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PREVENTING FRAUD AND MONEY LAUNDERING The government wants corporate executives charged when their staff carry out offences such as fraud and money laundering. How can you make sure you’re not one of those prosecuted?

31 October 2016

The government wants to take the fight against business crime right into the boardroom in a way that has not been seen before.

Attorney General, Jeremy Wright, has said the government is considering prosecuting those at the top of a company if any of its staff commit fraud or money laundering. Until now, such “failure to prevent” offences have only covered bribery (under the Bribery Act) and tax evasion. Extending their scope will place huge responsibility on those running a company.

So what can senior executives do to prevent themselves being prosecuted for the wrongdoing of those they employ?

Adequate measures

These latest proposals are about punishing breaches of the law. But the Attorney General says they are also an attempt to promote a culture of corporate responsibility – an attempt to encourage prevention of wrongdoing rather than just reacting to it and prosecuting it.

At the moment, it is difficult for the authorities to prosecute corporate executives for wrongdoing carried out by their staff. When an employee is found to have, for example, laundered money, the evidence trail can rarely be followed all the way to the top of the company’s staff structure.

Just last month, US bank Wells Fargo dismissed 5,300 employees as a result of a scandal involving large-scale mis-selling of bank accounts and credit cards. The bank is contrite and has paid $185 million to settle the matter. Yet the question remains, what could and should have been done to prevent it? And who in the boardroom should be to blame?

If the new proposals outlined in this article are introduced, any such cases arising in the UK are likely to see senior company figures in the dock.

This, however, will not be necessary if certain steps have been followed. Those in the boardroom will become liable for the crimes of their staff if they had not taken adequate measures to prevent those working for them breaking the law. But if they have taken adequate measures then they have a defence.

Putting it simply, they need to design out the problem: take careful steps to reduce the potential for employees to indulge in business crime.

Potential

The potential for wrongdoing being committed by any staff at a company has to be assessed and then acted upon. Senior staff must introduce new procedures or change existing ones so that it is as difficult as possible for any employee to commit the offences covered by the new proposals.

If need be, executives can hire business crime lawyers to investigate the possibility of offences being committed and then suggest ways in which this can then be designed out. This is done by making sure the potential for wrongdoing is removed from the way the company functions. Changes to the way individuals and departments work – both independently and with colleagues and third parties – can make it harder for illegal acts to be committed. Importantly for senior executives, these changes provide a strong defence should the new proposals become law and they find themselves investigated regarding offences committed by staff.

Encourage

However, if staff do still break the law, the company needs to have clear and appropriate whistle blowing procedures in place. Such procedures must be regularly reviewed and publicised if they are to be of value.

Encouraging staff to report their suspicions of wrongdoing and assuring them that their concerns will be investigated can go a long way to developing an anti-crime culture in a workplace.

Developing such a culture of legal compliance is another way in which senior company figures can show investigators that they should not be prosecuted if their staff have broken the law. Being able to show that you have carefully devised and thoroughly implemented such measures will be a robust way of defending yourself should you ever be investigated.

Vulnerable

The key is to know what potential there is for your workforce to commit business crime and then take action to both prevent it and, should it still happen, allow staff to report it. Failure to do either of these will leave you very vulnerable to prosecution under these new proposals.

These proposals are not a gimmick. They are the government’s way of making sure that those in senior positions do not try and get by doing the bare minimum when it comes to tackling business crime. A failure to pay attention to - or take action regarding - the illegal behaviour of your staff is now more likely to lead to you being prosecuted for their wrongdoing.

The challenge in business now is to make sure everything possible has been done to prevent staff bringing legal trouble on themselves, the company and the individuals running it.


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