In 2014, the UK government announced that it was considering creating a new offence of “failing to prevent economic crime”, aimed at increasing corporate responsibility for the acts of employees. It was intended to build upon the existing corporate offence of failing to prevent bribery (Section 7 Bribery Act 2010), to which the only defence is that the business in question has implemented adequate procedures to do so. However, the Justice Minister, Andrew Selous, has recently announced that plans to bring in the new offence are not being progressed given there is little evidence of corporate economic wrong-doing going unpunished. The announcement is made against the background that no prosecutions under Section 7 of the Bribery Act 2010 have yet taken place.
The recent announcement means that the existing framework for establishing corporate liability for economic crime generally will not be extended. As such, the “identification principle” will continue to apply. In order to establish criminal liability for a corporate body, it will be necessary to prove, beyond reasonable doubt, that an individual at executive or board level committed the acts amounting to the commission of the offence, with the criminal intent to commit those acts. The announcement is silent on whether similar proposals to introduce new law to impose corporate liability for a failure to prevent the facilitation of tax evasion will continue. HMRC recently conducted a consultation on this proposal, and it is thought that, even if new legislation is not introduced, HMRC may seek to achieve some of the same aims by other means.
Section 7 of the Bribery Act 2010 remains in place. For such an offence, if it is proved, beyond reasonable doubt, that a bribe was given to obtain or retain business or some other sort of business advantage, then the burden shifts to the corporate entity to show that it had adequate procedures in place to prevent such wrong-doing.
While there have been no prosecutions as yet under Section 7, a Scottish company was recently reported as having paid out more than £200,000 under a civil settlement reached with the Scottish authorities following a contravention of the corporate offence of failing to prevent bribery. The company, Brand-Rex Ltd, had operated an incentive scheme for UK distributors and installers, with holidays being provided for those who met or exceeded sales targets. One of the company’s independent installers offered those holiday tickets to an employee of an end customer, who was in a position to influence who received the work. The employee accepted the tickets and went on the holidays.
Brand-Rex avoided prosecution by self-reporting the offence and carrying out an internal investigation. It accepted that it could have prevented the offence. A civil settlement was therefore deemed appropriate. In England, it is likely that a Deferred Prosecution Agreement (“DPA”) would be used in such circumstances. Entry into a DPA is at the discretion of the prosecutor. If a DPA is deemed appropriate, the corporate body is charged but the proceedings are immediately suspended, subject to various conditions being met (for example, the payment of a fine or compensation). Providing the conditions are satisfied, no further action will be taken.
This case is the first reported resolution under Section 7. It emphasises the need to continue to implement policies to seek to prevent any bribes being offered. If adequate procedures are not put in place to prevent bribes, then unlimited fines can be imposed. In this case, the sum of £212,800 was calculated based on the gross profits obtained as a result of the misuse of the scheme.