30 Oct 2012 | 02:07 pm | 2 min. read
New rules announced this week by the Ministry of Justice could be undermined by a failure to pass equivalent legislation in Scotland, according to economic crime experts at international law firm Pinsent Masons.
Plans to allow businesses in England & Wales to enter into US-style 'plea bargains' in return for reporting economic crime within their own organisation could create a Scottish 'blind spot' without action from Holyrood.
Scotland-based business crime experts at international law firm Pinsent Masons have raised the concern following confirmation from the Ministry of Justice on Tuesday last week that it will legislate to introduce Deferred Prosecution Agreements for businesses guilty of offences such as bribery, fraud and money laundering.
DPA 'deals' are intended to encourage businesses to self-report instances of economic crime in return for lenient treatment, including the opportunity to avoid a criminal investigation and prosecution. Under a DPA, companies would pay a substantial penalty, compensate victims and take remedial action - but they would not be convicted of a criminal offence.
While DPAs are going to become a new law enforcement tool in England & Wales, there are currently no proposals for DPAs in Scotland.
Pinsent Masons says that is "unworkable" as most corporate crimes by UK companies are subject to concurrent jurisdiction, meaning that both the Serious Fraud Office and the Crown Office in Scotland could prosecute.
Tom Stocker, a Partner at Pinsent Masons, says that DPAs will need to be introduced into Scotland if they are to be an effective tool.
"In situations where the SFO and the Crown Office and Procurator Fiscal Service have concurrent jurisdiction, operating two separate enforcement models is impractical. It creates ambiguity and uncertainty which undermines the incentive for self-reporting by businesses operating in Scotland", says Stocker.
“We made the point during the consultation period that global settlements need to be achievable.
"It remains insufficiently clear to businesses operating on both sides of the border whether plea bargains entered into with the SFO in London will be respected by the Scottish authorities.
"Scottish companies could also be at a disadvantage to companies in England & Wales if DPAs do not extend to Scotland.
"There is no doubt that the Scottish police and the Crown Office and Procurator Fiscal have made considerable headway in tackling white collar and corporate crime. We have excellent police officers and quality prosecutors, but our criminal procedure is archaic when it comes to corporate offending. It is important that Scottish law enforcement is equipped with the same law enforcement tools available to other prosecutors down south to address sophisticated and cross-border offending involving companies and other commercial organisations ."
Pinsent Masons, which has 14 offices around the world, has also highlighted concerns at an international level which could affect multinational businesses, particularly in the energy and financial services sectors.
Stocker continues, "Economic crime almost by definition crosses borders and therefore more than one country may have jurisdiction. In the case of the US it can be enough that money, emails or telecommunications pass through it in order for its authorities to have jurisdiction. If it becomes public that an organisation in the UK has entered into a DPA with the SFO, will that raise a flag to the US authorities that there is something going on that they should be investigating? We need a memorandum of understanding between the UK and the US – and other jurisdictions – on how cases involving concurrent jurisdictions will be handled or attempts to combat cross-border corruption could be severely hampered.”
Pinsent Masons has also expressed concern that enforcement authorities on both sides of the border need greater resources if they are to effectively tackle complex cross-border crime.
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