Latest UK investigations update

ECCTA timeline

In respect of the changes to Companies House powers, the government website is committed to ensuring that Companies House is able to issue financial penalties for any relevant offices under the new ECCTA and the Companies Act in Autumn 2024.¹ Guidance on information sharing measures between firms has also been published, which is designed to support the existing anti-money laundering regime under Schedule 9 of the Proceeds of Crime Act 2022.²

In respect of the new ‘failure to prevent fraud’ corporate offence, the long-awaited Guidance was published on 6 November 2024. We cover the Guidance extensively in our article here. In short, and as we predicted, the Guidance mirrors that which accompanied the failure to prevent bribery corporate offence and the failure to prevent the facilitation of tax evasion offence, and it will be a defence for large organisations to show that they had reasonable prevention procedures in place to prevent fraud. The Guidance is principle-based, focusing on: top-level commitment, risk assessment, proportionate risk-based prevention procedures, due diligence, communication, and monitoring and review.

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With publication of the Guidance, this means that the failure to prevent fraud offence will come into force on 1 September 2025. Large organisations therefore have less than nine months to conduct a review of their existing procedures and ensure that their reasonable procedures are up to scratch.

Bribery and corruption

In the UK, six former Glencore executives were charged in September 2024 in respect of allegations for conspiracy to make corrupt payments to government officials in Cameroon, Nigeria and the Ivory Coast between 2007-2014, following Glencore’s guilty plea and £276 million fine in relation to the same, paid to the Serious Fraud Office (‘SFO’). This promises to be a lengthy ordeal as the trial is not likely to take before mid-2027.

In late November, the SFO simultaneously made the announcements that it was closing its investigation into Canadian jet manufacturer Bombardier (citing deferral to US and Canadian investigations) and launching a new joint investigation with France’s Parquet National Financier (PNF) into suspected bribery and corruption at multi-national aviation and defence group Thales. 

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The SFO appear to be streamlining their case list and concentrating their efforts on international cooperation and prosecution of individuals. In 2025, we can expect to see more activity for the SFO, both in respect of ongoing matters and possibly more enforcement action in respect of new matters as well (such as through dawn raids, for example)

Commodities

In October, a commodity trade Elliott Associates’ (‘Elliott’) appeal was dismissed in the UK Court of Appeal regarding its lawsuit against the London Metal Exchange (‘LME’) in relation to its suspension and cancellation of nickel trades on 8 March 2022. Elliot argued that the decision to cancel the nickel trades was unlawful and sought a judicial review action.

In the judgment, Males LJ stated that despite the background to this case was complex, this ultimately was a “straightforward case” and that the events of the “extreme price movement during a short period…. was a once in a generation event” and to allow the trades to stand “would have meant a real risk of a….’death spiral’ in the international metals market.”³ Elliot has said they are considering the ruling and any next steps.

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The Court of Appeal ultimately held that the decision to cancel the trades was not pursuant to improper purposes to disadvantage Elliot (and the other appellants) but rather to avoid a loss of confidence in commodity markets as a whole, not just nickel futures. In times of instability therefore, it is not unheard of for exchanges to intervene in order to preserve market stability and instil market confidence.

Supply chains

In June 2024, a Court of Appeal decision held that the National Crime Agency (‘NCA’) was wrong not to investigate alleged offences under Part 7 of the Proceeds of Crime Act 2022 (‘POCA’), in relation to imports of cotton products to the UK from the Xinjian Uyghur Autonomous Region of China (‘XUAR’), in circumstances where the World Uyghur Congress allege that the products were a result of forced labour and or human rights abuses.⁴

It was held that the NCA were wrong to say that the ‘adequate consideration exemption’ anywhere in the supply chain (i.e. paying market price for goods imported into the UK) would be enough to remove the taint from the purchased goods.

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It is clear that POCA can still apply in circumstances where there was constructive knowledge but no actual knowledge of criminal conduct (such as modern slavery, forced labour or human rights abuses).

It is clear therefore that the onus is growing on companies themselves to get their houses in order and conduct risk assessments on their global supply chains.

Audits

The General Election which took place in July brought in a new Labour government and with political changes come legislative changes. Among the new raft of legislative bills which are already under consideration, the Labour government plans to tackle audit reform through the new Draft Audit Reform and Corporate Governance Bill. We addressed audits in our bulletin in April this year and specifically, the transition from the Financial Reporting Council (‘FRC’) to the Audit, Reporting and Governance Authority (‘ARGA’).

The Bill promises to oversee the transition from the FRC to the ARGA, extend public interest entity (‘PIE’) status to include large private companies where they will be subject to additional audit requirements, introduce a new regime to protect against conflicts of interest, and remove unnecessary regulatory burden on small PIEs. If implemented effectively, this new Bill could prove to be instrumental in avoiding large scale corporate failures like Carillion we saw in 2023. 

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For large private companies, it looks like they are looking down the barrel of increased audit scrutiny and requirements. It will pay off therefore to be proactive and upfront about potential issues which could affect the audit process, including any internal policies or procedures in relation to the same.  

Covid-19 contracts

In September, Transparency International (‘TI’) released their investigative report into the way the UK handled Covid-19 public procurement. Following analysis of over 5000 UK contracts, TI determined that 135 contracts were potentially corrupt as they were associated with three or more ‘red flags’. The report lists these 14 ‘red flags’ to look out for, categorised into 4 broad areas: risks in the procurement process, risks in the supplier profile, poor contract outcomes and cross-cutting risks.⁵  While the red flags themselves of course are not indicative of wrongdoing, they were used to identify contracts which were then subject to heightened scrutiny.

The key findings were: (i) 28 contracts went to those with political connections, (ii) 51 contracts went through a ‘VIP Lane’ which meant that contracts were awarded to politically connected suppliers or were referred to by politicians; (ii) 8 contracts went to new/ inexperienced suppliers; and (iv) £30.7 billion worth of COVID-19 contracts were awarded uncompetitively.

The TI report comes as part of the ongoing Covid-19 inquiry and makes 15 recommendations to protect against this in future and urged the authorities to look into these problematic contracts. In fact, TI has written to the National Audit Office, the Public Accounts Committee and the Chancellor with detailed findings, and Tom Hayhoe has been appointed as the Covid corruption commissioner to lead the enquiry.

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Following the UK’s change in government, the Labour government has initiated the Covid inquiry to investigate PPE fraud claims during the pandemic under the previous government. It will be no surprise therefore to see follow up legal action in relation to these contracts in 2025, some of which resulted in billions of public money being written off due to potentially corrupt contracts.

We have previously written about the Economic Crime and Corporate Transparency Act here.

Footnotes

1. Economic Crime and Corporate Transparency Act: outline transition plan for Companies House – GOV.UK (www.gov.uk)
2. Guidance on the information sharing measures in the Economic Crime and Corporate Transparency Act 2023 – GOV.UK (www.gov.uk)
3. R Elliott Associates v London Metal Exchange final judgment.pdf at para 174
4. [2024] EWCA Civ 715 (27 June 2024)
5. Behind the Masks Report Final_0.pdf (transparency.org.uk) at Appendix 3.