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Corporate Crime Reform

The UK might get a new offence: of ‘corporate failure to prevent economic crime’.

Should the corporate criminal liability for economic crime change? So a consultation by the Ministry of Justice early in the year asked. The ministry made the point that it’s hard to pin corporate criminal liability on a large company, such as a bank, whether the board, managers or agents. Instead, under the Bribery Act 2010, a company can be guilty not of bribery itself but of a separate offence; of failing to prevent it. A firm can avoid prosecution if it can show that, despite a bribe having happened, the firm assessed risks and set up procedures to prevent it (even if such good governance failed). Would that sort of liability work to deter ‘economic crime’ (such as fraud and money laundering) in general? the consultation asked.

In 2015, the the Serious Fraud Office made a ‘Deferred Prosecution Agreement’ (DPA) with a bank over a failure to prevent bribery. In return for the SFO not taking Standard Bank to court, the bank agreed among other things to a fine and measures to prevent more such offending. Such reform would increase the cost of corporate compliance, as a charity, the Fraud Advisory Panel pointed out in its response to the consultation.

The panel favoured change on the lines of the Bribery Act for other frauds, to give firms an incentive to improve their corporate governance; and might be more effective against corporate misconduct. The Panel suggests that, as with the Bribery Act since 2011, a firm could make a defence that it has ‘adequate or reasonable’ procedures. But as the Panel points out, if there’s a conspiracy to do a fraud, it could be hard for a company to either monitor or enforce compliance. Just as the UK Bribery Act applies if a firm offers or takes a bribe abroad, so it might be with a new wider offence, the Panel adds. The authorities would also have to work out what was a crime, and what was for the regulators.

For the ‘Corporate liability for economic crime: call for evidence’, which closed in March, visit the Ministry of Justice website. and for the Fraud Advisory Panel’s comments, visit the Panel website.

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