Companies failing to prevent economic crime? Is a new dawn coming?
For some time now there has been talk of extending the "failure to prevent" corporate criminal liability to offences other than bribery and the facilitation of tax evasion. This has stemmed from criticism about the inherent difficulty under English law in securing prosecutions against companies involved in crimes such as fraud, false accounting and money laundering.
Given that English criminal law tends to require the most senior management of a company to have committed, sanctioned, or at least been aware of, the criminal conduct, successful corporate prosecutions have been few and far between. It is striking how incriminating emails have tended to "dry up" as investigations proceed to the upper echelons of a company.
The tide on this may, however, have started to turn. On 13 January a group of MPs proposed an amendment to the Financial Services Bill to try and hold businesses criminally accountable for fraud, false accounting and money laundering offences committed by their employees. In effect, the group have proposed the extension of the principles of section 7 of the Bribery Act 2010 and sections 45 and 46 of the Criminal Finances Act 2017 to further economic crimes. Should a business fail to put in place policies and procedures designed to prevent fraud, false accounting and money laundering, and an employee of that business commits such a crime, then the business should also be guilty of an offence.
Interestingly, the proposed amendment only seeks to impose criminal liability in this manner to business and firms regulated by the UK's Financial Conduct Authority (FCA). It is not yet understood why the proposal is limited in this way but, if it is to have any traction and lead to a change in the law, it is, in this writer's opinion, highly likely that it will be extended to all UK companies. After all, in no way is fraud, false accounting and money laundering restricted to financial services firms.
There are, however, considerable competing forces at work as to whether the proposed amendments make any headway. First, the government is very much focussed on two key issues - the pandemic and how the UK moves forward in light of the UK's exit from the European Union. The attention required on these issues may mean that any change to corporate criminal liability is some way off. Also, the government may be keen to avoid any suggestion of additional burdens on businesses by way of "red tape" in light of its stated aim to support UK businesses post-Brexit. And finally, the government said in November 2020 that it had finished its examination of potential changes to corporate criminal liability and had decided to task the Law Commission with conducting further analysis. The Law Commission has a wide range of options to look at - only one of which is extending use of the "failure to prevent" mechanism - so it may be that changes will await the outcome of their review.
