Just a few days have passed since the news of the outcome of the referendum on the UK’s membership of the EU. The immediate political and economic effects are both significant and well documented, becoming one of the few topics of conversation at the current time. There is also a great deal of uncertainty while we wait for decisions to be made on political leadership and the timing and process for exit, and for the eventual exit plan itself to be negotiated.
Companies and their advisers will be reviewing what areas of their businesses are subject to EU law and to what extent UK and EU laws are set to diverge. In this context, it is helpful to consider how far EU law affects business crime, and what might change.
Firstly, there are vast swathes of law that will be largely unaffected. The powers in the UK to conduct investigations, including powers of arrest, search and seizure, decisions to charge or alternative disposals, criminal procedure, evidence, sentencing confiscation, appeal and judicial review all stem from national laws. In addition, a number of the substantive business crime offences, including the Proceeds of Crime Act 2002, the Bribery Act 2010 and the Fraud Act 2006 were created by the UK Parliament without the influence of Europe. Many other laws, for example the Theft Act 1968, predate the UK’s membership of the EU.
Some influence of the EU is felt by the adoption of the European Convention on Human Rights (ECHR) and its application to UK cases. However, the ECHR was neither a regulation directly imposed on the UK, nor a directive requiring the UK to implement a specific outcome, but the direct implementation of a European law into UK legislation, which specifically retained parliamentary sovereignty. It is important to recognise this whenever claims are made about not being able to do something because of “human rights”.
Money laundering is the perfect example of an area of law with some, but limited, EU influence. The substantive law, governing the offences of money laundering, the creation of reporting requirements and the wider role of the Money Laundering Reporting Officer (MLRO), all stem from the national law. The Money Laundering Regulations 2007 are the result of a directive, and at the time of writing a statutory instrument putting the Fourth Money Laundering Directive into UK law is being prepared. Although one can of course argue such legislation could be drafted from scratch by UK lawmakers, the body responsible for the standards and effective implementation of legal, regulatory and operational measures for combating money laundering is The Financial Action Task Force (FATF), an inter-governmental global body. For more information see Practice note, Money laundering offences in the UK: overview.
Europe plays a significant role in both extradition and mutual legal assistance. It is correct to say that both exist with countries outside the EU, and not every country within the EU is as co-operative as prosecutors hope. However, the various European bodies provide a clear framework for assistance within member states. It is guesswork to suggest how far co-operation may decline, and it is unlikely that the most serious offences would suffer. The effect on lesser offences, in particular the speed of action, may be an issue.
The Extradition Act 2003 makes a distinction between category 1 territories, the remaining 27 EU states, and category 2 territories, containing some, but not all, other territories. Contrary to some suggestions, EU membership has made extradition an easier process because of the standardisation. Hussain Osman, accused of a failed bombing attack in London in July 2005, fled to Italy, and was arrested and extradited to the UK within two months. For more information see Practice note, Mutual legal assistance.
Some direct areas of EU law are unlikely to be contentious. It is difficult to see any future administration not wanting to recognise and implement EU trade sanctions, and probably impossible if a future trade agreement is to be reached. Other areas where EU set standards are subject to criminal penalties for breach, for example the Enterprise Act 2002 and various environmental and health and safety offences, could be more vulnerable.
Perhaps the most important consideration is that organised crime does not recognise boundaries, and in the cybercrime age criminals do not need to be physically in the UK to commit large scale fraud, or indeed oversee the supply lines of illegal drugs. There may have been elements within the leave campaign who proposed that a closing of borders would lead to a reduction in crime. This demonstrates a key misunderstanding of organised crime.
Time will tell whether the vote to leave the EU will result in a host of business crime laws to redraft.