Evidence call for corporate crime crackdown

The Ministry of Justice (MoJ) has issued a call for evidence on how to tackle corporate crime such as money laundering, fraud and false accounting.

Currently, only board level personnel can be held liable for offences since prosecutors must prove the “directing will and mind” of businesses undertaking criminal activity. The MoJ seeks views on whether this hinders the prosecution of companies, and whether it should introduce alternatives such as: a US-style vicarious liability offence, making companies guilty through the actions of their staff, without the need to prove complicity; a “failure to prevent” model, where a company is liable unless it can show it has taken steps to prevent reoffending; and a strengthened regulatory regime.

Louise Hodges, partner at Kingsley Napley, said the consultation already had “a chequered past with the proposals bouncing on and off the table over the last few years.

“All options remain open including US-style vicarious liability (previously championed by the Labour Party) which provides that a corporation may be held criminally liable for the illegal acts of its directors, officers, employees and agents if it is established that the corporate agent’s actions were within the scope of his duties and intended, at least in part, to benefit the corporation. This would present the greatest regime-change and the mere fact of its inclusion will strike fear in the corporate world.”

On the “failure to prevent” proposal, Hodges said: “Although potentially attractive, the ability for a company to predict and protect itself against every possible fraud that could be committed leaves the discretion to prosecute wide open and corporates facing increasing compliance costs and red-tape. 

“The least invasive proposal specified in today’s consultation is strengthening regulatory regimes, but is unlikely to satisfy those campaigning for a cleaner corporate culture.”

Elly Proudlock, counsel in WilmerHale’s UK investigations and criminal litigation practice, said: “Although it is early days, it is encouraging that the government has not ruled out comprehensive reform of the law on corporate criminal liability, beyond the extension of the ‘failure to prevent’ model.

“Rather than proceeding in a piecemeal fashion, the government should bite the bullet and look at the law more broadly. Given the increasingly cross-jurisdictional nature of investigations, there are good reasons for bringing the UK more in line with the US.”