Verdict The
Round-up of corporate
crime developments
across CMS
Summer 2017
Extension of corporate criminal
liability
The Czech Republic fi rst recognised that
legal entities could be criminally liable in
the 2012 Act on Criminal Liability of Legal
Entities and Proceedings against Them
(the “Act”). For such liability to arise, the
governing body, the executive of the legal
entity or an employee must have
committed at least one of the crimes
listed in the Act. On 1 December 2016, an
amendment to the Act came into force,
increasing the number of crimes that can
be committed by legal entities from 83 to
approximately 200. Some noteworthy
examples of newly imputable crimes are a
violation of obligations of trust, damage
to a creditor, favouring creditors and
causing bankruptcy.
The amendment also contains a new
defence for legal entities, not only in
respect of their employees, but also
persons in a leading or governing role.
Provided that the legal entity can prove it
had “undertaken all the effort that can be
reasonably required” to prevent a crime
being committed, and the crime was
committed by a person in a governing or
leading role in the company, or an
employee while exercising his/her tasks,
the entity will avoid liability. This is in
keeping with similar concepts in other
countries, such as the corporate offence
in the UK Bribery Act, where corporates
can avoid liability for failing to prevent
bribery if they can show they had in place
adequate anti-bribery procedures.
The Supreme State Prosecutor Offi ce has
published guidelines with examples of
possible measures that could be adopted
by legal entities in order to prevent crimes
being committed, including internal
regulations, training, ethical codes,
anti-bribery and corruption programmes
and appointing a corporate ombudsman.
It is not necessary for a legal entity to
adopt all of these measures, but it is
essential for companies to implement the
measures that are reasonably required,
then control and assess their impact.
Premeditation of Tax Evasion
On 1 July 2016, an amendment to the
Criminal Procedural Code and Criminal
Act came into force, introducing criminal
liability for the premeditation of
avoidance of taxes, fees and similar
mandatory payments (“Tax Evasion”).
The premeditation (i.e. the deliberate
creation of conditions for committing a
crime) of Tax Evasion is now listed as
punishable provided that the evasion
amounts to a minimum of CZK 5,000,000
(EUR 185,000). The amendment has also
further extended the scope of Tax Evasion
by making it possible to initiate criminal
proceedings where an offender
premeditates, attempts or commits Tax
Evasion in connection with an organised
group operating in several states.
Temporary suspension of criminal
prosecution
The 1 July 2016 amendment of the
Criminal Procedural Code also enables a
police authority to decide temporarily to
suspend the criminal prosecution of a
suspect if the suspect provided or
promised to provide a bribe solely
because he or she was requested to do
so, then notifi es the authorities willingly
and offers full and truthful testimony
about the crime in both preliminary and
court proceedings. Should the suspect fail
to comply with his/her undertaking to
assist the police, or if new facts emerge,
the police can recommence the
prosecution at a later date.
A new criminal sanction
On 18 March 2017, a new sanction was
introduced into Czech anti-corruption
law, namely confi scation of a person’s
property. A court may impose this
sanction if it concludes that the particular
property originated from the proceeds of
criminal activity.
Four signifi cant
changes to Anti-
Corruption laws
Czech spotlight
Belgium: New guilty plea
procedure adopted
Over the past year, the Belgian public
prosecutor has made regular use of the
new “guilty plea” procedure, particularly in
white collar crime proceedings. Since
February 2016, the prosecutor (on its own
initiative or at the request of the defendant
or his lawyer) can offer an agreement
allowing the defendant to “plead guilty”.
Through such an agreement, the public
prosecutor proposes a sentence that is
generally a lesser sentence than would
otherwise be imposed, providing an
incentive for the defendant to agree.
The prosecutor may also propose that the
sentence be suspended. By entering into
the agreement, the defendant
acknowledges his guilt and accepts the
proposed sentence. If the Court approves
the sentence, it will sentence the defendant
pursuant to the agreement. The Court may
refuse to approve the agreement if it
considers that the legal conditions have not
been met or the proposed sentence is not
appropriate for certain reasons. Given that
the guilty plea procedure can take place at
any stage prior to a fi nal judgment and
given the (infamous) duration of Belgian
criminal proceedings, the procedure should
prove a useful way of simplifying the
process in straightforward cases.
France: Law requires mandatory
compliance programmes
On 9 December 2016, the French
Parliament adopted the “Sapin II” law,
which provides for the setting up of an
anti-corruption agency responsible for the
prevention and detection of corruption in
France, and sets out new measures
designed to change the behaviour of
companies. It requires certain large
companies/groups of companies and public
bodies to adopt compliance programmes
designed to prevent and detect acts of
corruption in France or abroad. The
programmes must contain eight specifi c
measures, including: (i) implementing a
code of conduct; (ii) implementing an
CMS round-up
internal alert system for employees;
and (iii) corruption risk mapping to analyse
the company’s exposure. The penalty for
failure is a fi ne of up to EUR 1 million. The
prosecutor may also now offer a public
interest legal settlement, akin to a
“deferred prosecution agreement”, in
which case the fi ne imposed may be higher
– up to 30% of the company’s turnover.
Sapin II also requires companies with more
than 50 employees to implement
whistleblowing procedures for staff and
establishes protections guaranteeing
anonymity/ confi dentiality for the
whistleblower, the persons targeted by the
alert and the information that is gathered.
Germany: Anti-money laundering
directive transposed
On 17 May 2017, the German Parliament
passed a law transposing the Fourth EU
Anti-Money Laundering Directive. The law
reduces the burden of establishing
anti-money laundering measures on the
non-fi nancial sector, specifi cally “traders in
goods” companies, who will only be
required to perform “know your client”
(KYC) checks for cash transactions above
the threshold amount of EUR 10,000.
Previously, all traders in goods had to
perform KYC checks for all cash
transactions or other transactions in
suspicious cases, and were also required to
establish formal risk-based safety measures
such as internal controls or employee
training. The German practice had always
been considered an “over-transposition” of
the Third EU Money Laundering Directive.
With suspicious transaction reporting still
defi cient outside the fi nancial sector in
Germany, traders in goods remain obliged
to perform KYC for suspicious transactions
and to report suspicious activity to a
re-designed fi nancial intelligence unit,
which will be moved from the federal
police offi ce to the federal customs offi ce.
Germany is not expected to meet the 26
June 2017 deadline for the establishment
of a nation-wide transparency register,
which will probably not be operational
before 2018.
Italy: Scope of bribery offence
extended
On 14 April 2017, a Decree on bribery in
the private sector came into force, fi nally
implementing a Council of the EU Decision
of 2003. The fi rst key change is the
modifi cation of the bribery offence,
including: (i) extending the scope of the
offence from commercial companies to any
“private entity”; (ii) extending the scope to
include bribery through intermediaries and
recognising that individuals with executive
functions are capable of bribing on behalf
of a company ; (iii) expanding the range of
behaviours relevant for the offence; (iv)
eliminating the requirement for the bribery
to cause “damage to the company”; and (v)
providing for prosecution to be possible
when a distortion in competition in the
supply of goods and services derives from
the criminal conduct. The law also
introduced the crime of incitement of
private-sector bribery.
Poland: Confi scation of assets
rules adopted
In April 2017, a law came into force
implementing new rules on the
confi scation of assets connected with a
crime. The changes include: (i) confi scation
of the entire enterprise owned by an
individual (not a legal entity), if used to
commit a crime or hide the proceeds of a
crime and (ii) compulsory company
management by a manager appointed by
the prosecutor or court, depending on the
phase of the proceedings, as a new interim
measure of securing, among other things,
confi scation and sanctions that may be
imposed on a corporate entity. Another
signifi cant change relates to a presumption
that proceeds relating to assets obtained in
the period from up to fi ve years prior to
committing the crime and until the ruling
of the court of fi rst instance convicting the
perpetrator have criminal origins. This
measure is possible in case of some more
serious offences only, in particular if the
perpetrator obtained a benefi t from the
crime equivalent to c.a. EUR 50,000, or
participated in organised crime. The
amendment also extended the ability to
use evidence obtained via operational
surveillance (e.g. police wire-tapping).
Portugal: Appeal of Face Oculta
corruption case
In April 2017, the Appellate Court of
Oporto issued its fi nal award in the “Face
Oculta” case, which was the fi rst large
scale corruption investigation in Portugal.
The criminal investigation commenced nine
years ago, the case underwent 180 court
sessions and the trial lasted for three years.
The case involved thirty four individual
defendants, including well-known
politicians and notorious businessmen, all
of whom were convicted and imprisoned.
CMS Lisbon advised two defendants -
directors of a public utilities company
– who were acquitted on appeal. However,
thirty of the initial thirty four individual
convictions were confi rmed on appeal.
Russia: Anti-corruption law
amended
Russia is widely assumed to have a high
level of corruption (according to
international studies and ratings) and a
number of anti-corruption measures have
been implemented over the past decade,
most recently in 2016 and 2017. In July
2016, amendments to anti-corruption
legislation were adopted extending criminal
liability for assisting in bribery or acting as
intermediary in bribery, which had
previously only covered bribery of civil
servants or state offi cials. In June 2017,
amendments to a number of legislative
acts came into force introducing a ban on
public offi cials (as well as their spouses and
minor children) opening and holding bank
accounts and assets in banks abroad, as
well as owning and using foreign fi nancial
instruments. In line with strict anticorruption
rules, the legislator has also
recently obliged Russian legal entities to
disclose information about their benefi cial
owners at the request of government
authorities.
Serbia: Amendments to the
Criminal Code and Seizure and
Confi scation Law
On 23 November 2016, the Serbian
Parliament adopted a series of anticorruption
laws, including amendments to
the Criminal Code (the “Code”). The
amendments, which largely came into force
on 1 June 2017, bring the Code in line with
EU, Council of Europe and UN standards.
The key amendments include changes with
respect to criminal offences against
economic interests (i.e. white-collar crime),
increasing the number of criminal offences
in the Code to 29 (previously 25). Three
existing offences have also been
decriminalised (abuse of authority of a
responsible person, issuing a cheque and
use of payment cards without coverage,
and misleading customers. In a further
development, the Serbian Parliament also
adopted amendments to the Law on
Seizure and Confi scation of the Proceeds
from Crime ( the “Seizure Law”). The
amendments are generally focused on
making the procedure for seizure and
confi scation more effi cient (e.g. appeal has
now become the only legal remedy
available to the property owner). The
Seizure Law will now also apply to, among
others, criminal offences against economic
interests, and introduces the possibility of
confi scation of assets of the same value as
the proceeds of crime if the proceeds
themselves are not available. Finally, it
extends the deadline for the public
prosecutor to fi le a request for confi scation
of assets to six months from the date of
the fi nal judgment.
Switzerland: Court examines
privilege in internal investigations
On 20 September 2016, the Swiss Federal
Tribunal held that legal professional
privilege did not prevent prosecutors from
accessing documents produced by lawyers.
Two law fi rms had been retained by a Swiss
bank to carry out an investigation of
suspected contraventions of laws by the
bank’s employees, and provide strategic
legal advice on a defence for the bank.
The fi rms interviewed the employees, made
fi le notes and produced a report. When the
federal prosecutor demanded disclosure of
the documents, the bank asserted
privilege. In considering legal advice
privilege, the Tribunal held that the law
fi rms had performed tasks as part of an
“outsourced compliance controlling
process”. The fact that the internal
investigation had been conducted by
lawyers did not alter the nature of the
tasks, which constituted non-legal work.
The judgment has been controversially
received, as the collation of facts and their
legal analysis are often inseparable
elements of one and the same mandate.
It illustrates the importance of placing an
internal investigation into the wider context
of specifi c legal work, and carefully
considering the format in which
information collected by lawyers is
presented to a client, given the risk of later
disclosure to criminal investigation
authorities.
UK: SFO overcomes privilege
claim for internal investigaton
documents
On 8 May 2017, in Director of the SFO v
ENRC, the English High Court held that
certain documents created by a company’s
legal advisers during an internal
investigation were not protected by legal
professional privilege and must be
disclosed to the Serious Fraud Offi ce
(“SFO”) (the prosecutor) as part of its
criminal investigation. A law fi rm had
conducted an internal investigation into
allegations of corruption, creating interview
notes and a draft report during a period of
dialogue and an agreement to cooperate
with the SFO as part of its self-reporting
process. The judge found that as part of
the basis of litigation privilege is the
contemplation of adversarial proceedings,
where a criminal prosecution was not
reasonably contemplated (as opposed to an
investigation by the authorities), litigation
privilege could not apply. This was
important as litigation privilege provides
wide protection for lawyer work product,
including documents relating to the
litigation that go beyond merely giving or
seeking legal advice. The judge also noted
that it is harder to claim litigation privilege
in the criminal context than in a civil one
because the commencement of criminal
proceedings requires a high threshold test
to be met that does not exist in civil cases.
In addition, where lawyers are instructed in
a purely investigatory, ‘fact-fi nding’ role,
their work product will not be covered by
legal advice privilege as the work does not
involve legal advice. So a mere record of an
interview would not be protected. The
company has stated it intends to appeal.
4 | The Verdict
For further resources and the latest news on corruption issues, visit
CMS’ Anti-Corruption Zone: www.cms-lawnow.com/aczone
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6 | The Verdict
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