UK "considering proposals" to criminalise failure to prevent economic crime

Out-Law News | 04 Sep 2014 | 11:16 am | 2 min. read

The UK government is considering whether companies should face criminal charges for failing to prevent fraud, money laundering and other economic crimes, according to the country's chief prosecutor.

In his first major speech as attorney general, Jeremy Wright told a conference in Cambridge that the government was "considering proposals for the creation of an offence of a corporate failure to prevent economic crime". This new offence would be "modelled" on the existing criminal offence of failure to prevent bribery, as set out in section 7 of the 2010 Bribery Act, he said.

Corporate crime expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said that the new offence, if introduced, would "represent a seismic change in corporate criminal liability".

"The proposal has cross-party support and is now being pushed onto the government agenda in the wake of high profile scandals and overwhelming public appetite for corporate and white collar accountability," he said. "Business should not bury its head in the sand."

Criminalising corporate failure to prevent economic crime by an employee or agent was first suggested by David Green, head of the Serious Fraud Office (SFO), last year. He said that the change would make it easier for the SFO, which investigates serious and complex fraud and corruption cases, to bring charges against companies.

Other than for corporate manslaughter offences, to which a separate legal regime applies, companies can generally only be found liable for the acts of employees or agents if the offender was a "directing mind" and the act was the "will of the company". An exception to this general principle was established by the Bribery Act, which created a new offence of "failure to prevent" bribery by people working for or on behalf of a business.

To date, no company has been prosecuted of failing to prevent bribery under the Bribery Act. The law states that a company will be found responsible for bribery carried out by employees or agents unless it can show that it had "adequate procedures" designed to prevent bribery in place.

In his speech Wright said that ensuring that the UK had "the correct laws and structures in place to tackle fraud and corruption, and to improve detection of money laundering" was a priority for the government. He said that there had been "a number of noteworthy developments in UK law enforcement's response to economic crime" over the previous year, including the SFO's announcement of its first charges brought under the Bribery Act and the creation of the National Crime Agency (NCA) to lead on serious and organised crime that cuts across regional and international borders.

Wright also confirmed that the government was planning to publish "the first ever national anti-corruption plan" shortly. According to a Financial Times report published in June, this document is expected to set out the roles of the various bodies involved in the investigation and prosecution of economic crimes and could also consider information-sharing and funding arrangements.

Other initiatives highlighted by Wright included the introduction of deferred prosecution agreements (DPAs) in February, and forthcoming legislation that would enable the government to set up a central registry of company beneficial ownership. DPAs allow companies that admit to unacceptable corporate behaviour to defer prosecution in exchange for a range of stringent conditions, which can include the payment of compensation to victims and substantial financial penalties.

"The evolving nature of economic crime means we need to continue to find and develop new ways to expose and combat it," he said.