Extraterritoriality: The UK Perspective

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27.1 Overview

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

In the context of economic crime, the United Kingdom’s jurisdiction has steadily increased over the past three decades. Most recently, and prompted by Russia’s invasion of Ukraine in February 2022, the Economic Crime (Transparency and Enforcement) Act 2022 (ECA) was introduced, and in October 2023 the Economic Crime and Corporate Transparency Act 2023 (the ECCT Act) received royal assent. The ECA introduced registration and information requirements for overseas entities buying (or holding) property in the United Kingdom and reformed the unexplained wealth order regime and sanctions (as described further below).[2]

The ECCT Act reforms Companies House powers, establishes enhanced verification requirements for company ownership and control, and creates new powers to seize and recover cryptoassets. Given the decentralised nature of cryptoassets, these powers will need extraterritorial application to be effective. Most significantly, the ECCT Act introduces a new corporate criminal offence of failure to prevent fraud. It also reforms the common law identification doctrine by attributing liability to corporates through the acts of senior managers instead of the well-established ‘directing mind and will’ test.

For certain economic crimes, authorities may bring prosecutions in the United Kingdom even when all the relevant criminal conduct occurred overseas. The most obvious example is the UK Bribery Act 2010 (UKBA). In line with the United Kingdom’s extension of its jurisdictional reach, the authorities have increased their coordination and cooperation 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.

27.2 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. There is no exemption for facilitation payments (also known as ‘grease’ payments) under the UKBA.

27.2.1 Offences under sections 1, 2 and 6

UK prosecutors may pursue an offence under sections 1, 2 or 6, even where part of the relevant conduct took place outside 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]

27.2.2 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 this strict liability offence is to show that it had in place ‘adequate procedures’ 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 current publicly available information, 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 Serious Fraud Office (SFO) agreed a record-breaking deferred prosecution agreement (DPA) with Airbus SE, including a total penalty of almost €3.6 billion,[11] in relation to five counts of the failure to prevent offence across five jurisdictions.[12] In June 2021, the SFO agreed a DPA with Amec Foster Wheeler Energy Limited (AFWEL) in relation to one count of conspiracy to make corrupt payments and nine counts for failure to prevent bribery (section 7 offence) regarding the use of corrupt agents in conduct that spanned Nigeria, Saudi Arabia, Malaysia, India and Brazil. Under the terms of the DPA, AFWEL will pay a financial penalty and costs amounting to £103 million in the United Kingdom, which forms part of the US$177 million global settlement with UK, US and Brazilian authorities.[13]

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.[14] 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 Tesco in a separate and subsequent civil action, brought by its shareholders.

27.3 Economic Crime and Corporate Transparency Act 2023

Since the introduction of the UKBA over a decade ago, there has been considerable debate regarding whether the corporate criminal offence of failure to prevent bribery should extend to other forms of economic crime.[15] The ECCT Act provides, in summary, that a ‘relevant body’ is guilty of an offence if an associated person commits a fraud offence intending to benefit (whether directly or indirectly) the relevant body or any person to whom the associated person provides services on behalf of the relevant body. The relevant body will not be guilty of an offence if the body itself was, or was intended to be, a victim of the fraud offence.

It will be a defence if the body can show that it had reasonable preventive procedures in place at the time the offence was committed or that it was reasonable for the body to have no preventive procedures. The government will need to consult and publish guidance regarding procedures before the offence comes into force. The offence will only apply to large organisations meeting certain criteria.

The offence applies to a body corporate or partnership wherever it is incorporated or formed; however, unlike the section 7 offence where it is irrelevant whether the bribery occurs outside the United Kingdom, most of the statutory fraud offences listed within the proposed corporate offence must have a ‘relevant event’ occurring within England and Wales.[16]

This means that if an associated person, such as an employee of an organisation, commits fraud under UK law, or targeting UK victims, the employer could be prosecuted, even if the organisation (and the employee) is overseas.[17]

27.4 Proceeds of Crime Act 2002

27.4.1 Money laundering offences under Part 7

Money laundering has a broad meaning under UK law.[18] 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. ‘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.[19] 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 R v. Rogers,[20] which emphasised the wide territorial 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 to withdraw money from that account. He was convicted under section 327(1)(c) of POCA of converting criminal property. He appealed against his 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 stated that the offence of money laundering is ‘par excellence an offence which is no respecter of national boundaries’[21] and therefore Parliament must have intended that the section 327 offence would have extraterritorial effect. As such, there was sufficient jurisdictional nexus to try Mr Rogers as the acts resulting in the property becoming criminal property 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.[22]

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 and the laundering of the criminal property take place outside the United Kingdom.[23]

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
  • the relevant criminal conduct was not, when it took place, unlawful under the criminal law of that other country.[24]

This defence 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’ imprisonment in the United Kingdom had it occurred there.[25] In practice, therefore, most cases (e.g., bribery, corporate fraud and tax evasion) relevant to readers will remain squarely within the wide extra­territorial scope of POCA.

27.4.2 Civil recovery orders under Part 5

Separately, the civil recovery regime set out in POCA[26] 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 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.[27]

Combined with the wide jurisdictional scope of the definition of ‘unlawful conduct’,[28] civil recovery orders are a powerful and attractive tool in the hands of UK prosecutors. The civil recovery regime was bolstered by the introduction of account freezing and forfeiture orders as part of the Criminal Finances Act 2017,[29] which enables prosecutors to apply to freeze the contents of bank accounts if they have reasonable grounds for suspecting that funds in an account are recoverable (as defined in section 304 of POCA) or intended for use in unlawful conduct.

In October 2021, the Crown Prosecution Service (CPS) secured the largest-ever proceeds of crime account forfeiture in the United Kingdom. Following an international investigation, the CPS obtained account freezing orders against two accounts held by Du Toit & Co LLP (a South African law firm operating from UK offices) and Xiperias Ltd (a Cypriot registered company). Both respondents agreed to forfeit €34 million, to settle litigation alleging that the funds in two bank accounts were derived from unlawful conduct.[30]

The Criminal Finances Act 2017 also introduced unexplained wealth orders (UWOs).[31] On application to the High Court, prosecutors[32] can seek a UWO to compel a respondent (whether or not UK-domiciled) to disclose information about their property,[33] including the nature of their interest in it and how they acquired it. Part 2 of the ECA broadened the scope of the UWO regime by enabling prosecutors to obtain a UWO against ‘responsible officers’ of an entity (including directors, managers or partners) within or outside the United Kingdom where the respondent is a corporate entity.

UWOs may be 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 (1) the respondent’s known income is insufficient to acquire that property or (2) the property has been obtained through unlawful conduct;[34] 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.

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, the prosecutor may make a formal request for assistance from the other country’s government.[35]

In practice, there have been only a handful of reported UWO cases to date; this is not expected to change significantly in the foreseeable future. The most recent government report addresses this issue in the following terms:

The number of UWOs applied for and obtained is low but this must be considered within the wider context of the UK’s asset recovery system.
The use of UWOs, along with all other suitable investigatory powers, are considered in during the course of every financial investigation. UWOs may be most effective where there is no clear link between the property and unlawful conduct and where the respondent has accrued assets that cannot be explained by their known income or employment. Therefore they are an invaluable investigate [sic] tool that aim to assist agencies to gather crucial evidence at the outset of an investigation where they may otherwise be unable to do so. Further, UWOs are intended for exceptional and complex cases.[36]

27.5 Tax evasion and the Criminal Finances Act 2017

The Criminal Finances Act 2017 introduced a new corporate offence focused on tax evasion. As with the UKBA’s corporate offence, this was 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).[37]

If the offence took place outside the jurisdiction, 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 comprise three component parts: the prosecution must prove criminal evasion by a taxpayer, and there must have been dishonest[38] facilitation of tax evasion by an associated person.[39] 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.[40] 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.[41] 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 offence.[42]

27.6 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.[43]

For the purposes of this chapter, we focus on financial sanctions.[44] 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.

In April 2021, the United Kingdom enacted the Global Anti-Corruption Sanctions Regulations 2021, specifically targeting individuals suspected of involvement in serious corruption. 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.[45] The new regime operates through specific asset freezes and travel bans on individuals and entities.[46]

In response to Russia’s invasion of Ukraine in February 2022, the United Kingdom enacted a series of statutory provisions amending its Russia sanctions regime (the Amendments).[47] The Amendments expand the scope of existing sanctions to target any person involved in obtaining a benefit from or supporting the government of Russia. The Amendments have a deliberately broad scope and express extraterritorial application, applying to conduct by UK persons whether or not they are in the United Kingdom, and certain powers relating to maritime enforcement apply to British ships in international or foreign waters.[48]

The ECA also implemented a number of changes to the sanctions regime, including an urgent designation procedure (which applies to persons subject to similar sanctions by the United States, the European Union, Australia, Canada or any other specified country).

The United Kingdom may also issue financial sanctions under certain specific statutes, such as the Terrorist Asset-Freezing Act 2010[49] or via regulations targeted at specific jurisdictions. Those advising businesses concerned about liability should carefully review the text of the specific statutory instrument, and the underlying 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.[50]

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.[51]

In its 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.[52] 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’.[53]

The Policing and Crime Act 2017 introduced a wider range of enforcement options, specifically (1) making sanctions offences eligible for consideration for a DPA,[54] (2) making sanctions offences eligible for (civil) serious crime prevention orders under the Serious Crime Act 2007[55] and (3) empowering OFSI to impose (civil) financial penalties.[56]

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

Mutual legal assistance (MLA) allows one state to seek cooperation from another in the investigation or prosecution of criminal offences via a formal letter of request.[57]

The framework governing the United Kingdom’s approach to MLA is contained in statute, primarily the Crime (International Co-operation) Act 2003 (CICA) and various bilateral and multilateral treaties.[58] The United Kingdom does not, however, need a formal treaty basis to cooperate. The UK Home Office Central Authority is primarily tasked with receiving, and acceding to,[59] MLA requests.[60]

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.[61]

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 with regard to the privilege against self-incrimination. For example, one method of MLA is to compel witnesses to attend court.[62] 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.[63]

MLA is not the only avenue for UK authorities to extend their information-gathering overseas. In February 2019, the Court of Appeal decided the case of Jimenez.[64] It held that HM Revenue and Customs (HMRC) was entitled to serve an ‘information notice’[65] 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.[66]

The decision in Jimenez contrasts with the decision in KBR v. SFO,[67] in which the Supreme Court held that the SFO’s powers under section 2(3) of the Criminal Justice Act 1987 were not intended to extend extraterritorially to compel a non-UK company to produce documents held overseas. The SFO’s case had relied in part on the Court of Appeal’s decision in Jimenez but the Supreme Court in KBR distinguished Jimenez on the basis that HMRC’s powers were only exercisable in relation to someone liable for tax in the United Kingdom (and who therefore had an identifiable relationship with the United Kingdom) and that non-compliance was not a criminal offence, such that the general presumption that UK legislation is not intended to have extraterritorial effect did not apply.

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 agencies[68] 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 States[69] that will enable UK law enforcement agencies to request electronic data, via warrant, from US technology companies, speeding up the investigation and prosecution of serious criminals and replacing the existing MLA regime.

27.8 Corporate transparency

27.8.1 Beneficial ownership disclosure requirements

Registers of beneficial ownership provide transparency and play an important role in efforts against corruption, tax evasion and money laundering. The United Kingdom now has registers of beneficial ownership for three different types of assets: companies, trusts, and property and land.

One of the primary purposes of SAMLA was to curb money laundering in British overseas territories such as the British Virgin Islands, the Cayman Islands and the Crown dependencies.[70] As such, in December 2020, the UK government published an Order in Council requiring all overseas territories to establish public registers of beneficial ownership.

Despite periodic statements of support, implementation remains a work in progress, and the time frame for implementation remains unclear. In May 2023, the UK and Overseas Territories issued a joint communique that, among other things, announced ‘establishing a technical working group on beneficial ownership transparency to share expertise on, and consider issues around, the implementation of publicly accessible registers of company beneficial ownership that contain the necessary safeguards to protect the right to privacy’.[71]

The ECA requires all non-UK entities that own or buy real property in the United Kingdom to join a public register listing the entity’s beneficial owners. Aimed at preventing criminals from hiding their property ownership behind chains of obscure shell companies, registration requires the identification and disclosure of beneficial owners, being those that:

  • hold more than 25 per cent of the shares or voting rights in that entity;
  • have the right to appoint or remove the majority of the directors of that entity; or
  • have the right to exercise or actually exercise significant influence or control over that entity.

The rules applied retrospectively to property bought up to 20 years ago in England and Wales. Non-UK entities that already owned property in the United Kingdom had six months from the date of the Act’s commencement (by 31 January 2023) to apply for registration or dispose of their property.[72]

The ECCT Act aims to introduce further measures to promote corporate transparency, including providing Companies House with enhanced investigative and enforcement powers and introducing identity verification for company ownership and control.

27.8.2 Transaction screening

The National Security and Investment Act 2021 (which came into force in January 2022) created a new screening regime that allows the government to review and potentially prevent or unwind certain transactions that may give rise to a risk to national security. Certain transactions falling within 17 ‘sensitive’ sectors of the UK economy now require the government’s clearance prior to completion, otherwise they will be void.[73]

The screening regime applies where the target entity or asset is from, in, or has a sufficient connection with, the United Kingdom. A qualifying entity must carry on activities in, or supply goods or services to people in, the United Kingdom, and a qualifying asset must be used in connection with such activities.[74] The Department for Business, Energy and Industrial Strategy published specific guidance[75] on when target entities and assets outside the United Kingdom are within the scope of the new regime, which indicates a relatively broad approach in this regard. For example, an overseas company producing goods for export to a UK company could be caught, as could machinery located overseas producing equipment used in the United Kingdom.

Whether an entity will have a sufficient connection is likely to be fact-specific. For example, the guidance cites that an overseas entity is likely to be a qualifying entity if its staff travel to the United Kingdom and undertake business activities similar to working in a regional office (such as performing services for a UK client regularly) but is not likely to be one if the staff solely conduct market research or are part of a sales team seeking new clients.[76]

27.9 Online Safety Act 2023

The Online Safety Act received royal assent in October 2023. It introduces a new regulatory regime to address harmful content online, including prioritising children’s safety. There are three categories of service (and some exemptions) that fall within the scope of the Act: user-to-user services, search services and services that publish or display pornographic or other high-risk content.

The Act sets out a detailed regulatory regime that, among other things, allows the Office of Communications (Ofcom) to require companies not meeting their obligations to comply and to impose fines of up to £18 million or 10 per cent of global turnover (whichever is higher). Ofcom will also be able to bring criminal sanctions against senior managers of companies that, for example, fail to comply with Ofcom’s requests for information or that destroy or withhold information.

In addition to UK service providers, the Act applies to providers outside the United Kingdom that have ‘links with the UK’. This includes where UK users form one of the target markets for the service (or the only market) or there is a significant number of users in the United Kingdom.


Footnotes

[1] Anupreet Amole is a partner and Deborah Williams is a professional support lawyer at Eversheds Sutherland. The authors would also like to acknowledge the work of Jessica Lee and Chloë Kealey on the previous edition of this chapter.

[2] The introductory text of the Economic Crime (Transparency and Enforcement) Act 2022 (ECA) begins: ‘An Act to set up a register of overseas entities and their beneficial owners and require overseas entities who own land to register in certain circumstances; to make provision about unexplained wealth orders; and to make provision about sanctions.’

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

[4] UKBA, s.12(2)(c).

[5] UKBA, 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 (e.g., 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. A section 7 offence will be committed only if the associated person intended to obtain or retain business or another 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. To date, the only case in which a corporate defendant has raised the statutory defence is R v. Skansen Interiors Ltd [2018]. While this was a jury conviction before the Crown Court and therefore provided no judicial guidance as to what compliance measures might constitute ‘adequate procedures’, it is a useful demonstration of the importance of substance over form where compliance policies and procedures are concerned.

[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. In addition, the reforms under the Economic Crime and Corporate Transparency Act (ECCT Act) providing for corporate criminal liability attributed to the acts of senior manager will include bribery offences under the UKBA.

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

[10] UKBA, s.12(5).

[11] Of which €991 million was to be paid to the Serious Fraud Office (SFO) as disgorgement of profits, a fine and the SFO’s legal and investigative costs.

[12] Ghana, Indonesia, Malaysia, Sri Lanka and Taiwan.

[13] In December 2023, judicial approval was granted for a deferred prosecution agreement (DPA) between the Crown Prosecution Service and Entain plc totalling £615 million. The DPA follows an investigation by HM Revenue and Customs (HMRC) into Entain plc’s legacy Turkish-facing business and the activities of former third-party suppliers and former employees. It is reported that the DPA arises from alleged offences under s.7.

[14] [2019] EWHC 109 (Ch).

[15] On 10 June 2022, the Law Commission published its options regarding corporate criminal liability for the government following its review. See Law Commission, Corporate Criminal Liability: an options paper, 10 June 2022 (the Options Paper).

[16] With the exception of fraudulent trading, the statutory offences listed within the failure to prevent offence in the ECCT Act are given extensive extraterritorial effect by s.1 of the Criminal Justice Act 1993. In relation to offences under s.1 of the Fraud Act 2006, ‘relevant event’ includes the occurrence of any gain or loss.

[17] This is reflected in the government fact sheet regarding the offence.

[18] The House of Lords had proposed that the new corporate offence of failure to prevent should also include money laundering offences; however, the government opposed that on the basis that the existing law (the Proceeds of Crime Act 2002 (POCA) and the Money Laundering Regulations) are sufficient.

[19] POCA, s.340(2) and (3).

[20] [2014] EWCA Crim 1680.

[21] ibid., para. 52.

[22] Observations made by Lord Woolf CJ in R v. Smith (Wallace Duncan) (No.4) [2004] 2 Cr App R 17, [2004] EWCA Crim 631 that the English courts have moved away from definitional obsessions about jurisdiction and instead will apply English criminal law where a ‘substantial measure of the activities constituting a crime take place in England’ were also applied by the Court in Rogers.

[23] 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’ (para. 18), Jedinak v. District Court in Pardubice [2016] EWHC 3525 and Balaz v. District Court of Zloven [2021] EWHC 1862 (Admin), in which it was ‘conceded that [Rogers] was of general application to any offence under the money laundering provisions’. 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 extraterritorial effect of the money laundering offences was independent of that’.

[24] POCA, ss.327(2A), 328(3) and 329(2A).

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

[26] POCA, Part 5.

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

[28] 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 of POCA, 241A (by Criminal Finances Act 2017 (CFA), s.13) adds ‘gross human rights abuse or violation’ to the definition of unlawful conduct for the purposes of Part 5 of POCA (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 under the Magnitsky Act of 2012.

[29] CFA, Part 1, Chapter 3; POCA, ss.303Z1–303Z19.

[31] See Part 1 of the CFA, which amends POCA.

[32] Under POCA, s.362A(7) enforcement agencies permitted to apply for an unexplained wealth order include the National Crime Agency

[33] By express cross-reference to POCA, s.414 it is clear that ‘property is all property wherever situated’.

[34] Point (2) was introduced by ECA, s.47.

[35] ECA, s.362S, inserted by CFA, s.3.

[37] In June 2022, the Law Commission published its long-awaited proposals on reforming corporate criminal liability in England and Wales (the Options Paper). While the Options Paper rejects the much discussed failure to prevent economic crime offence, it outlines 10 options for strengthening corporate liability, which notably included the expansion of the failure to prevent model to fraud.

[38] 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. The test in Ivey was affirmed in Barton and Booth v. R [2020] EWCA Crim 575.

[39] 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.

[40] CFA, s.44(2) and (3).

[41] CFA, s.44(4).

[42] CFA, s.44(6).

[43] 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.

[44] For trade sanctions, see the Export Control Act 2002 (and the related Export Control Order 2008 (ECO 2008)) and the Customs and Excise Management Act 1979 (as amended). 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 ECO 2008 imposes those restrictions. It 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 and military use. See ECO 2008, Part 4 and Schedule 1. Trade sanctions apply to anybody present in the United Kingdom (i.e., all persons (natural and legal)), all UK subjects anywhere in the world and any legal entity incorporated under UK law.

[45] The Global Anti-Corruption Sanctions Regulations 2021 (the Regulations) define involvement in serious corruption widely. Corruption, however, includes bribery and the misappropriation of property. As such, the Regulations revoke the United Kingdom’s specific misappropriation-related sanctions regulations.

[46] As at 10 August 2023, there have been 39 individual designations under the Regulations. The accompanying statutory guidance is available at www.gov.uk/government/publications/global-anti-corruption-sanctions-guidance.

[47] As at September 2023, there have been three amendments in 2023, the latest being the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023, which entered into force on 30 June 2023. These update the Russia (Sanctions) (EU Exit) Regulations 2019, which is the United Kingdom’s key statutory provision regarding sanctions against Russia.

[49] 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.

[50] Office of Financial Sanctions Implementation (OFSI), Financial Sanctions: Guidance, August 2022, p. 36. The maximum term of imprisonment was increased from two to seven years – see the Policing and Crime Act 2017 (PCA), ss.144 and 145.

[51] OFSI, Financial Sanctions: General Guidance, August 2022, p. 10.

[52] OFSI enforcement and monetary penalties for breaches of financial sanctions: Guidance, August 2022. A previous version of the Guidance stated (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 more recent versions of the guidance.

[53] Sanctions and Anti-Money Laundering Act 2018, s.21.

[54] PCA, s.150.

[55] PCA, s.151.

[56] PCA, s.146. For breaches of financial sanctions committed after 15 June 2022, ECA, s.54 amends PCA, s.146 empowering OFSI to impose monetary penalties for breaches of financial sanctions on a strict liability basis. This represents significant departure from the previous position where s.146 required persons to have knowledge or reasonable cause to suspect they were in breach of financial sanctions.

[57] While mutual legal assistance (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 cooperation for intelligence purposes or if the material otherwise is admissible in that form.

[60] Through operation of s.52 of, and the conditions specified in Schedule 4 to, the Serious Crime Act 2007. 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 ceased to 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 Title XI of Part 3 of the UK–EU Trade and Cooperation Agreement.

[61] The Director and any designated member of the SFO, the FCA and the Bank of England are examples of designated prosecuting authorities.

[62] Crime (International Co-operation) Act 2003, s.15.

[63] ibid., Schedule 1.

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

[65] Pursuant to the Finance Act 2008, Schedule 36, para. 1.

[66] 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. It 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, 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’.

[67] R (on the application of KBR, Inc) v. Director of the Serious Fraud Office [2021] UKSC 2.

[68] These include the SFO, the NCA, the police, HMRC and the FCA.

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

[70] Guernsey, the Isle of Man and Jersey.

[72] Failure to comply with the registration obligations constitutes a criminal offence for the entity and each officer of that entity. The offence is punishable by a daily fine (not exceeding £2,500) or up to five years’ imprisonment, or both. The Secretary of State may exempt a person from registration if he or she considers it necessary to do so ‘in the interests of the economic wellbeing of the United Kingdom’.

[73] Acquisitions completed before 12 November 2020 are exempt.

[76] Another complexity is that, whereas a non-UK entity counts as a qualifying entity if it carries on activities in the United Kingdom or supplies goods or services to persons in the United Kingdom, for an acquisition of such an entity to require mandatory notification it must actually carry on UK activities (i.e., suggesting mere supply of goods or services to UK persons is insufficient) that fall within one of the 17 sensitive sectors.

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