Corporate Crime - Investigations, Prevention and Defence

What is Corporate Crime?

Corporate crime is illegal behaviour that is carried out by individuals in the course of their work which benefits the company or organisation that employs them. In many cases of corporate crime, the person committing it (the corporate criminal) may not believe or realise that their actions are criminal.

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In 1939, American criminologist Edwin Sutherland defined white-collar crime as “a crime committed by a person of respectability and high social status in the course of his occupation.” ^[1]  Corporate crime or business crime is one type of white-collar crime.

This is different from other types of white-collar crime, which are often committed by those who are fully aware they are breaking the law and do so in order to make illegal gains.  Corporate crime can also be committed by a company or organisation (the “corporate’’ itself).

Some of the most common corporate crimes include anti money laundering, fraud, tax evasion, false accounting and bribery and corruption (which has become an increasingly important issue for law enforcement agencies in a number of countries in recent years). But corporate crime can also involve wrongdoing relating to issues such as the environment, health and safety, staff welfare or mis-selling. 

The prosecution of companies has traditionally been rare. But the issue of companies being held criminally liable – meaning they are prosecuted for offences - appears to be under consideration in a number of countries; including the UK. 

Prosecuting companies depends on the concept of corporate criminal liability.

What is Corporate Criminal Liability?

In England and Wales, establishing corporate criminal liability in order to convict a company requires proving beyond reasonable doubt that the company committed the illegal act - and that it had the intention to do so. As companies do not have intentions, it is the acts and the state of mind of those who represent the “directing mind and will” of the company that are considered in such cases.

This approach, known as the identification principle, applies to a company’s directors, managing director and other senior figures who speak and act for the company. If such an individual can be proven to have committed a criminal act - and had the intention to commit it – the company can be prosecuted (as can the individual concerned).

Why Prosecuting Corporate Crime is Difficult.

Prosecuting corporate crime is arguably more difficult than other crimes. Unlike, for example, a street crime such as an assault or robbery, corporate crime is often carried out privately – or even in secret – so there is likely to be few witnesses and little obvious evidence.

A lot of corporate crime can involve complex, high-level financial crime that is not easily identified or understood by many, which also makes it hard to detect. But recent years have seen a number of examples of corporate crime coming to light, due to the efforts of investigative journalists, whistleblowers, non-governmental organisations and pressure groups. These are keen to show that offences have been committed and want the criminal law to be brought to bear on the corporates they believe to be responsible.

But even if corporate crime is detected, it can be difficult for the authorities to identify exactly who committed the offence and whether they did so intentionally. There is also the challenge of deciding whether the company itself should be prosecuted for the crime committed by its employees or representatives, under the identification principle mentioned earlier.

It is worth pointing out that the UK’s Companies Act 2006 contains more than 1,300 sections regarding carrying out business lawfully^[2]. It includes many criminal offences that can be committed by both a company and individuals within it. Yet only a small number of offences under the Act result in action being taken.

Even when it may be possible to identify who carried out the wrongdoing, a company’s complex management structures can make it hard for the authorities to prove that the crimes committed by an individual or individuals were done so with the knowledge of the company. In the US and some other jurisdictions, corporates can automatically be held liable for the criminal activities of their staff and other representatives. But corporate criminal liability is often not this straightforward.

With enforcement agencies often working with limited resources and budgets, they can struggle to bring a successful corporate crime prosecution. Taking a case to trial can be costly and high-risk.  As an alternative in the UK, the Serious Fraud Office or Crown Prosecution Service can conclude a deferred prosecution agreement (DPA) with a company that could have been prosecuted for a corporate crime.

Under a DPA, a prosecution is suspended for a set period of time, providing the company continues to meet certain specified conditions. A number of other countries either have, or are about to introduce, DPA-style arrangements. This could be seen as a sign of how difficult it is to successfully prosecute corporate crime. 

Recent Corporate Crime Legislation.

In the UK, however, legislation has been introduced in the past two decades that has made it easier to prosecute certain types of corporate crime.

• The Bribery Act 2010 created an offence of failure to prevent bribery.^[3]
• The Criminal Finances Act 2017 was extended to include the offence of failure to prevent the facilitation of tax evasion. Such failure to prevent offences make the prosecution of a company more straightforward: all that has to be proven is that the offence was committed, and the company did not prevent it.^[4]
• The Corporate Manslaughter and Corporate Homicide Act 2007 was also notable, as it meant that, for the first time, companies and organisations could be found guilty of corporate manslaughter as a result of serious management failures resulting in a gross breach of a duty of care.^[5]

There have been arguments made by many commentators that, when it comes to prosecuting corporate crime, the criminal justice system is not made to measure. This, they argue, has led to shortcomings when it comes to holding corporate criminals to account.

But in 2021 the Law Commission sought views on how the law relating to corporate criminal liability could be revised ^[6], to ensure that criminal offences committed by corporations and their directors and senior management would not go unpunished. The issue of corporate crime, it seems, continues to attract official attention. The Law Commission aim to publish their options for reform report in early 2022.^[7]

It is important, therefore, that any company seeks advice from those law firms with the relevant expertise as soon as there is even a suggestion that it will be investigated.

About Rahman Ravelli - Corporate Crime Lawyers.

Rahman Ravelli has in-depth experience in conducting corporate internal investigations and representing clients and companies in such circumstances worldwide. Its specialist teams are fully aware of all legal developments regarding corporate crime and corporate criminal liability and capable of managing all aspects of domestic and global investigations.

References.

[1] Wikipedia - White Collar Crime: https://en.wikipedia.org/wiki/White-collar_crime
[2] Companies Act 2006: https://www.legislation.gov.uk/ukpga/2006/46/contents
[3] Bribery Act 2010, Section 7 Failure of commercial organisations to prevent bribery: https://www.legislation.gov.uk/ukpga/2010/23/crossheading/failure-of-commercial-organisations-to-prevent-bribery
[4] Criminal Finances Act 2017, PART 3. Section 45 Failure to prevent facilitation of UK tax evasion offences: https://www.legislation.gov.uk/ukpga/2017/22/part/3/enacted
[5] Corporate Manslaughter and Corporate Homicide Act 2007, Section 8: https://www.legislation.gov.uk/ukpga/2007/19/section/8
[6] Law Commission - Law Commission consultation on corporate criminal liability: https://consult.justice.gov.uk/law-commission/corporate-criminal-liability/
[7] Law Commission - Corporate Criminal Liability - Reviewing the law relating to the criminal liability of non-natural persons, including companies, and providing options for reform: https://www.lawcom.gov.uk/project/corporate-criminal-liability/