The Government has announced proposals for a new corporate offence of failure to prevent economic crime. While “economic crime” has not been fully defined, the proposals are that it will include fraud, money laundering and false accounting. The proposals will be the subject of consultation over the Summer.
The offence uses the same corporate criminal liability mechanism that is found in the Bribery Act 2010 offence of failing to prevent bribery and also the new offence currently under consultation of failure to prevent the facilitation of tax evasion. Under these offences, the corporate is effectively strictly liable (i.e. without the need for intention or knowledge) for criminal activity by its associated persons (e.g. employees, contractors, agents etc.) unless the corporate can demonstrate that it had sufficiently robust prevention procedures in place.
In the Bribery Act 2010, the UK already has one of the most stringent anti-bribery legal regimes in the world. The announcement at the corruption summit hosted by the UK on 12 May continues the now familiar UK policy drumbeat of zero tolerance towards business crime. It also reinforces the UK’s apparent willingness to set the highest standards and lead the fight against business crime internationally.
Thomas Webb’s view is that, while the UK is right to continue its zero tolerance approach to business crime, the creation of more strict liability corporate offences entails a significant danger of overloading UK businesses with risk. First, the liability relates to the actions of third parties over whom they can never realistically exercise complete control (e.g. employees of a subsidiary operating overseas). Second, the proposed offence will almost certainly require most businesses to substantially review and expand their existing policies and procedures, at considerable cost. Third, the liability in question is not merely a fine, or regulatory censure. It is a criminal conviction, with all the stigma and reputational harm that this entails.