Speaking at the 34th Cambridge Symposium on Economic Crime, the Attorney General Jeremy Wright has called for a culture of corporate responsibility to be introduced from the boardroom level, down. The Symposium’s focus on corporate accountability has generated much discussion on the limits of current legislation and plans for addressing the rising levels of economic crime.
The corporate offence of “failure to prevent” has already been introduced into our legislation, first in respect of bribery and in the coming months, the failure to prevent tax evasion will be codified. Despite abandoning plans in October 2015, the government has now revived its intention to begin consulting on an extension of the offence to cover the failure to prevent economic crime, such as money laundering, false accounting and fraud.
Currently, corporate liability can only be established if an offence (other than bribery) is committed by a senior member of the company. Similar to the US model of “vicarious liability”, the UK now seems to be following suit with the intention of implementing the “control theory” model. This model places a burden on corporates to prevent crimes being committed in the course of its business dealings. Simply put, the model is intended to prevent board members from being able to distance themselves from crimes being committed or facilitated by employees and agents beneath them. This shift is intended to incentivise a culture of good corporate governance.
What will this mean in practise for businesses? Currently, a business must have “adequate procedures” in place to prevent bribery. Assuming that similar regulation is imposed for the prevention of other economic crimes, corporates will need to take pre-emptive action to review and adapt their internal policies in order to limit the potential for misconduct. The government, in turn, will need to provide targeted and specific guidance as to the new policies that companies will need to have in place.
The government has decided to take a positive step towards the combat of economic crime, rather than remaining static. Whilst of course change of some form is necessary, the legal mechanism for effecting this change will need to be finely balanced with its potential commercial impact. The changes are intended to have extra-territorial reach, which means businesses worldwide with any connection to the UK will be affected. Bearing this in mind, business should remain alert to and engage with the consultation process for these proposed offences in due course.
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