Presentation by Nicholas Ryder Professor in Financial Crime

Presentation by Nicholas Ryder Professor in Financial Crime Thursday, September 14 2017 ‘Corporate Liability for Economic Crime – merely window dressing or a statement of intent’

Abstract • • What is white collar crime? The extent of financial crime Financial Crime Legislation Key Regulatory Agencies Did they get away with it? Enforcement activities Recent Developments Corporate Liability for Economic Crime 2

What is white collar crime? • The term was first used by Edwin Sutherland (1939): – “a crime committed by a person of respectability and high social status in the course of his occupation” – white-collar criminals include: • robber barons, • merchant princes, and • captains of finance and industry. • But is this definition still relevant in 2017? • Is it time to extend the definition to apply to companies? Corporate Liability for Economic Crime 3

Extent of Financial Crime Fraud: Money Laundering • National Fraud Authority (2011) - £ 39 bn • National Fraud Authority (2012) - £ 73 bn • National Fraud Authority (2013) - £ 52 bn • • • Between 2 and 5 % of Global GDP, approximately $1. 6 tn (United Nations, 2009) Between $590 bn and $1. 5 tn per year (FATF), National Crime Agency: £ 36 -90 bn Corporate Liability for Economic Crime 4

Financial Crime Legislation • Money Laundering: – Proceeds of Crime Act 2002 – Money Laundering Regulations 2017 – Crime and Courts Act 2013 – Criminal Finances Act 2017 • Fraud: – Criminal Justice Act 1987 – Fraud Act 2006 • Bribery/Corruption: – Bribery Act 2010 Corporate Liability for Economic Crime 5

Financial Crime Legislation • The Financing of Terrorism – Terrorism Act 2000 – Anti-terrorism, Crime and Security Act 2001 – Terrorism Act 2006 – Counter-Terrorism Act 2008 – Terrorist Asset-Freezing etc. Act 2010 Corporate Liability for Economic Crime 6

Financial Crime Legislation • Market Manipulation – Financial Services (Banking Reform) Act 2013 s. 36 – Financial Services Act 2012 s. 89 -91 Part 7 – Market Abuse • Financial Services and Markets Act 2000 s 118 – Insider Dealing • Criminal Justice Act 1993 Part V Corporate Liability for Economic Crime 7

Key Regulatory Agencies • Serious Fraud Office • Financial Conduct Authority • National Crime Agency Corporate Liability for Economic Crime 8

Did they get away with it? • • • The Secondary Banking Crisis, Johnson Matthey Bank, Barlow Clowes, BCCI, Barings Bank, HSBC – money laundering and terrorist financing, RBS – purchase of ABM Amro, HBOS – Fraud and Barclays? Corporate Liability for Economic Crime 9

Enforcement activities Financial Conduct Authority 1. 2007 £ 5. 3 m 2. 2008 £ 22. 7 m 3. 2009 £ 35 m 4. 2010 £ 66. 1 m 5. 2011 £ 89. 1 m 6. 2012 £ 311. 5 m 7. 2013 £ 474. 1 m 8. 2014 £ 1. 47 bn 9. 2015 £ 905 m 10. 2016 £ 22. 2 m 11. 2017 £ 163. 3 m (September 2017) Corporate Liability for Economic Crime 10

Enforcement activities Serious Fraud Office: 1. 2001/2006 61% 2. 2006/2007 71% 3. 2007/2008 68% 4. 2008/2009 91% 5. 2010/2011 84% 6. 2011/2012 73% 7. 2012/2013 70% 8. 2013/2014 71% 9. 2014/2015 78% 10. 2015/2016 56% Corporate Liability for Economic Crime 11

Enforcement/Sanctions MLRO Bank • Michael Wheelhouse was fined £ 17, 500 (October 2008) • Sudipto Chattopadhyay fined £ 14, 000 (May 2010) • Syed Itrat Hussainn £ 17, 500 (May 2012) • Coutts & Company £ 8. 75 m (March 2012) • EFG Private Bank £ 4. 2 m (March 2013) • Standard Bank Plc £ 7. 6 m (January 2014) • Deutsche Bank £ 163 m (January 2017) Corporate Liability for Economic Crime 12

Sanctions: Libor • 2015: • 2013: – Deutsche Bank £ 227 m (FCA) – Barclays £ 284 m (FCA) • 2014: – Lloyds Bank and Bank of Scotland, £ 105 m (FCA) – Martin Brokers (UK) Ltd £ 630, 000 (FCA) – Rabobank, £ 105 m (FCA) – ICAP Europe Ltd, £ 14 m (FCA) – Royal Bank of Scotland, £ 85 m (FCA) • 2012: – UBS AB, £ 160 m (FCA) – Barclays Bank, £ 59. 5 m (FCA) Corporate Liability for Economic Crime 13

Enforcement/Sanctions • Bribery and Corruption: • Prosecutions: – Yang Li – the failing student – Munir Yakub Patel – the Magistrates Court Clerk – Mawia Mushtaq – the driving examinee • Deferred Prosecution Agreements: – Standard Bank, – XYZ, – Rolls Royce and – Tesco. Corporate Liability for Economic Crime 14

Recent Developments • Cabinet Office Review (2016) – “The Cabinet Office will look at the UK’s response to economic crime more broadly … [t]his will include looking at the effectiveness of our organisational framework and the capabilities, resources and powers available to the organisations that tackle economic crime” (Amber Rudd, Home Secretary) – full terms of reference have not been made publically available – prompted increased anxiety from current law enforcement and regulatory agencies Corporate Liability for Economic Crime 15

Recent Developments • Corporate Liability for Economic Crime (January 2017) – Amendment to identification doctrine – Strict (vicarious) liability offence – Strict (direct) liability offence – Failure to prevent an element of the offence – Investigate the possibility of regulatory reform on a sector by sector basis Corporate Liability for Economic Crime 16

Questions? • • • Is it time for the corporate death penalty? Important position of financial services sector? Too scared to prosecute? Too scared to jail? Political appetite? Corporate Liability for Economic Crime 17