On 2 September the attorney-general, Jeremy Wright, speaking at the Cambridge Symposium on economic crime, confirmed that the government is“considering proposals for the creation of an offence of corporate failure to prevent economic crime”. The proposed offence would be modelled on the offence of failure of a commercial organisation to prevent bribery, as set out at Section 7 of the Bribery Act 2010. Mr Wright’s comments followed similar sentiments expressed in July of this year by the then solicitor-general Oliver Heald QC.
It now seems likely that the introduction of legislation to extend the scope of corporate criminal liability is not far away. Fuelled by external influences such as the banking scandals, there is an increasing desire to hold corporates liable for criminal offences committed under their watch. Whereas the US regularly and actively prosecutes corporates for criminal offences, this has historically been difficult in the UK due to the “identification principle”, which establishes that a company is only criminally liable for offending behaviour if the acts and state of mind that make out the offence can be attributed to someone who represents the “directing mind and will” of the company.
The move is also being championed by David Green, the Director of the Serious Fraud Office (SFO), who said at the same event that he would“continue to speak in favour of amendment of S7 of the Bribery Act to create the offence of a company failing to prevent acts of financial crime by its associated persons. That would significantly increase our reach on corporate criminality, and is an idea that appears to be gaining traction.”
However, while the government may wish to appear tough on economic crime through the introduction of new legislative measures (this is the latest in a slew of new measures designed to tackle economic crime, following the Bribery Act 2010, the introduction of DPAs, and the formation of the National Crime Agency (NCA), amongst others) there is already criticism that the proposed offence would lack teeth. There have been no corporate prosecutions under section 7 of the Bribery Act since its enactment in July 2011, and with the SFO already under pressure running a number of existing high profile investigations (as set out in David Green’s speech at the Symposium), and having had to ask for an increase in its budget this year to deal with these, it is questionable whether the SFO would have sufficient resources to pursue corporates for yet another economic criminal offence.
Another aim for the government in introducing such legislation would be to encourage companies to improve their governance and take more steps to introduce procedures to prevent fraud, by introducing a defence for companies who have “adequate procedures” in place to prevent economic crime. Mr Heald indicated back in July that he would propose such a defence. Nonetheless, there could be less incentive for companies to take action and review all of their current corporate governance and compliance procedures to determine whether they are “adequate” if the SFO fails to show an active interest in prosecuting those that fail in implementing such procedures. Equally, corporates would argue that there is no need for a corporate criminal offence, as the reputational risks are sufficient to encourage them to manage their own affairs so as to prevent such offences taking place.
As yet, no timescale has been given for the introduction of this new corporate criminal offence, though it seems unlikely that it would be introduced before the general election in 2015. However, the two main political parties would both see the advantage in presenting a strong stance against corporate criminal activity, so changes may result regardless of which party is in government next year. Whether such legislation would lead to more corporates being prosecuted will however remain to be seen.