01 Nov Directors could face jail if they ‘don’t prevent’ money laundering
British board members and company directors, be warned: your role in the fight against money laundering could soon become more critical. This is the warning from The Corporate Governance Institute, a provider of online governance education to aspiring and existing directors. Globally.
David W Duffy, the co-founder and CEO of The Corporate Governance Institute, said: “In the latest legislative proposals to combat financial crime, MPs are not only suggesting that directors should have more responsibility, but that they should face harsher punishments for breaking the rules. In short, prison time could be on the cards for those who don’t pull their weight.”
For directors, this means:
Their level of personal legal responsibility in financial crime cases will increase.
They could be liable if authorities can prove that their company facilitated financial crime.
They could go to jail in such a situation.
It also means that their career as a Non-Executive Director would be over if they were found to be culpable. A director only has one reputation, so it needs to be protected.
This doesn’t just apply to scenarios of ‘actively assisting’ foul play. It could easily apply to a lack of due diligence in preventing foul play.
Duffy continued: “At the moment, the legal changes revolve around the Economic Crime and Transparency Bill, which is currently at the committee stage and is awaiting a third reading in the House of Commons. MPs are expected to propose amendments to this bill which would place liability for any ‘failure to prevent criminal activity’ on company directors beefing up the regulatory framework still further.
“The Economic Crime and Transparency Bill already contained provisions for stricter oversight in the UK. It was due to give new powers to law enforcement to tackle organised crime and sweeping reforms to the company registration process.”
With this sentiment widespread amongst MPs, expect tougher regulations to follow, shining the spotlight of responsibility on directors more than before.
Analysts estimate that between £80 and £100 billion in dirty profits are laundered through the UK annually. In 2020, a leaked US Treasury report called the area a “higher-risk” jurisdiction. The country was repeatedly mentioned in the FinCEN files (an extensive dossier of money laundering revelations) in September of that year.
Duffy continued: “The UK – and London in particular – is considered a hotbed of dirty Russian money and a gateway through which it flows to the west. At the heart of the problem are controls that global watchdogs consider lax, which is why MPs are keen to see more accountability.”
“Directors should be aware of this, as they are ultimately responsible for strategy, due diligence, and company direction. If they blindly allow their firms to get involved in financial crime, or if they know about it and do nothing, their culpability is now likely to increase,” he concluded.
