In April 2017, the United Kingdom enacted the Criminal Finances Act which has created substantial new scopes of liability for companies engaging in business abroad.
Section 13 of the CFA expands the scope of the Proceeds of Crime Act to cover the international commission of gross human rights abuses against whistleblowers and human rights activists. This means that UK prosecutors can now use civil recovery procedures to freeze and then seize assets they allege are the products of gross human rights abuses (GHRA).
The primary targets of this modification are kleptocrats attempting to store assets in the UK. As the current UK Minister of Security, Ben Wallace, said: “[i]n an increasingly competitive international marketplace, the UK simply cannot afford to be seen as a haven for dirty money.”
However, the Criminal Finances Act also creates strong implications for all companies or individuals doing business outside the UK, particularly in areas where human rights violations are commonplace. Under the Act, it is equally unlawful to engage in activity linked to GHRA as it is to engage in them, and this includes profiting from, or materially assisting, GHRA. This is combined with what appears to be strict a liability intent standard to create a potent area of vulnerability for companies.
In purely legal terms, a company that unknowingly profits from goods tainted by GHRA is just as much a potential target for prosecutors as a dictator’s son.
The Criminal Finances Act places every entity holding assets in the UK on notice that those assets are vulnerable should they be the direct or indirect product of a GHRA. Even if a targeted company eventually avoids seizure, their assets may still have been frozen during the proceedings, creating possible business complications.
This post and others we’ll publish soon on the FCPA Blog are intended to help companies mitigate these risks, by introducing and explaining the new GHRA provisions, as well as by showing how to ensure compliance with the Criminal Finances Act and address potential violations.
We’ll begin by addressing the civil recovery mechanism.
The Proceeds of Crime Act empowers prosecutors to pursue assets in the UK that are allegedly the products of unlawful activity. This includes assets that “represent” the alleged benefits of a crime.
For example, if the benefit is a $2 million Swiss bank account, prosecutors could seize a $2 million London apartment. Targeted assets are frozen before trial, and this can occur without notice if there is a risk of capital flight. There are no limits on the targetable amount, it is (legally) possible for prosecutors to freeze all of Apple’s assets in the UK.
Recovery occurs through civil suit, on a balance of the probabilities standard. Licit goods are considered permanently tainted by association with illegal acts. So, if a company sells rings containing blood diamonds, then prosecutors can seize the entire revenue of the sale, not just the profit.
In the next post, we’ll analyze the Criminal Finances Act’s definition of a “gross human rights abuse.”
Richard J. Rogers is a founding partner at Global Diligence LLP, a London-based law firm specializing in international law and human rights compliance. It offers a wide range of services to companies operating in high-risk zones to help ensure compliance with international standards. He can be contacted here.
Sasho Todorov is a rising third year Vanderbilt law student and an intern at Global Diligence. He can be contacted here.