Directors could face jail time in UK over money laundering

British board members and company directors, be warned: your role in the fight against money laundering could soon become more critical.

In the latest legislative proposals to combat financial crime, lawmakers 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.

British lawmakers are proposing corporate law changes to stem the tide of money laundering and other financial crimes. 

For directors, this means:

• Their level of personal legal responsibility in financial crime cases will increase. 
• They could be liable if authorities say their company facilitated financial crime. 
• They could go to jail in such a situation.

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.

At the moment, the legal changes revolve around the Economic Crime and Transparency bill, which is currently at the committee stage and 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, the Times reported last week.

To parliamentary groups – one for anti-corruption and responsible tax, the other for fair business banking – support the amendments. 

Both groups contain of representatives from all major political parties.

The Economic Crime and Transparency bill had 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. 

But MPs were not pleased.

It is a “crushing disappointment,” according to the anti-corruption and responsible tax parliamentary group chair Margaret Hodge. 

“We will never enjoy sustained economic growth on the back of dirty money, and we will never truly reform corporate culture in Britain until there is a real deterrent against bad behaviour,” she told the Times. 

With this sentiment widespread amongst MPs, expect tougher regulations to follow, shining the spotlight of responsibility on directors more than before.

Historically, yes, although it continues to boast efforts to rectify this. 

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. 

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.