Disputes Yearbook 2024:
Corporate crime and investigations

Economic crime reforms – Companies can be liable for failing to prevent fraud from September 2025

We reported last year on the significant reforms introduced by the Economic Crime and Transparency Act 2023. After much expectation, the new offence of failure to prevent fraud will come into force on 1 September 2025. Companies within scope of the offence should be using this period to review their existing anti-fraud controls with a view to ensuring they constitute "reasonable procedures" and will therefore act as a defence to liability in respect of a fraud committed by an "associated person".

Further detail on the government guidance on what constitutes reasonable procedures can be found here, and we are continuing to analyse this new development on our podcast.

UK trade sanctions enforcement – New agency with civil enforcement powers

October 2024 saw the launch of a new body with civil enforcement powers in respect of trade sanctions – the Office of Trade Sanctions Implementation (OTSI). OTSI is intended to help businesses comply with trade sanctions, as well as being tasked with investigating potential breaches, issuing civil penalties and referring cases to HM Revenue & Customs for criminal enforcement where needed, with powers largely mirroring those held by the Office of Financial Sanctions Implementation (OFSI) in respect of financial sanctions.

Although further guidance on the, often complex, application of trade sanctions will be welcomed, OTSI's creation means there are now a range of bodies responsible for different aspects of sanctions compliance, licensing and enforcement. Companies may also need to navigate multiple reporting routes in the event of suspected breaches. Further detail on OTSI's powers and remit can be found in our previous briefings here and here. 

Financial sanctions enforcement – Continued area of OFSI and FCA focus

Although financial sanctions enforcement remains at a comparatively low level within the UK, notable cases continue to filter through. OFSI's most recent civil penalty is of interest as having been the first penalty imposed in respect of sanctions imposed against Russia following the invasion of Ukraine (OFSI's previous Russia-related enforcement has related to the restrictions imposed following the 2014 invasion of Crimea), and the first to include a penalty imposed on a strict liability basis.

The FCA has also recently fined a challenger bank for filings in its financial crime controls, in particular, in connection with financial sanctions, underscoring the importance of these controls in the regulated sector. Further information can be found here. 

Sanctions disputes – Recent caselaw provides more clarity

The scale of sanctions introduced by the UK, EU, US and others following Russia's invasion of Ukraine has been unprecedented. Those seeking to comply with sanctions have faced challenges due to the complexity of the measures and speed with which they have been introduced, as well as some uncertainty about the extent and application of some measures. This has been further complicated for those operating in numerous jurisdictions by divergences in key regimes and the introduction of Russian countermeasures.

In the UK, recent developments in case law provide some clarity as to the application of certain UK sanctions. For example, UK asset freezing measures apply both to named designated persons and entities owned or "controlled" by them. After an initial expansive interpretation of the concept of "control", the English courts have clarified this and set out criteria which can be of assistance in determining whether an entity is, or could be, "controlled" by a designated person and therefore should be subject to an asset freeze (see our blogpost) .

Recent case law has also provided some clarity as to when certain acts may be considered "in connection with" prohibited arrangements related to the making available of restricted goods and technology, and when a party has protection from civil liability for acts done in the reasonable belief they are in compliance with UK sanctions (see our blogpost) .

We also discussed the above developments in a recent podcast. Further developments are expected as sanctions-related litigation makes its way through the English courts and it is hoped that additional case law will provide additional guidance to assist businesses in navigating this complex realm.

SFO five-year strategy

The Serious Fraud Office (SFO) has published a new five-year strategy with an emphasis on innovation and the prevention of crime. The strategy highlights the need for the agency to play a greater role in the national effort to tackle fraud by: (i) ensuring that cases progress faster; (ii) taking "bold and pragmatic" decisions on its casework; and (iii) being seen as the partner of choice domestically and internationally. Fraud is now estimated to be the UK's most prevalent crime, and the new strategy recognises that the length of SFO investigations has increased, their complexity has grown, and "at times – we have struggled to keep pace with demand". Key challenges such as the increasing pace of change and technological innovation have led the SFO to undertake a number of key initiatives including adopting this new strategy.

For more detail on the strategy and the latest on the SFO's direction, please see our previous briefings here, here and  here.

Court of Appeal decision shines a spotlight on ESG and money laundering issues in supply chains

The Court of Appeal has handed down a significant judgment giving rise to repercussions for retailers across a range of sectors: World Uyghur Congress, R (on the application of) v National Crime Agency [2024] EWCA Civ 715. The issue on appeal was whether the National Crime Agency (NCA) erred in law in its decision not to investigate imports of cotton with suspected links to forced labour and human rights abuses overseas. The case provides clarity on the "adequate consideration" exemption from the money laundering offence of acquisition, use or possession of criminal property confirming that such consideration affords protection to a purchaser but does not preclude the property from being "criminal property" in the hands of someone else with the requisite knowledge or suspicion. In light of this decision, companies are advised to take responsibility for their supply chains on a holistic level, or else be prepared for the possibility of an investigation by the NCA (or other analogous bodies) if there is any suggestion that criminal property may have been involved at any stage of the chain. It is clear after this judgment that the chain cannot be broken, or "cleansed", by the provision of adequate consideration at an earlier stage, thereby reintroducing potential liability for each party within the chain and establishing a legal route through which companies who indirectly support human rights abuses in other countries can be investigated and potentially prosecuted in the UK.

Please see our blogpost for further detail.