Out-Law News 2 min. read
19 Jan 2017, 3:51 pm
Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, was commenting as the Ministry of Justice (MoJ) began a call for evidence on corporate criminality. The MoJ is seeking views on whether companies can be held sufficiently to account for the criminal wrongdoing of their staff under the existing law, among other issues.
"The call for evidence looks like a victory for those who have been campaigning to block a reform of the fraud laws concerning corporate crime," said Vitou, a corporate crime expert at Pinsent Masons.
"Trailed originally as a consultation for the introduction of a new offence to complete a trio of offences in addition to the failure to prevent bribery and tax evasion offences, the MoJ has instead published a call for evidence which broadly speaking asks: do corporate crime fraud laws need to be changed at all? This is a far cry from earlier statements that the law was broken and needs to be fixed," he said.
The Criminal Finances Bill, which is currently before parliament, would introduce a new criminal offence for companies that fail to prevent their employees and representatives from facilitating tax evasion. This new offence would particularly affect banks, trust companies and advisers. It is based on the 'failure to prevent' offence that already exists under UK bribery laws, and includes a defence for organisations that are able to show that they have put "reasonable procedures" in place to prevent the facilitation of tax evasion by their representatives.
The MoJ now intends to examine the case for reform of the law on corporate liability for other economic crimes, such as fraud, false accounting and money laundering. Under the existing laws, enforcement agencies can struggle to prosecute companies for their role in these offences, the department said. This is because companies can generally only be found liable for these acts by their employees or agents if the offender was a "directing mind" and the act was the "will of the company".
The call for evidence seeks views on whether the need to prove the involvement of a directing mind is hindering the prosecution of companies for wrongdoing and, if so, what would be a "just and proportionate" alternative approach. This could include a 'failure to prevent' offence, along the lines of that introduced by the Bribery Act; or a US-style 'vicarious liability' offence, under which companies would automatically be responsible for the actions of their staff without the need to prove complicity.
Alternatively, the government could consider strengthening the various applicable regulatory regimes, according to the paper.
The MoJ is also seeking evidence on the costs and benefits of further intervention "against the background of the significant changes that have already been made to tackle misconduct in some sectors". This includes the costs to businesses of implementing any new preventative measures, according to the document.
The call for evidence closes on 24 March 2017.
"Corporate economic crime undermines confidence in business, distorts markets and erodes trust," said Sir Oliver Heald QC, the justice minister. "Companies must be held to account fro the criminal activity that takes place within them."