New approach to economic crime in Scotland hailed

The Crown Office and Procurator Fiscal Service (COPFS) has extended its self-reporting and leniency programme to cover crimes following the implementation of the Economic Crime and Corporate Transparency Act 2023 (ECCTA).

Previously, self-reporting initiatives were only available for reporting instances of bribery after being introduced in 2011, with Scotland the only part of the UK which has a policy offering civil settlements to self-reporting businesses rather than deferred prosecution agreements.

Under the expanded initiative, companies and other organisations which self-report economic crimes could be given the opportunity to negotiate a civil settlement in exchange for making a full disclosure and taking remedial action. The initiative applies to all corporate failure to prevent offences including bribery (Bribery Act 2010); facilitation of tax evasion (Criminal Finance Act 2023) fraud and other economic crimes (ECCTA); and to the principal offences of fraud and bribery where an organisation is criminally liable under a newly introduced “senior manager” test of attribution.

Tom Stocker, corporate crime expert at Pinsent Masons, said: “This is a welcomed development which shows the Scottish authorities are serious about tackling economic crime through a ‘carrot and stick’ approach. Businesses that are ethical and wish to address fraudulent and corrupt conduct now have a means to do so without irreparable harm being caused to their business.”

“The Scottish regime is significantly more lenient than the deferred prosecution agreement regime that operates in England & Wales because the Scottish regime allows the business to conduct the investigation and make a disclosure, and then to reach a resolution based on the benefit derived without an additional penalty being applied.”

Leniency will only be offered to organisations after investigations into the suspected misconduct by forensic accountants and solicitors, and a disclosure report being submitted to COPFS – which must be satisfied civil settlement is in the public interest. If it is, the case will be transferred to the Scottish government’s Civil Recovery Unit for a suitable civil settlement – ‘quantum’ – to be calculated and ultimately negotiated.

The move comes in the wake of new laws around failure to prevent fraud coming into effect under ECCTA

Companies have been preparing for the shift in doing due diligence and exposure under the ECCTA as it took effect on 1 September.

David Lister, forensic accountancy expert at Pinsent Masons, said: “The assessment of quantum under the initiative is attractive for businesses. It is based on a modified POCA [Proceeds of Crime Act] quantification and rightly focusses on the assessment of the benefit obtained from the suspected offending, recognising the often-complex financial fact pattern in UK corporates.”

“Adopting a profit-based calculation can be challenging but reasonable resolutions are achievable. Another upside to resolving suspected fraud and other financial crimes in this way is that auditors and other important stakeholders have visibility and clarity of approach. COPFS and the CRU are to be commended for expanding the initiative,” he said.

“It will help to address economic crime in Scotland and enable businesses to be part of the solution.”