Widening the scope of corporate criminal liability: A new offence of failure to report economic crime
Those keeping a keen eye on the development of corporate criminal liability will have been aware that since the beginning of the year the director of the Serious Fraud Office, David Green, has been vocal about widening the scope of corporate criminal liability. On 2 September 2014, Jeremy Wright QC MP finally confirmed that this is to likely to become a reality; in his maiden speech as Attorney General to the Cambridge International Symposium on Economic Crime, he stated that “officials are considering proposals for the creation of an offence of a corporate failure to report economic crime, modelled on the section 7 Bribery Act offence”.
The details are, as yet, unknown. However the comparison with section 7 of the Bribery Act 2010 is a useful one for those considering what such an offence might look like. Section 7 of the 2010 Act provides that a commercial organisation is guilty of an offence if a person associated with the organisation bribes another person, intending to obtain or retain business for the organisation or an advantage in the conduct of business for the organisation. By virtue of section 8 of the 2010 Act, an ‘associated person’ is someone who performs services on behalf of C. Such a wide definition encompasses employees, agents, subsidiaries and service partners. The only defence available to the organisation is contained in section 7(2) of the Act, which requires the organisation to prove (on the balance of probabilities) that it had in place adequate procedures designed to prevent bribery by associated persons.
When the section 7 offence was first proposed, there was widespread backlash from businesses. They objected on the basis that it was unfair, too heavy and put the onus of proof onto them. Since the passing of the 2010 Act, many companies have sought to protect themselves through enhancing their anti-corruption procedures and training, and seeking the advice of compliance advisors. As an aid to these measures, in 2011 the Ministry of Justice issued guidance to the 2010 Act, setting out a number of recommendations for commercial organisations. These include regular risk assessment, a clear due diligence strategy and regular monitoring and review.
Both offences represent an erosion of the established English principle that a company’s criminal responsibility lies only so far as its ‘directing will and mind’. In this way, the United Kingdom is taking a step closer to the United States’ approach, where a company can be responsible for the actions of those agents or employees acting within the scope of its employment and at least in part to benefit the company. It is debatable as to how desirable the move is. On the one hand, such an approach places a heavy and potentially expensive responsibility on a company for the actions of its individual employees, where individual prosecutions against those employees might more accurately represent their responsibility and punish the offence. On the other hand, it does provide a strong incentive for companies to put in place adequate measures to prevent financial crime, potentially limiting the scope for rogue employees to commit offences, and contributing more effectively to the prevention of financial crime as a whole.
As yet, there have been no successful prosecutions under section 7 of the 2010 Act. Nevertheless, commercial organisations will need to be acutely aware that the scope of their criminal corporate liability for associated persons may well be widening far beyond bribery offences. It is imperative that organisations have in place adequate procedures for the prevention of financial crime, in order to protect themselves as far as possible. In terms of practical steps, until more is known about the proposed offence and the timetabling of consultations, the best approach for organisations is to ensure they remain well acquainted with the recommendations of the 2011 Guidance, seek specialist advice as to risk prevention where appropriate and stay abreast of developments as they arise.