Corporate Crime: Time For Tighter Laws
The business community and legal advisers should note that the Law Commission is now investigating the UK’s current legislation on economic crime. New criminal offences for different types of corporate economic crime look increasingly likely.
This development is no great surprise given what has led up to it, though it has been a long time coming. There have long been concerns around the effectiveness of the existing laws in criminalising corporate entities when they commit economic crime. And calls for reform have been reignited in the wake of a number of recent prosecutions, not all of which have proved successful.
The current legal framework is, for the most part, set out in the Bribery Act 2010 and the Criminal Finances Act 2017. The Commission says that without legal reform, there is a risk of the UK falling behind international standards in the prosecution of economic crime. Brexit, with the transition period due to expire on 31 December, makes the issue even more pressing.
Justice secretary Robert Buckland QC said corporate economic crime undermines trust in business, distorts markets and damages people’s livelihoods and futures.
What’s the background?
A consultation was carried out back in 2017, with a call for evidence on how to reform corporate liability for economic crime. It was particularly concerned with criminal offences designed to punish and prevent economic crimes such as fraud, false accounting and money laundering when committed on behalf of/in the name of companies.
Notably, the consultation asked whether to extend the ‘failure to prevent’ offence model (which already applies to bribery and tax evasion offences) to other forms of economic crime. But government found no clear consensus among the respondents to the consultation on what corporate liability offence should be created if the so-called identification doctrine was replaced.
Time for change?
The Law Commission is now considering whether the existing laws are sufficiently equipped to tackle economic crime, and whether reform is needed so that law enforcement agencies are better able to hold companies to account for criminal wrongdoing. There will be a greater focus on whether specific new offences should be created.
One notable issue it will be considering is whether the law should provide an alternative approach to corporate liability for crimes (the terms of reference specifically exclude the substance of existing corporate offences).
As far as directors and senior company executives are concerned, the Commission will look at the implications of any change to the liability of non-natural persons for the liability of directors and senior managers. This includes in relation to the ‘consent or connivance’ provisions, such as those in section 92 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
The scope of the Commission’s brief is perhaps surprising given the government’s acknowledgment that the consultation prompted some significant opposition to reform, for instance, the financial services sector is already heavily regulated.
That said, the review is set to “be guided by the need to ensure proper accountability of corporations which engage in criminal conduct, without imposing disproportionate burdens upon business… and the legitimate interests of businesses are taken into consideration.” Businesses should be able to take some reassurance from this.
Professor Sarah Green, commercial and common law commissioner, one of the project leads, calls the review “an important step for protecting the UK’s internal competitiveness and reputation, and reassuring companies that the UK is a reliable place to do business”.
The Law Commission will make its recommendations for reform in 2021.
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