UK: Enforcement trends 2024

The corporate criminal and enforcement landscape in the United Kingdom is shifting, and 2024 is seeing significant developments. This article explores some of those developments and how they, along with organizational changes within the Serious Fraud Office, His Majesty’s Revenue and Customs, and the Office of Financial Sanctions Implementation, are likely to affect the enforcement agenda over the remainder of 2024 and beyond. Those doing business in the UK may wish to take note.

Serious Fraud Office: “swifter action and more dawn raids”

The new Director of the Serious Fraud Office (SFO), Nick Ephgrave, signaled early on in his tenure both a desire and an ability to alter the approach of the agency into one which is quick to launch, and efficient to progress, fraud investigations. Ephgrave has promised “swifter action and more dawn raids.” Initial indications suggest that the SFO is stepping up. Since Ephgrave became director on September 25, 2023, it has opened five new investigations. Further, it has conducted more dawn raids in the last six months than in the preceding two years. The SFO has also charged four individuals in two separate extant investigations.

A further tool available to the SFO (among other prosecutors) is the new offense of failing to prevent fraud, brought into law on October 20, 2023 within the Economic Crime and Corporate Transparency Act 2023 (ECCTA), along with an amendment to the definition of “senior staff” whose criminal actions can be used to attach criminal liability to their employer.

The new offense has similarities to the model adopted by the Bribery Act 2010, in that it creates a strict liability offense when a person associated with a corporate commits fraud intending for the company to benefit. The only defense is to have reasonable preventative procedures in place.

While this, in theory, significantly widens the scope for corporate prosecutions, it is quite possible that, as with the offenses of failing to prevent bribery and of failing to prevent the facilitation of tax evasion, the new offense is intended to tighten corporate compliance culture rather than lead to a series of high-profile prosecutions. The offense will come into force later in 2024, once the UK government publishes guidance on the elements of the offense itself and anticipated prevention procedures.

ECCTA also brought about a further development in corporate criminal doctrine in the UK by lowering the bar for prosecution of companies for the acts of their employees. Where previously a prosecutor had to demonstrate that the employee in question was a “directing mind and will” of the business, a term loosely understood to be members of the board, ECCTA has stipulated that the term “directing mind and will” now also encompasses other senior managers within the business, thus increasing the potential for companies to be prosecuted for acts of their employees.

His Majesty’s Revenue and Customs

In December 2023, HMRC, with assistance from the Crown Prosecution Service (“CPS”), finalized the first Deferred Prosecution Agreement (“DPA”) secured by a UK enforcement agency other than the SFO. Given that the Bribery Act 2010 primarily assigns responsibility for the investigation of bribery offences to the SFO, HMRC’s involvement would indicate a tax nexus to the case as well.

In recent months, HMRC has shown an appetite to pursue more investigations in this space, once again targeting cases where a bribery and tax offence overlap would provide it with justification to proceed.

The COVID pandemic brought about further reform to HMRC’s targets and priorities. The Fraud Investigation Service (FIS) within HMRC, established in 2016, had for years been targeting low-value and easy targets for prosecution. However, HMRC has signaled its intent to be more strategic in its approach and to target higher-value tax evaders. In the last 12 months, the FIS has secured income of £1.2 billion from two cases, a significant rise in value of recovered taxes compared to previous years.

We anticipate that HMRC will continue this approach, using its powers to prosecute for the failure to prevent the facilitation of tax evasion under the Criminal Finances Act 2017.

The changing landscape of sanctions enforcement

New agencies, new funding, new powers, and new geopolitical challenges mean businesses with a footprint in the UK are about to experience a materially different sanctions enforcement landscape. Although specific enforcement targets or priorities may well depend on the outcome of the general election called for July 4, 2024, overall sanctions enforcement activity in the UK is expected to ramp up regardless of which party prevails, making this a key area to watch for businesses in, or with operations in, the UK.

Developments of note include:

• A focus on circumvention – on February 22, 2024, the UK government published the UK Sanctions Strategy, signaling a strong intention to target investigations and enforcement against those circumventing sanctions via trade through third-party countries. This signal complements similar anti-circumvention messaging from other countries, including the US and EU.
• Increased scrutiny of the financial regulated sector – a key priority in the 2024-25 business plan published by the Financial Conduct Authority (FCA) – a key UK financial sector regulator – is to strengthen its supervision of regulated firms’ sanctions systems and controls. This announcement follows the FCA’s publication of findings in September 2023 from a “substantial” programme of work assessing sanctions systems and controls of over 90 firms.
• Closer partnership with the US – the UK’s financial sanctions regulator, the Office of Financial Sanctions Implementation (OFSI), has entered the second year of its Enhanced Partnership with OFAC in the US. This partnership has drawn the US and UK even closer not only on sanctions strategies and coordinated implementation of new sanctions, but also on mechanisms for sanctions implementation and enforcement. We anticipate this harmonization of approaches will continue and lead to joint enforcement actions, in particular related to Russian sanctions.
• New civil trade sanctions enforcement authority – in December 2023, the UK government announced the creation of a new unit responsible for the civil enforcement of the UK’s trade sanctions the Office of Trade Sanctions Implementation (OTSI). Currently, breaches of trade sanctions in the UK are only liable to criminal enforcement by HMRC. Once OTSI comes online, it is anticipated to have civil enforcement powers broadly similar to OFSI’s . OTSI is expected to start work in the summer of 2024 and to have a particular focus on the enforcement of services sanctions.

Learn more about the evolving enforcement landscape in the UK by contacting any of the authors or your usual DLA Piper relationship attorney.