Extraterritoriality: The UK Perspective

28.1 Overview

English criminal law applies to all persons within the territory of England and Wales. However, the UK authorities can also investigate and prosecute offences committed overseas.

In the context of economic crime, the past three decades saw a sustained legislative policy of extending the jurisdiction of the UK authorities. For certain economic crimes, authorities may bring prosecutions in the United Kingdom notwithstanding that all the relevant criminal conduct occurred overseas. The most obvious example is the Bribery Act 2010 (UKBA). In line with the UK’s extension of its jurisdictional reach, the authorities have increased their coordination and co-operation with other countries’ prosecutors. The trend towards greater cross-border information sharing and coordinated investigations is likely to continue in accordance with ongoing domestic and international obligations.2

Until recently, the UK courts had endorsed the trend of cross-border criminal investigations. In the KBR case, the UK Serious Fraud Office (SFO) had sought to compel (under section 2(3) of the Criminal Justice Act 1987) KBR, Inc, an American company, to produce documents that it held outside the United Kingdom. This occurred as part of the SFO’s investigation of certain UK subsidiaries of KBR, Inc. In 2019, the High Court held that a section 2 information notice by the SFO could have extraterritorial effect where a ‘sufficient connection’ exists between an overseas company and England and Wales. In particular, the Court observed that SFO investigations should not be ‘frustrated or stymied’ on the basis that evidence may be held on computer systems located outside the jurisdiction.

In February 2021, however, the UK Supreme Court unanimously upheld KBR’s appeal, ruling that Parliament could not have intended for the SFO to use its section 2 powers extraterritorially. The Supreme Court also dismissed the notion that a ‘sufficient connection’ test could be implied into the Criminal Justice Act 1987.

This decision was regarded as a blow, not only to the SFO but also other UK law enforcement agencies who investigate and prosecute complex cross-border crime and have similar document production powers. The Supreme Court has made clear that those agencies cannot simply circumvent the existing mutual legal assistance (MLA) framework in relation to the taking and receiving of evidence held abroad, no matter how lengthy and cumbersome that process may be for the prosecutor.

This chapter provides an overview of the extraterritorial aspects of UK law regarding economic crime and explores how the legislative landscape is developing in an effort to keep pace with economic crime investigation and enforcement in the digital age.

28.2 The Bribery Act 2010

The UKBA created offences of (1) offering, promising or giving a bribe and (2) requesting, agreeing to receive or accepting a bribe either in the United Kingdom or abroad, in the public or private sectors, more specifically:

  • sections 1 and 2 – bribing another person (active bribery) and being bribed (passive bribery);
  • section 6 – bribery of a foreign public official; and
  • section 7 – failure of commercial organisations to prevent bribery.

Each of the above offences has extraterritorial application, as outlined below.

28.2.1 Offences under sections 1, 2 and 6

UK prosecutors may pursue an offence under sections 1, 2 or 6, even where no part of the relevant conduct took place in the United Kingdom. This is the position provided that:

  • a person’s acts or omissions outside the United Kingdom would form part of such an offence if they had occurred in the United Kingdom;3 and
  • the person has a ‘close connection with the United Kingdom’.4

A ‘close connection with the United Kingdom’ is defined in the UKBA and includes British citizens and UK companies.5

28.2.2 Corporate offence under section 7

This offence is committed by a ‘relevant commercial organisation’ if a person associated with the organisation (an associated person)6 bribes another person intending to obtain or retain business, or an advantage in the conduct of business, for the organisation. In those circumstances, the organisation’s only defence to the strict liability offence is to show that it had ‘adequate procedures’ in place designed to prevent bribery on its behalf.7

A ‘relevant commercial organisation’ includes a company or partnership (wherever incorporated) that carries on any part of its business in the United Kingdom. On the basis of information in the public domain currently, the courts are yet to consider a case where it is disputed that a commercial organisation indicted under section 7 was carrying on business within the United Kingdom.8 Until the courts hear argument on that specific point, practitioners continue to refer to the Ministry of Justice guidance regarding the corporate offence. That guidance recommends a ‘common sense approach’ and notes that a ‘demonstrable business presence’ is required. Neither having the company’s shares listed on the London Stock Exchange nor having a UK subsidiary would necessarily mean that a foreign company is carrying on business for the purposes of section 7 of the UKBA.9

It is irrelevant whether the acts or omissions forming part of the section 7 offence took place in the United Kingdom or elsewhere.10 Therefore, it is possible for either of the following scenarios to form the factual basis for a section 7 offence:

  • any business formed or incorporated in the United Kingdom, where the bribery is conducted entirely outside the United Kingdom by an associated person who has no connection with the United Kingdom and who is performing services outside the United Kingdom; and
  • any business formed or incorporated outside the United Kingdom, but that carries on part of its business in the United Kingdom, where the bribery is conducted entirely outside the United Kingdom by an associated person who has no connection with the United Kingdom and who is performing services outside the United Kingdom.

In January 2020, the SFO agreed a record-breaking deferred prosecution agreement (DPA) with Airbus SE. The DPA charges Airbus with five counts of the failure to prevent offence across five jurisdictions.11 The DPA will be in force until 31 January 2023 and is thought to be the first co-ordinated settlement agreement between the UK, US and French authorities. It is also the world’s largest resolution for bribery, amounting to a total penalty of almost €3.6 billion, €991 million of which was to be paid to the SFO as disgorgement of profits, a fine and the SFO’s legal and investigative costs.12

When advising companies on self-reporting to the authorities, practitioners should be aware of the practical risks to confidentiality. Bringing material located abroad into England and Wales may lead to legal arguments relating to its collateral use in subsequent civil or regulatory proceedings, as in Omers Administration Corporation and others v. Tesco Plc.13 While that case related to documents held in England, the High Court ordered that documents provided to Tesco by the SFO during negotiations for a DPA should be disclosed by the company in a separate and subsequent civil action, brought by its shareholders.

28.3 The Proceeds of Crime Act 2002

28.3.1 Money laundering offences under Part 7

Money laundering has a broad meaning under UK law. The money laundering regime is designed to tackle the routes through which the proceeds of criminal activity are handled. The principal offences are found in sections 327 to 329 of the Proceeds of Crime Act 2002 (POCA), being:

  • concealing, disguising, converting, transferring or removing from the United Kingdom, any criminal property (section 327);
  • entering or becoming concerned in arrangements that one knows or suspects facilitate the acquisition, use, etc., of criminal property (section 328); and
  • acquiring, using or possessing criminal property (section 329).

Property is ‘criminal property’ if it represents a person’s benefit from criminal conduct; in turn, ‘criminal conduct’ is conduct that either is an offence in the United Kingdom or would be an offence if it had taken place within the United Kingdom.14 Although the prosecution must adduce evidence of a predicate offence from which the proceeds of crime emanate, a prosecutor need not prove the type of predicate offence in every instance. Instead, the prosecutor will need to provide the court with detailed particulars explaining why the property should be regarded as criminal in origin, and that evidence should be sufficiently potent to demonstrate that the only reasonable inference is that the property arose from criminality.

The location of the underlying criminal conduct is immaterial. Instead, the pertinent issue is whether the conduct would constitute a criminal offence in the United Kingdom had it occurred here. This principle was confirmed by the Court of Appeal in 2014 in the case of R v. Rogers,15 which served to emphasise the wide scope of the money laundering regime. Mr Rogers, a UK citizen resident in Spain, permitted money generated by a fraudulent scheme in the United Kingdom to be paid into a Spanish bank account that he controlled, and allowed another person, the scheme’s principal, to withdraw money from that account. Mr Rogers was convicted under section 327(1)(c) of POCA of converting criminal property. He subsequently appealed against that conviction, arguing that the court did not have jurisdiction to hear Part 7 offences against a non-UK resident where the relevant conduct occurred entirely outside the United Kingdom.

In dismissing the appeal, the court expressly considered the wording of section 340(11)(d) of POCA, that money laundering is an act that would constitute an offence under section 327, 328 or 329 if done in the United Kingdom, and concluded that the language clearly indicated that Parliament had intended for the Part 7 offences to be extraterritorial in effect. The court went on to state that, even if they were wrong on that interpretation of the statute, the modern approach to jurisdiction required ‘an adjustment to the circumstances of international criminality’, and noted: ‘The offence of money laundering is par excellence an offence that is no respecter of national boundaries. It would be surprising indeed if Parliament had not intended the Act to have extra-territorial effect (as we have found it did).’16

In light of this extraterritorial effect, the court was able to establish a sufficient jurisdictional nexus to try Mr Rogers on the basis that the acts that led to the property becoming criminal property for the purposes of POCA plainly took place, and had an impact on victims, in the United Kingdom, and that the laundering of the proceeds by Mr Rogers in Spain was directly linked to those acts in the United Kingdom. The court added that this was:

not a case where the conversion of criminal property relates to the mechanics of a fraud which took place in Spain and which impacted upon Spanish victims. In those circumstances our courts would not claim jurisdiction. But in this case when the significant part of the criminality underlying the case took place in England, including the continued deprivation of the victims of their monies, there is no reasonable basis for withholding jurisdiction17

Rogers and subsequent cases indicate that a person may be guilty of a money laundering offence under sections 327 to 329 of POCA in circumstances where both the predicate offending (i.e., the criminality that gives rise to the existence of proceeds of crime) and the laundering of the criminal property take place outside the territory of the United Kingdom.18

There exists a limited exception described as the ‘overseas conduct defence’. A person will not be liable under sections 327 to 329 if:

  • he or she knew or reasonably believed that the relevant criminal conduct occurred abroad; and
  • that relevant criminal conduct was not, when it took place, unlawful under the criminal law of that other country.19

The ‘overseas conduct defence’, however, does not apply to conduct that (despite being legal under local law) would constitute an offence punishable by a maximum sentence of over 12 months in the United Kingdom if it had occurred there.20 In practice, therefore, most cases (e.g., bribery, corporate fraud, tax evasion) relevant to readers will remain squarely within the wide extra­territorial scope of POCA.

28.3.2 Civil recovery orders under Part 5

Separately, the civil recovery regime set out in POCA21 enables UK prosecutors to seek orders from the High Court to recover property that either is or represents property obtained through unlawful conduct. As applications for civil recovery orders and property freezing orders are determined through civil, not criminal, proceedings before the High Court, the standard of proof is the balance of probabilities. The High Court may issue such an order against any person or property wherever domiciled or situated, if there is or has been a connection between the facts of the case and any part of the United Kingdom.22 Combined with the wide jurisdictional scope of the definition of ‘unlawful conduct’,23 civil recovery orders are a powerful and attractive tool in the hands of UK prosecutors.

An additional civil recovery power became available to UK prosecutors in late January 2018.24 On application to the High Court, prosecutors25 can seek an unexplained wealth order (UWO) against any persons (whether or not UK domiciled) regarding their property, irrespective of that property’s location. In summary, a UWO is available where:

  • there is reasonable cause to believe the respondent holds specific property valued at or above £50,000;
  • there are reasonable grounds to suspect that the respondent’s known income is insufficient to acquire that property; and
  • either the respondent is a ‘politically exposed person’ or there is reasonable suspicion that the respondent (or a person connected to him or her) is or has been involved in serious crime in the United Kingdom or abroad.

Where granted, the UWO compels the respondent to explain the nature of their interest in the property, and to explain how they obtained it. Failure to do so creates a presumption that the property was obtained unlawfully, and it is therefore a valid target for civil recovery proceedings under Part 5 of POCA.

The respondent, namely the person who holds or obtains the relevant property, ‘includes any body corporate, whether incorporated or formed under the law of a part of the United Kingdom or in a country or territory outside the United Kingdom’.26 By express cross-reference to section 414 of POCA,27 it is clear that ‘property is all property wherever situated’.

Where a UWO is granted against property outside the United Kingdom, and the UK prosecutor believes there is a risk of dissipation or frustration by concealing the relevant assets, that prosecutor may make a formal request for assistance from the other country’s government.28 Since their introduction in early 2018, and at the time of writing, the National Crime Agency (NCA) has secured UWOs in four separate cases.29

In June 2020, however, the NCA encountered its first setback when the Court of Appeal ruled that it had ‘no real prospect’ of succeeding in overturning the High Court’s decision in April 2020 in NCA v. Baker and Others,30 which ordered the discharge of three UWOs obtained by the NCA against Nurali Aliyev, the grandson of former Kazakh president, Nursultan Nazarbayev. In its ruling,31 the Court of Appeal found that the case presented by the NCA was ‘flawed by inadequate investigation into some obvious lines of enquiry’.32 The decision is an instructive example of the court’s approach to robust scrutiny of UWO applications.

28.4 Tax evasion and the Criminal Finances Act 2017

The Criminal Finances Act 2017 also introduced a new corporate offence focused on tax evasion. As with the UKBA’s corporate offence, this represents another significant departure from the traditional ‘directing mind’ identification doctrine for corporate criminal liability under English law.

Part 3 of the Criminal Finances Act 2017 creates two corporate offences of failure to prevent the facilitation of tax evasion. The offences are modelled on section 7 of the UKBA and apply to both domestic and overseas tax evasion. The offences are (1) failure to prevent the facilitation of UK tax evasion offences (section 45) and (2) failure to prevent the facilitation of foreign tax evasion offences (section 46).

If the offence took place outside the jurisdiction, however, UK prosecutors must still prove to the criminal standard that both the taxpayer and the associated person committed an offence. The prosecutor will also need to prove dual criminality of the conduct. The offences consist of three component parts. First, the prosecution must prove criminal evasion by a taxpayer; and there must have been dishonest33 facilitation of tax evasion by an associated person.34 Where these two components are satisfied, the relevant body is criminally liable (unless it can show that it had ‘reasonable preventative procedures’ in place, or that it was unreasonable to expect the company to have had such procedures in place).

A ‘relevant body’ is a company or a partnership, wherever it may be incorporated or formed.35 A ‘person associated’ with the relevant body is an employee, an agent or any other person performing services for or on behalf of that relevant body.36 Again, this is broadly comparable to the concepts in the UKBA. Section 46 of the Criminal Finances Act 2017 provides that a company or partnership that carries on business in the United Kingdom will commit an offence if a ‘person associated’ with it commits a ‘foreign tax evasion facilitation offence’, unless the company or partnership had reasonable procedures in place to prevent the facilitation offence. A foreign tax evasion facilitation offence means conduct that:

amounts to an offence under the law of a foreign country, . . . relates to the commission by another person of a foreign tax evasion offence under the law of that country, and . . . would, if the foreign tax evasion offence were a UK tax evasion offence, amount to a UK tax evasion facilitation offence37

28.5 Financial sanctions

Financial sanctions restrict the provision of financial services, or access to global capital markets, or both. More specifically, those restrictions can include bans on investments in a particular country, or the denial of banking relationships. Trade sanctions restrict the trading of certain products or commodities (e.g., arms, oil and diamonds) from targeted countries (e.g., Iran, Russia and Syria) and control the export of certain products (e.g., military or dual-use items) to targeted countries.38

For the purposes of this chapter, we focus on financial sanctions.39 On 1 January 2021, the United Kingdom’s legal framework regarding financial sanctions was consolidated under the Sanctions and Anti-Money Laundering Act 2018 (SAMLA). Previously, the United Kingdom used secondary legislation to implement various sanctions programmes made by the United Nations Security Council and the European Union. This post-Brexit sanctions framework has given the United Kingdom a new and broad discretion to amend and update its domestic regime. The UK Foreign, Commonwealth and Development Office has implemented a number of regulations to replace the EU sanctions regimes (as implemented in the United Kingdom) with domestic regulations. The United Kingdom has also adopted country-specific regulations to replace the equivalent EU regulations that restrict activities in respect of certain countries or territories as well as certain terrorist organisations.40

In July 2020, the British government announced the UK Global Human Rights Sanctions Regulations 2020 (the Regulations),41 pursuant to SAMLA.

The Regulations empower the Foreign Secretary to designate persons (whether or not UK persons) according to specific criteria and impose asset freezes and travel bans.42

In April 2021, the United Kingdom enacted the Global Anti-Corruption Sanctions Regulations 2021 specifically targeting individuals suspected of involvement in serious corruption.43 The new regime is designed to complement the Regulations. The scope of the regime is wide and allows for an individual or entity to be designated if there are reasonable grounds to suspect that the person is involved in serious corruption. Indirect involvement through, for example, an entity owned or controlled directly or indirectly by a person who is or has been so involved, is also captured.44 As with the 2020 Regulations, the new regime operates through specific asset freezes and travel bans on individuals and entities.45

The United Kingdom may also issue financial sanctions under certain specific statutes, such as the Terrorist Asset-Freezing Act 2010.46 The specific restrictions imposed by any one set of financial sanctions (e.g., those relating to Russia’s involvement in Ukraine) will vary in each case. Those advising businesses concerned about liability should carefully review the text of the specific statutory instrument, and the underlying EU regulation, in each case. Broadly, however, UK financial sanctions impose criminal liability for a person who:

  • makes funds or economic resources available, whether directly or indirectly, to a designated person;
  • deals with funds or economic resources belonging to or controlled by a designated person; or
  • acts in a way, whether directly or indirectly, to circumvent the relevant financial sanction prohibitions.47

While the jurisdictional scope of UK financial sanctions is broad, they do require some element of UK nexus. The sanctions apply to:

  • anybody present in the United Kingdom, namely all persons (natural and legal) ‘who are within or undertake activities within the UK’s territory’; and
  • all UK nationals and all UK legal entities (including branches, and the UK subsidiaries of foreign companies), wherever they may be in the world and irrespective of where their activities occur.48

In its updated guidance, the Office of Financial Sanctions Implementation (OFSI) states that a sanctions breach need not occur within UK borders for its authority to be engaged, but that any such breach must have a ‘UK nexus’, which OFSI will determine on the facts of each case.49 This may provide some degree of comfort to foreign businesses with no UK footprint. Notably, SAMLA provides for sanctions being imposed regarding (1) conduct within UK jurisdiction by any person and (2) conduct anywhere in the world but only if the conduct is by a ‘United Kingdom person’.50

The Policing and Crime Act 2017 introduced a wider range of enforcement options, specifically (1) making sanctions offences eligible for consideration for a DPA,51 (2) making sanctions offences eligible for (civil) Serious Crime Prevention Orders under the Serious Crime Act 200752 and (3) empowering OFSI to impose (civil) financial penalties.53 In April 2020, OFSI utilised is powers under the Act and announced that it had imposed a £20.4 million penalty on Standard Chartered for breaches of EU ‘sectoral sanctions’ on Russian companies in the banking, oil and defence sectors.54 This case is by far OFSI’s largest and most significant sanctions enforcement action to date.

28.6 Conspiracy

Readers will be familiar with cases involving suspected or alleged conspiracies to commit substantive offences. When considering conspiracy in the economic crime context, practitioners should be aware of the interplay between (1) common law conspiracy to defraud, (2) the conspiracy offence in section 1A Criminal Law Act 1977, and (3) the Fraud Act 2006, whose extraterritorial reach is specified by the Criminal Justice Act 1993 (as amended).

28.6.1 Common law conspiracy to defraud

Common law conspiracy to defraud is one of the very few remaining common law conspiracy offences, section 5 of the Criminal Law Act 1977 having replaced all others with a general statutory offence. Statute has made clear that a person charged with conspiracy to defraud may be liable irrespective of whether he or she became a co-conspirator in England or whether any act in relation to the conspiracy occurred in England.55

28.6.2 Statutory conspiracy to commit offences abroad

The Criminal Justice Act 1987 provides that a prosecutor may pursue common law conspiracy to defraud even in circumstances where the substantive offence would be covered by a specific statute.56 However, in many cases, ranging from Innospec Limited57 in 2010 to the attempted prosecution of Barclays Bank regarding Qatar and the recent convictions of a number of former Unaoil executives for bribery offences in Iraq,58 the SFO has relied on section 1(1) of the Criminal Law Act 1977 to bring charges of conspiracy to commit offences.59

In 1998, the Criminal Law Act 1977 was amended to provide expressly for a discrete offence of conspiracy to commit criminal offences outside the jurisdiction.60 By section 1A of the Act, a conspiracy may involve the doing of an act in a place outside England and Wales that constitutes an offence in that other jurisdiction. The purpose of section 1A was to extend existing UK law, and to give the English courts extraterritorial jurisdiction in relation to a conspiracy (1) partly formed or carried out in England and Wales, and (2) where the object was the commission of a foreign offence (where there is an equivalent offence in England and Wales). This section only applies, however, where four nexus conditions are satisfied.61

Similarly, the Fraud Act 2006 has expressly broad extraterritorial application.62 Put simply, where any element of a statutory fraud offence63 occurs within England and Wales, the court will have jurisdiction to try a defendant whether or not he or she was in the jurisdiction at any material time, and whether or not he or she was a British citizen at the time.

28.6.3 Inchoate offences

Separately, practitioners should not overlook the inchoate offences of encouraging or assisting others in the commission of offences. The Serious Crime Act 2007 includes statutory inchoate offences (under sections 44 to 46) of encouraging or assisting the commission of offences; these have extraterritorial application in certain circumstances.64

28.7 Mutual legal assistance, cross-border production and the extraterritorial authority of UK enforcement agencies

MLA allows one state to seek co-operation from another in the investigation or prosecution of criminal offences via a formal letter of request.65

The framework governing the United Kingdom’s approach to MLA is contained in statute, primarily the Crime (International Co-operation) Act 2003 (CICA), the European Convention on Mutual Legal Assistance in Criminal Matters 2000, and various bilateral and multilateral treaties (for example, with the United States in 1994, with Brazil in 2005 and with India in 1995). The UK Home Office Central Authority66 is primarily tasked with receiving, and acceding to, MLA requests.67

Outgoing MLA requests (i.e., those from the United Kingdom to a foreign state) seeking evidence must be issued by a court or a designated prosecuting authority.68

Evidence obtained from or by the United Kingdom pursuant to an MLA request cannot be used for any purpose other than that specified in the request without consent of the foreign authority.

In practice, persons subject to a request from a foreign authority, whether formal or informal, should ensure that they do not disclose material that is legally privileged, and ensure they take all appropriate steps to protect their rights under UK law, including as to the privilege against self-incrimination. For example, one method of MLA to foreign states is to compel witnesses to attend court.69 Importantly, however, a witness cannot be compelled to give evidence where he or she could not otherwise be compelled to testify under either UK law or that of the requesting state.70

Mutual legal assistance is not, of course, the only avenue for UK authorities to extend their information-gathering overseas. In February 2019, the Court of Appeal decided the case of Jimenez.71 The Court held that Her Majesty’s Revenue and Customs (HMRC) was entitled to serve an ‘information notice’72 on a British individual resident overseas to obtain information about his tax position. Mr Jimenez, a UK national resident in the United Arab Emirates, challenged service of that notice at his address in Dubai. HMRC had served the notice as part of its investigation into Mr Jimenez’s tax affairs. In 2017, the High Court quashed the notice on the basis that Schedule 36 to the Finance Act 2008 was silent as to its extraterritorial effect. The Court of Appeal subsequently overturned that decision on the basis that the purpose of Schedule 36 is to prevent tax evasion, which is often cross-border in nature and, in the absence of any express restriction on the geographical effect, the legislation must confer effective investigatory powers on HMRC. In short, the Court of Appeal held that Parliament intended that specific information-gathering power should be available for investigating the UK tax position of relevant persons resident overseas.73 Permission to appeal the decision was granted in June 2019, but a hearing has not yet been fixed by the Supreme Court.

The Crime (Overseas Production Orders) Act 2019 introduced an information gathering tool for UK agencies. Since data is increasingly managed, processed and stored by entities located outside the United Kingdom, the Act enables specified investigative agencies74 to apply to a Crown Court judge for an overseas production order (OPO). An OPO enables receipt of electronic data directly from an overseas communications service provider. The government has stated that this will be subject to robust judicial oversight, and that there are existing statutory protections for legally privileged or journalistic material.

The United Kingdom has entered into a data access agreement with the United States75 that will enable UK law enforcement agencies to request electronic data, via warrant, from US tech companies, speeding up the investigation and prosecution of serious criminals and replacing the existing MLA regime.

Transparency of corporate ownership

Among other things, one of the primary purposes of SAMLA was to curb money laundering in British overseas territories such as the British Virgin Islands (BVI), the Cayman Islands and the Crown dependencies.76

While there has been momentum towards establishing publicly available registers of corporate beneficial ownership,77 some overseas British territories resisted the change at a political level.78 In particular, the government of Bermuda has opposed the register, arguing that the imposition of the register is an affront to the constitutional standing of Bermuda, while other territories have resisted the change on economic grounds. As a result, in December 2020, the UK government published an Order in Council79 requiring all overseas territories to establish public registers.80


Footnotes

1 Anupreet Amole is a partner, Aisling O’Sullivan is an associate, and Francesca Cassidy-Taylor is a chartered legal executive, at Brown Rudnick LLP. The authors thank Chloë Kealey of the firm for her assistance with this chapter.

2 For example, the Common Reporting Standard (formally the Standard for Automatic Exchange of Financial Account Information) is an initiative by the Organisation for Economic Co-operation and Development aimed at hindering tax evasion and money laundering.

3 UK Bribery Act 2010 (UKBA), s.12(2)(b).

4 ibid., s.12(2)(c).

5 ibid., s.12(4). A person has a close connection with the United Kingdom if, and only if, the person was one of the following at the time the acts or omissions concerned were done or made: a body incorporated under the law of any part of the United Kingdom, a British overseas territories citizen, a British national overseas, a British overseas citizen, a person who under the British Nationality Act 1981 is a British subject, a British protected person under the British Nationality Act 1981, an individual ordinarily resident in the United Kingdom, or a Scottish partnership.

6 An ‘associated person’ is defined in the UKBA as a person who performs services for or on behalf of the company in any capacity (i.e., an employee, agent or subsidiary), which is to be determined by reference to all the relevant circumstances and not merely the nature of his or her relationship with the company. It is worth bearing in mind that a section 7 offence will be committed only if the associated person intended to obtain or retain business or an advantage in the conduct of business for the relevant organisation.

7 UKBA, s.7. Although ‘adequate procedures’ is not defined in the UKBA, the Ministry of Justice’s guidance (March 2011) broadly outlines what businesses need to demonstrate to mount a successful ‘adequate procedures’ defence, for example proper risk-assessment procedures, due-diligence protocols and top-level commitment.

8 The section 7 offence is in addition to, and does not displace, liability that might arise under the UKBA where the commercial organisation itself commits an offence by virtue of the common law ‘identification’ principle. For more information on the common law ‘identification principle’ see the Introduction of this book.

9 Ministry of Justice Guidance to the Bribery Act 2010 (March 2011), paras. 34 to 36.

10 UKBA, s.12(5).

11 Ghana, Indonesia, Malaysia, Sri Lanka and Taiwan.

12 Other recent instances in which a company accepted charges of failure to prevent bribery, contrary to section 7, were seen in October 2020, when the SFO agreed a DPA with Airline Services Limited (ASL) under which ASL was required to pay almost £3 million and to co-operate with the SFO; and July 2021 when the SFO secured DPAs with two companies (not identified for legal reasons) under which the companies were required to pay just over £2.5 million. The July 2021 DPAs shared a common statement of facts and also covered charges of bribery contrary to s.1 UKBA.

13 [2019] EWHC 109 (Ch).

14 Proceeds of Crime Act 2002 (POCA 2002), s.340(2) and (3).

15 [2014] EWCA Crim 1680. This case was applied in Jedinak v. Czech Republic [2016] EWHC 3525 (Admin) and Balaz v. Slovakia [2021] EWHC 1862 (Admin) and followed in Sulaiman v. France [2016] EWHC 2868 (Admin).

16 R v. Rogers (Bradley) and others [2014] EWCA Crim 1680 (per Treacy LJ) at p. 1026, paras. 52 and 54.

17 ibid. (per Treacy LJ) at pp. 1026 to 1027, para. 55.

18 Sulaiman v. Tribunal de Grande Instance [2016] EWHC 2868 (Admin) in which Dingemans J confirmed that Rogers is binding authority ‘for the proposition that offences of money laundering extend to extraterritorial actions’ (at para. 18), Jedinak v. District Court in Pardubice [2016] EWHC 3525 and Balaz v. District Court of Zvolen [2021] EWHC 1862 (Admin) in which it was ‘conceded that [Rogers] was of general application to any offence under the money laundering provisions’. The implication of these decisions is that, while Rogers suggests that cases where both the predicate offence and the money laundering offence take place overseas might be decided differently, in fact in cases decided subsequent to Rogers this has not been the case. In Jedinak, despite the arguments by the defence that ‘the court was clearly to an extent motivated by the recognition that some part of the offending [in Rogers] (and indeed the damage cause by the offending) impacted on this country and nationals of this country’, the court held that ‘it is clear in my judgment that the decision relating to the possible extra-territorial effect of the money laundering offences was independent of that’.

19 POCA 2002, ss.327(2A), 328(3) and 329(2A).

20 The Proceeds of Crime Act 2002 (Money Laundering: Exceptions to Overseas Conduct Defence) Order 2006.

21 POCA 2002, Part 5.

22 ibid., s.282A, inserted by Crime and Courts Act 2013, s.48 following the UK Supreme Court decision in Perry v. SOCA [2012] UKSC 35. POCA 2002, s.282A and Schedule 7A have retrospective effect – see POCA, Schedule 7A, para. 7(7).

23 Defined as (1) conduct within the United Kingdom that is unlawful under UK criminal law or (2) conduct outside the United Kingdom that is unlawful in that other country and would have been unlawful in the United Kingdom, had it occurred here. This is, therefore, a dual criminality test. The insertion in POCA 2022 of a new s.241A (by s.13 of the Criminal Finances Act 2017) adds ‘gross human rights abuse or violation’ to the definition of unlawful conduct for the purposes of POCA, Part 5 (civil recovery). This was the first time the United Kingdom targeted assets held anywhere in the world owned by those involved in repressive regimes; this follows the approach in the United States to a statute known as the Magnitsky Act of 2012. See Section 28.5.

24 See Criminal Finances Act 2017, Part 1, which amends POCA.

25 Under POCA, s. 362A(7), enforcement agencies permitted to apply for a UWO include the National Crime Agency, the Serious Fraud Office, HM Revenue and Customs, the Financial Conduct Authority and the Director of Public Prosecutions.

26 POCA, s.362H(5), inserted by Criminal Finances Act 2017, s.1.

27 ibid., s.362H(6), inserted by Criminal Finances Act 2017, s.1.

28 ibid., s.362S, inserted by Criminal Finances Act 2017, s.3.

29 At the time of writing, the NCA has successfully defended two UWOs: National Crime Agency v. Hajiyeva [2020] EWCA Civ 108; and National Crime Agency v. Mansoor Hussain and others [2020] EWHC 432 (Admin).

30 [2020] EWHC 822 (Admin). The NCA sought orders to compel four offshore companies to explain the source of funds used to buy five London homes for £80 million which, it claims, were purchased using illicit funds generated by Mr Aliyev’s late father.

31 Order available at: https://globalinvestigationsreview.com/digital_assets/5177505d-8751-4434-a19e-6d931ac70bf0/Court-of-Appeal-%5b1%5d.pdf.

32 ibid.

33 The test for dishonesty must now be viewed in light of the Supreme Court’s decision in Ivey v. Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67, which disapproved the second limb of the well-known test in R v. Ghosh [1982] EWCA Crim 2. Although the observations of the court were technically obiter, the Court of Appeal (Criminal Division) has indicated that Ivey correctly reflects the law – see R v. Pabon [2018] EWCA Crim 420. The test in Ivey was affirmed in Barton and Booth v. R [2020] EWCA Crim 575.

34 The ruling of the Court of Appeal in Barton and Booth v. R [2020] EWCA Crim 575 in April 2020, in endorsing Ivey, affirmed that the test for dishonesty should be judged by reference to society’s standards rather than the defendant’s understanding of those standards. The ruling renders organisations and their senior executives or employees more vulnerable to conviction when charged in cases involving fraud and other dishonesty-related offences.

35 Criminal Finances Act 2017, s.46(2).

36 ibid., s.44(4).

37 ibid., s.46(6).

38 A decision by the European Court of Justice, which upheld the EU sanctions against Russia regarding its annexation of Crimea in 2014, demonstrates the rationale in practice. See PJSC Rosneft Oil Company v. Her Majesty’s Treasury and Others, Case C-72/15, 28 March 2017.

39 For trade sanctions, see the Export Control Act 2002 (and the related Export Control Order 2008) and the Customs and Excise Management Act 1979. The Customs and Excise Management Act 1979 imposes criminal liability where a person exports goods from the United Kingdom ‘when the exportation or shipment is or would be contrary to any prohibition or restriction for the time being in force’. The Export Control Order (ECO) 2008 imposes those restrictions. The ECO 2008 specifies a three-tier categorisation of goods, with Category A products including items designed for torture, Category B including arms and ammunition, and Category C being items that have a dual civil/military use. See Part 4 and Schedule 1 of the ECO 2008. Trade sanctions apply to (1) anybody present in the United Kingdom, i.e., all persons (natural and legal), (2) all UK subjects anywhere in the world, and (3) any legal entity incorporated under UK law.

40 A number of regulations have been enacted under SAMLA that mirror sanctions measures previously in force in the United Kingdom under EU Regulations. Those enactments merely give the new measures an independent statutory footing under UK law.

41 https://www.legislation.gov.uk/uksi/2020/680/made. The accompanying statutory guidance is available at https://www.gov.uk/government/publications/global-human-rights-sanctions-guidance/global-human-rights-sanctions-guidance.

42 The designation criteria in Regulation 6(3) are broadly defined and include anyone who ‘is responsible for or engages in’ human rights abuses; ‘facilitates, incites, promotes or provides support for such an activity’; ‘provides financial services, or makes available funds, economic resources, goods or technology, knowing or having reasonable cause to suspect that those financial services, funds, economic resources, goods or technology will or may contribute to such an activity’; ‘provides financial services, or makes available funds, economic resources, goods or technology to a person [responsible for or engaged in human rights abuse]’; who ‘profits financially or obtains any other benefit from an activity’ violating human rights.

43 https://www.legislation.gov.uk/uksi/2021/488/contents/made.

44 The Regulations define involvement in serious corruption widely. Corruption, however, includes bribery and the misappropriation of property. As such, the Regulations revoke the UK’s specific misappropriation related-sanctions regulations.

45 As of August 2021, there have been 27 individual designations under the Regulations. The accompanying statutory guidance is available at https://www.gov.uk/government/publications/global-anti-corruption-sanctions-guidance.

46 The other relevant UK statutes, which also take a broad jurisdictional approach, are the Counter-Terrorism Act 2008 and the Anti-terrorism, Crime and Security Act 2001.

47 Office of Financial Sanctions Implementation (OFSI), Financial Sanctions: Guidance, March 2018, p. 12. The maximum term of imprisonment was recently increased from two to seven years – see Policing and Crime Act 2017 (PCA 2017), ss.144 and 145.

48 OFSI, Financial Sanctions: Guidance, March 2018, p. 7.

49 OFSI, Monetary penalties for breaches of financial sanctions: Guidance, April 2021. The prior version of the Guidance stated (at para. 3.8) that OFSI ‘will not artificially bring something within UK authority that does not naturally come under it’. This statement regarding OFSI’s jurisdiction over financial sanctions breaches has been removed from the revised guidance and may signal a more expansive interpretation of OFSI’s jurisdiction to impose penalties.

50 Sanctions and Anti-Money Laundering Act 2018, s.21.

51 PCA 2017, s.150.

52 ibid., s.151.

53 ibid., s.146.

54 OFSI, HM Treasury, Report of Penalty for Breach of Financial Sanctions Regulations (section 149(2) PACA 2017 report) Imposition of Monetary Penalty – Standard Chartered Bank, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876971/200331_-_SCB_Penalty_Report.pdf.

55 Criminal Justice Act 1993, s.3(2).

56 Criminal Justice 1987, s.12, which retained the offence at common law of conspiracy to defraud – see Criminal Law Act 1977, s.5(2).

57 The charge against Innospec Ltd was that between February 2002 and December 2006, the company, through various agents, engaged in systematic and large-scale corruption of senior government officials of Indonesia to secure contracts for the supply of a fuel additive, tetraethyl lead (TEL). The corrupt behaviour took the form of bribes, totalling approximately US$8 million. The seriousness of the corruption was aggravated by the fact that Innospec Ltd’s behaviour was aimed at blocking legislative moves to ban TEL, owing to environmental and public health concerns. The company pleaded guilty to conspiracy contrary to Criminal Law Act 1977, s.1 and was fined US$12.7 million.

58 https://www.sfo.gov.uk/2020/07/13/former-unaoil-executives-guilty-of-giving-corrupt-payments-for-oil-contracts-in-post-occupation-iraq/, accessed 26 July 2020.

59 In R v. Turner, Kerrison, Papachristos and Jennings in 2014 (and the subsequent appeal SFO v. Papachristos and Kerrison [2014] EWCA Crim 1863), four former executives of Innospec Ltd were convicted and imprisoned for conspiracy offences in relation to their roles in bribing state officials in Indonesia and Iraq to secure contracts for the supply of products produced by Innospec Ltd.

60 Inserted by Criminal Justice (Terrorism and Conspiracy) Act 1998, s.5.

61 The conditions set out in Criminal Law Act 1977 (CLA 1977), s.1A(6) are pursuit of the agreed conduct would involve an act by one or more of the parties outside the United Kingdom; that act is an offence under local law in that other country; the agreement would be a conspiracy (within CLA 1977, s.1(1)) but for the fact that the offence would not be an offence triable in England and Wales if committed in accordance with the parties’ intentions; and a party to the agreement, whether directly or via an agent, did anything in England and Wales regarding formation of the agreement before its formation, became a party to it in England and Wales, or did or omitted anything in England and Wales pursuant to the agreement. Where those conditions are satisfied, the prosecutor may pursue conspiracy charges under s.1A, referring to the offence as being a conspiracy to commit the underlying substantive offence (e.g., drug trafficking or people smuggling) but for the fact that it was not triable in England and Wales.

62 Criminal Justice Act 1993, Part 1, as amended by the Fraud Act 2006 (Schedule 1).

63 Being fraud by false representation (Fraud Act 2006, s.2), fraud by failing to disclose information (ibid., s.3), or fraud by abuse of position (ibid., s.4).

64 Through operation of Serious Crime Act 2007, s.52, and the conditions specified in Schedule 4.

65 While MLA is used for gathering and exchanging information, and requesting and providing assistance in obtaining evidence located abroad, extradition is the legal process by which an individual is transferred from one state to another for the purposes of being tried or serving a sentence already imposed. The Extradition Act 2003 sets out the UK extradition legal framework. MLA is generally not appropriate if the material can be obtained directly via law enforcement co-operation for intelligence purposes or if the material otherwise is admissible in that form.

66 There are exceptions such as EU freezing orders for property, which need to be sent directly to the relevant UK prosecuting authority.

67 Through operation of Serious Crime Act 2007, s.52, and the conditions specified in Schedule 4. Following the end of the Brexit transition period on 31 December 2020, the provisions of the European Union’s Framework Decisions 2003/577/JHA (on Mutual Recognition of Freezing Orders) and 2006/783/JHA (on Mutual Recognition of Confiscation Orders) and the replacement Regulation 2018/1805 no longer apply to the United Kingdom. Requests for assistance in relation to restraint and confiscation should be made directly to the UK Central Authority under the provisions of the UK–EU Trade and Cooperation Agreement, Part 3, Title XI.

68 The Director and any designated member of the SFO, the Financial Conduct Authority and the Bank of England are examples of designated prosecuting authorities.

69 Crime (International Co-operation) Act 2003, s.15.

70 ibid. Schedule 1.

71 R (on the application of Tony Michael Jimenez) v. First Tier Tax Tribunal (Tax Chamber) and HMRC [2019] EWCA Civ 51.

72 Pursuant to Finance Act 2008, Schedule 36, para. 1.

73 The Court also dismissed Mr Jimenez’s argument that HMRC’s conduct amounted to an exercise of UK official acts in the territory of another sovereign state. The Court held that service of the information notice did not seek to impose any criminal liability on a foreign national, and did not offend against the territorial sovereignty of the United Arab Emirates. Interestingly, in the leading judgment given by Lord Justice Patten noted that: ‘the more recent decision[s] of the Supreme Court in Bilta and the Divisional Court in KBR confirm that the jurisdiction to serve a notice requiring the provision of information from a person resident abroad or even to impose liability on the recipient will not raise eyebrows where they serve to protect a sufficient national interest. In my view, the present case falls squarely within that category of case’.

74 These include the SFO, the National Crime Agency, the police, HMRC and the Financial Conduct Authority.

75 Agreement on Access to Electronic Data for the Purpose of Countering Serious Crime [CS USA No. 6/2019] (https://www.gov.uk/government/publications/ukusa-agreement-on-access-to-electronic-data-for-the-purpose-of-countering-serious-crime-cs-usa-no62019), accessed on 21 July 2020. This Agreement is facilitated by the Crime (Overseas Production Orders) Act 2019.

76 Guernsey, the Isle of Man and Jersey.

77 For example, the Cayman Islands and Bermuda have committed to providing beneficial ownership registers by 2022.

78 For example, the government of Bermuda has opposed the register, arguing that the imposition of the register is an affront to the constitutional standing of Bermuda.

79 ’The Overseas Territories (Publicly Accessible Registers of Beneficial Ownership of Companies: draft Order in Council, published 14 December 2020.

80 Some territories, such as the Cayman Islands, have reacted positively, declaring they will be compliant with a fully transparent company ownership register by 2022. Jersey, Guernsey and the Isle of Man have jointly made a similar commitment for public registers by 2023.

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