Richard van Staden ten Brink, one of our criminal enforcement partners, wrote an op-ed article in Het Financieele Dagblad of 30 March 2015.

It can happen to any company. An employee commits fraud for the employee’s own personal gain, for the company’s benefit, or both. In this situation, a company has no other option but to start an internal investigation and impose disciplinary action. Often at this stage, the Public Prosecution Service is unaware of the investigation, and the company needs to decide whether to report the matter to law enforcement authorities.

In the Netherlands, criminal offences committed by employees are easily attributed to the company they work for. Former or current employees, as well as the company itself, can be prosecuted in cases where the criminal conduct took place in the context of normal business operations, the company benefited from the criminal offence, and/or where there was no policy or set of rules in place to prevent the criminal offence.

As of 1 January 2015, new legislation to prevent financial and economic crimes entered into force (see also In context February 2015). This new legislation allows higher fines to be imposed on companies that commit financial and economic offences: up to a maximum of 10% of the annual turnover instead of the pre-2015 maximum of EUR 810,000.

As a consequence, if a company reports fraud committed by former or current employees to law enforcement authorities, it in fact also reports itself to these authorities. In some cases, a company manages to reach a settlement. In other cases, a company’s criminal case is tried in open court. This is why companies often choose not to report, and former or current employees who have committed the fraud go unpunished.

This is clearly not desirable for many reasons. First of all, there is the prospect of repeat offence. The former or current employee could again be employed in a position of trust and again commit fraud when working for an unsuspecting employer. Second, this situation creates double standards. A minor offence, such as when a cashier steals cash from a cash register, gets reported to the police. But if an employee commits large-scale fraud, he or she goes unpunished because the company fears liability and prosecution for the employee’s conduct.

A “safe harbour”, well known under US law, could resolve this issue. A safe harbour could protect companies that “do the right thing” by reporting fraud to law enforcement authorities. Certain conditions should, of course, apply. This could include that a company proves that management was not involved in the fraud and that the report was filed before any criminal investigation was initiated.

Such a safe harbour could be implemented into new legislation or policy rules to prevent the Public Prosecution Office from prosecuting these types of cases. Implementing a safe harbour also increases the detection and punishment of white-collar cases. The price to pay – the fact that a company cannot be held criminally liable – is not high if the safe harbour only covers criminal conduct that the company’s management had no part in.

Source: Het Financieele Dagblad