvement in the money laundering by way of facilitation. But how different is the Al Capone offence where one is required to reasonably suspect that his/her actions will help an organised crime group to carry out criminal activities? It clearly broadens the concept beyond money laundering and the Government argues that it captures "helping" rather than being more involved in the actual committing of the criminal activity whether that be the money laundering or the underlying crime.
The relevant clause and sub-clauses
An offence can be committed by a person under section 45(1) of the Serious Crime Bill. 'Person' is an extremely broad category and does not discriminate against any one particular profession or indeed business sector or individual. In the Serious Crime Bill Factsheet (Nov 2014), the Home Office states "the new participation offence…will also send a clear signal to discourage corrupt and complicit professionals and others who provide the materials, services, infrastructure, information and other support that organised crime groups need." (see https://www.gov.uk/government/publications/serious-crime-bill-organised-serious-and-gang-related-crime, Documents – Fact Sheet – Participation Offence).
Under section 45(2), a person participates in the criminal activities of an organised crime group if the person takes part in any activities that the person knows or reasonably suspects—
(a) are criminal activities of an organised crime group, or
(b) will help an organised crime group to carry on criminal activities.
Criminal activities are defined in sections 45(3), (4) and (5) as: activities carried out in England and Wales which constitute an offence in England and Wales1; or activities carried on outside England and Wales which constitute an offence under the law in force of the country where they are carried on, and would constitute an offence in England and Wales2; and these activities are carried on with a view to obtaining (directly or indirectly) any gain or benefit.
Organised Crime is defined in section 45(6) as a group that—
(a) has as its purpose, or as one of its purposes, the carrying on of criminal activities, and
(b) consists of three or more persons who act, or agree to act, together to further that purpose.
To be guilty of an offence, the person does not need to know any of the persons who are members of the organised crime group, and only one of the acts/omissions comprising participation in the group's criminal activities needs to take place in England and Wales. In addition, the gain or benefit does not need to be financial in nature (section 45(7)).
1 Punishable on conviction on indictment with imprisonment for a term of 7 years or more.
2 As above.
In transactional matters there are often issues which although prima facie commercial in nature are close to the line of criminality, e.g. where does repeated hospitality become a bribe or a payment towards a local government project in return for a mining licence smack of corruption? Would turning a blind eye to such an issue in contract negotiations or a corporate transaction be such active participation or "helping" a criminal organisation to commit a criminal activity – never mind potential money laundering if a benefit has or will accrue from the underlying crime? Clearly – no-one should "turn a blind eye" but in practice it is not always easy to detect criminality and professionals will need, more than ever, to be on their guard and to ensure they not only comply with existing legislation such as POCA but also the Serious Crime Bill once enacted.