Out-Law Analysis | 05 Oct 2016 | 3:03 pm | 2 min. read
This is part of Out-Law's series of news and insights from Pinsent Masons experts on the impact of the UK's EU referendum. Watch our video on the issues facing businesses and sign up to receive our 'What next?' checklist.
It is clear from comments made by new prime minister Theresa May in recent months that we can expect a formal consultation shortly, and for the biggest change in corporate criminal law in history to hit the statute books soon.
As the outcome of the UK's EU referendum became clear, there was concern that plans announced by David Cameron would be shelved under a new prime minister. Cameron was closely associated with policies such as a planned new criminal offence of failure to prevent economic crime and the creation of a beneficial ownership register, announced in May on the day of the Global Anti-Corruption Summit in London.
But from as early as the speech given at the official launch of her campaign to become leader of the Conservative Party, May has highlighted the issue of corporate irresponsibility in society as one of the main themes of her leadership. Last month, at the G20 summit, she announced her intention to publish corporate governance reform proposals before Christmas.
Our sources confirm the same.
If there was any doubt, at the Cambridge Economic Crime symposium last month, this policy message was supported in a trio of speeches from law enforcement leaders.
In a speech the attorney general, Jeremy Wright, confirmed that the government would "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".
This announcement was welcomed by David Green, the director of the Serious Fraud Office (SFO) and a self-described "enthusiastic supporter" of a failure to prevent economic crime offence; and by SFO general counsel Alun Milford in their own speeches at the same event.
Milford expanded on these themes with a detailed and 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.
As Wright explained, the UK's 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, which introduced a new criminal offence of 'failure to prevent' bribery by people working for or on behalf of a business.
The introduction of a failure to prevent economic crime offence would be the most sweeping change to corporate law in over a hundred years - with a bigger impact on businesses than the introduction of the Bribery Act. On the assumption that businesses will be able to defend any such claims if that can show that they had 'adequate' or 'reasonable' procedures in place to prevent the criminal acts, as is the case for the bribery and planned facilitation of tax evasion offences, businesses should be prepared for substantial new burdens.