Author: Azizur Rahman
6 April 2017
3 min read
At the start of the year, the UK government announced consultations on the possible reform of corporate criminal liability. The reason for this was the difficulties faced when looking to prosecute companies in England and Wales.
Currently, in England and Wales, a corporation is only criminally liable if senior managers can be proven to be blameworthy culpable under the “identification principle”. This means proving the guilt of the person who is the “directing mind’’ of the company: the person whose intentions are shown in the activities of the company that he or she controls. Many, including the Serious Fraud Office (SFO), believe this is extremely difficult to achieve.
However, the issue of liability when it comes to companies has already been the subject of change recently.
Section 7 of the Bribery Act 2010 introduced the concept of failure to prevent bribery. This means that a company can be prosecuted for not stopping bribery being carried out in its name; regardless of whether or not it knew it was happening. The failure is an offence in its own right, although a company has a defence if it can show it had adequate anti-bribery procedures in place.
The Criminal Finances Bill creates two new “failure to prevent” offences for corporate entities. Section 40 creates an offence where a company or a partnership is guilty if a person associated with it facilitates UK tax evasion, while Section 41 creates a similar offence regarding foreign tax evasion. Under each section, a company will have a defence if they had in place reasonable prevention measures; much like Section 7 of the Bribery Act’s defence. It is worth emphasising here, therefore, that whatever changes may be introduced regarding corporate liability, companies have to act to make sure they have proper business crime prevention procedures in place. If changes are introduced, such procedures will go a long way towards ensuring you have a chance of mounting a strong defence. This is already the case with the Bribery Act and looks set to be with the Criminal Finances Bill.
Why we do not know precisely what may happen with corporate liability once the consultation is complete, we have an idea of the possibilities.
The consultation puts forward five options:
The options differ in scope and focus. But they all contain an element of companies having to create, introduce and maintain procedures to prevent wrongdoing.
Already this year, we have seen the SFO ordering Rolls-Royce to pay £671M for serous and sustained bribery that it failed to self-report and the FCA fining Deutsche Bank £163 million for having poor anti-money laundering controls. And yet neither was prosecuted; which may indicate a reluctance to prosecute large companies.
These cases both involved enormous fines but no criminal conviction, possibly giving the impression there is no appetite to prosecute big companies. We wait to see what the consultation produces. Will it change the perception that companies are too big or complex to prosecute?
Whatever course is taken, it is bound to mean those in business having to make sure their compliance procedures are robust and fit for purpose.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.