The costs of failing to prevent business crime can be numerous. Legal, financial and reputational problems can follow; often all at the same time. This can pose a real threat to the company at the centre of the allegations – no matter how large it is. Just ask Western Union.
The American company has had to pay a $586M settlement over allegations that up to 2,000 of its agents were involved in assisting money laundering and fraud between 2004 and 2012. Faced with such a huge problem, Western Union was left with the option of reaching a settlement or facing prosecution. Either outcome was always likely to lead to huge financial penalties being imposed – not to mention loss of business, falling share price and difficulties finding future trading partners.
When such cases do happen, we can safely assume that measures to prevent business crime were not adequate. Just as we can assume that compliance may now be on the company’s agenda.
This case is one that indicates we are in an era in which it is no longer possible to turn a blind eye to business crime. In the UK alone, recent years have seen the introduction of the Bribery Act, increased measures to tackle money laundering, a greater onus on financial institutions to report their suspicions and tougher legislation regarding tax offences, not to mention increased funding being made available to the Serious Fraud Office (SFO) and the creation of the National Crime Agency (NCA) and the Financial Conduct Authority (FCA).
It is fair to say that if business crime is being perpetrated in your company and you fail to investigate, it may only be a matter of time before an outside agency starts looking into your affairs. And that, as Western Union discovered, can be costly.
Some in business may feel they have no need to investigate any suspicions of wrongdoing because information about such activities will never “leak out’’ to anyone else. For the reasons we have just listed, that would be a huge mistake. Others may have suspicions but feel that they lack the relevant expertise to investigate.
As a firm whose corporate fraud lawyers regularly initiate and conduct detailed internal investigations on behalf of clients, we can say that expertise is available to any company that needs assistance when it comes to seeking evidence of wrongdoing and following the evidence trail.
Such an investigation is the only genuine course of action open to companies that need to establish the facts regarding suspicions of wrongdoing by staff or trading partners. It also provides the person or company that commissioned the investigation with a number of options once the facts have been established.
If an investigations indicate that fraud has been perpetrated, a company can:
- Report the matter to the police or other agency; for example, the SFO. That organisation will then decide whether there is enough evidence to make it worth bringing a criminal prosecution.
- Initiate civil proceedings against the person or persons believed to have committed the offence, in order to recoup what the company believes it has lost due to the criminal activity.
- Bring a private prosecution, under the Prosecution Offences Act 1985, against the person or persons that the company suspects of wrongdoing.
If an investigation has identified wrongdoing, a private prosecution can be a swift response. It can be less expensive than civil proceedings, gives you greater control of proceedings than if you let the police or other agency handle the prosecution and it has deterrent value.
It is possible to initiate civil proceedings while, at the same time, reporting the matter to the police or bringing a private prosecution.
What a company also has to determine, however, when wrongdoing is suspected, is the issue of corporate liability as opposed to personal liability.
Prosecuting authorities often find it difficult to establish corporate criminal liability. But that is certainly not the case with the UK’s Bribery Act. The Act makes it a strict liability offence – no intention needs to be proved – for a company to have any connection to bribery via its staff, representatives or third parties. The company commits an offence under the Act if a person associated with it bribes another person intending to obtain or retain business for the company or gain an advantage in the conduct of business for the company.
If a company is found to have committed an offence, it is almost inevitable that individuals associated with it have committed an offence. It is worth noting also that just because a company is not prosecuted for its wrongdoing, this does not mean that the individuals allegedly involved will not be.
But both a company and its individuals have to be alert to the possibility of, and the need to investigate, wrongdoing.
Ben Ticehurst is a corporate fraud lawyer with an impressive track record in representing corporations and senior business individuals in white-collar crime investigations. He is noted for his skill in investigating, analysing and advising on the best course of action.