The recent announcement by the Ministry of Justice to introduce new corporate criminal offences addressing failure to prevent economic crime heralds a significant expansion in the potential for criminal liability for companies. There is to be a consultation over summer to look at possible corporate liability for failing to prevent offences such as fraud, theft, money laundering, offences under the Financial Services and Markets Act 2000. The possible offences are not yet known but it is likely to include all of those offences and more. This move comes hot on the heels of the announcement in April this year of a consultation looking at corporate criminal liability for failure to prevent the criminal facilitation of tax evasion.
This development in respect of economic crime is an interesting resurrection of a proposal that was quietly shelved in September 2015. It seems that the current political climate and the interest in anti-corruption has fuelled the desire to reconsider these issues.
The concern for most businesses will be the move away from the need for the prosecution to show that the senior members of the company/corporation had some involvement or at least awareness of the illegal activity. This was known as the ‘directing mind’ test. This requirement is likely to be removed if these offences are brought in. The offences are likely to mirror the Bribery Act 2010 offences where there is a positive duty on companies to have robust procedures and policies in place to prevent corruption. It is anticipated that now companies, corporations and any other relevant body will be required to ensure that it has in place policies and procedures to prevent any person or legal body associated with the company committing economic crime.
Businesses need to be aware of the huge burden this will place on them and some of the more pressing issues are likely to be as follows:
- The financial burden of conducting detailed risk assessments;
- The financial burden of taking advice on and producing policies and procedures which will be necessary to defend any allegation of corporate failure to prevent;
- The concern that the criminal activity is likely to include crimes committed anywhere in the world;
- The financial burden of monitoring compliance by all persons associated with the company including employees, contractors, agents and subsidiaries;
- The financial burden of training and due diligence in respect of these policies and procedures.
The increasing regulatory burdens being placed on businesses these days coupled with the threat of a hugely increased chance of being found criminally liable mean that it is ever more important for businesses to protect themselves from the outset. It is increasingly likely that specific insurance such as “Directors and Officers” policies will come into their own and provide much needed legal costs if defending any allegations of this nature.
If you or your business requires any advice in respect of corporate criminal liability or any regulatory breach then we have a team of specialists available to assist. Please call us for confidential advice on 01616 966 229.