International - Written by on Thursday, September 8, 2016 1:02 - 0 Comments

Opinion: New UK govt crackdown on ‘corporate irresponsibility’ to be underpinned by biggest change to corporate criminal law in history

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s300_number10Speaking at the G20 earlier this week Theresa May highlighted the issue of corporate irresponsibility in society as a key theme of her leadership.

Our sources confirm the same.

If there was any doubt at the Cambridge Economic Crime symposium this week this policy message was supported in a trio of speeches from law enforcement leaders.

In a speech Jeremy Wright, Attorney General said:

“…as you may have noticed we have a new Prime Minister, and her commitment to tackling economic crime and corporate responsibility is evident.

The Prime Minister has spoken of her intention to “get tough on irresponsible behaviour in big business…”

The Government remains committed to tackling economic crime and corruption in all its forms….”

“…there is more to do in our response….

… the Government will soon consult on plans to extend the scope of the criminal offence of a corporation ‘failing to prevent’ offending beyond bribery to other economic crimes, such as money laundering, false accounting and fraud.

The Prime Minister has prioritised ‘building an economy for all’ and that means that businesses of all sizes should be accountable and promote responsible actions through effective corporate governance.

Our current system of limited corporate liability incentivises a company’s board to distance itself from the company’s operations. In this way, it operates in precisely the opposite way to the Bribery Act 2010, one of whose underlying policy rationales was to secure a change in corporate culture by ensuring boards set an appropriate tone from the top.

The threat of conviction is greater under ‘failure to prevent’ and as a result, companies might be more likely to not just enter into deferred prosecution agreements but also, crucially, to take the actions necessary to discourage such offending within the organisation in the first place. The prospect of being convicted of criminal offences often encourages greater cooperation between the parties involved, saving jolietta in canada time and public money.

An extension of the failure to prevent offence can enhance the UK’s reputation in the fight against fraud and help to promote improved corporate governance.

So let me end by saying this. When considering the question ‘where does the buck stop?’ and who is responsible for economic crime, it is clear that the answer is to be found at every level, from the boardroom down. Both corporations and individuals are responsible.”

The intention of the Government actions I have described is not only to prosecute and to fine for breaches of the law but to promote a culture of corporate responsibility so that we are addressing the threat earlier on and not just reacting to it through investigation and prosecution.

A change in culture is something that will take time but the results, as we are already starting to see, will be worth the effort.”

David Green CB, QC speaking at the same conference on Monday said:

“As an enthusiastic supporter of a new “failing to prevent economic crime” offence since 2012, I warmly welcome the consultation announced at the Anti-Corruption Summit.

As things stand, before a company can be prosecuted in this country, the “identification principle” requires the prosecutor to identify the “controlling mind” of the company and prove that that person was complicit in the offence under investigation.

In a world of increasingly complex corporate structures, the identification principle can hobble the prosecutor in those cases where it is right to prosecute the company.

The principle is illogical in that at present it is the only route to liability for all major economic crime offences (fraud, false accounting, money laundering) except bribery and (soon) tax evasion.

The principle operates unfairly: it is always easier to identify the controlling mind in a small company than in the case of a large corporation.

It is also creates unhelpful incentives for senior executives: on the one hand to distance themselves from knowledge of operations in fraud cases, on the other to preach compliance in bribery cases so as to demonstrate adequate procedures.

Tom Hayes was prosecuted in this country for his role in Libor manipulation. The operation of the identification principle meant that we could not touch the bank for which he worked whilst manipulating Libor. That bank was held to account for Hayes’ conduct in a New York courtroom, where vicarious liability made the prosecution a much simpler matter.

A “failure to prevent economic crime” offence would significantly increase the prosecutors’ reach in those cases where a company should be held to account for the conduct of persons associated with it. It would also underpin the anti-corruption, responsible capitalism and social justice agendas, and the prosecutors’ contribution to those efforts.”

Alun Milford, the SFO General Counsel expanded on these themes with a detailed and (we would say) compelling argument for the implementation of a failure to prevent economic crime offence calling the present set up Unfair in application, unhelpful in its impact and unprincipled in scope.

We agree with the sentiment expressed and the principle arguments made by the Attorney General, the SFO Director and the General Counsel of the SFO.

Post Brexit, there was concern that these latest plans announced by David Cameron would be shelved under a new Prime Minister.

Not so.

In fact, the new Prime Minister and Conservative government resolve to improve corporate culture looks stronger than ever.

Expect a formal consultation shortly and for the biggest change in corporate criminal law in history to hit the statute books soon…

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