Head of Banking & Lender Disputes | Dispute Resolution | Banking & Finance
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From 26 December 2023, organisations will be liable for the fraudulent acts of their senior managers.
This is the "Attributing criminal liability for economic crimes to certain bodies" offence under section 196 of the Economic Crime and Corporate Transparency Act 2023 (the Act having received Royal Assent in October earlier this year).
It is vital that organisations understand the intricacies of the new offence and how its implementation will impact their risk exposure.
We have previously prepared an article on the technical detail of the offence.
In short, if a senior manager commits a relevant offence, then their organisation will also be guilty of that offence.
A senior manager is an individual who plays a significant role in making decisions about (a) how the whole or a substantial part of the activities of an organisation are managed or organised or (b) the actual managing or organising of the whole or a substantial part of those activities.
This is a wide definition, and it is likely to give rise to uncertainty as to who exactly qualifies as a senior manager (for example, their job title may not contain the words "senior manager", but they may nevertheless still be considered to be one given the nature of the role that they undertake).
This new definition essentially lowers the (previously very high) threshold for attributing the offences of employees to their organisations.
Therefore, if a senior manager commits (or attempts to commit, conspire, aid, abet, counsel, or procure) any of the offences that are listed in Schedule 12 of the Act, their organisation will also be guilty of the same offence. The schedule 12 offences are numerous but include, for example:
It is essential for organisations of all sizes to consider the impact of the legislative change since the new regime is likely to increase an organisation's risk of criminal liability by broadening the number of employees whose acts may be attributable to the organisation.
Unlike the Act's "Failure to Prevent Fraud" offence, there will be no defence of having had reasonable procedures. This arguably makes it even more important to take steps now to ensure your risk is mapped and have prevention and response strategies in place.