Corporate Criminality: Are New Offences on the Horizon?
It seems that no sooner has the government introduced tighter measures to crack down on corporate criminal liability, further moves are made to tighten regulations. We take a look at the latest suggestions for corporate criminal liability reform and what they could mean for companies and directors.
What’s the background?
Corporate crime is on the increase. The year to September 2020 saw more than 5,000 corporate convictions for offences ranging from environmental breaches to fraud. For these reasons, the business world has mostly welcomed law changes in recent years to tackle business crime in England and Wales – though there is understandable nervousness at the prospect of increasing regulation.
The most notable developments have been the introduction of the Bribery Act 2010, followed by the Criminal Finances Act 2017 (both of which introduced specific corporates criminal offences).
However, there have been continued challenges in prosecuting companies. Corporates, for example, can only be held liable for corporate criminal offences if a “directing mind of will” of the company has been involved in the alleged criminal conduct. According to a commons research paper, this so-called ‘identification doctrine’ has been narrowly interpreted by the courts.
The Law Commission has now reviewed the potential for reform and recently published its options for change. Which of these might be considered for adoption by government remains to be seen. It’s important to note that these are merely ‘options’, stopping short of recommendation for reform.
What are the suggested options?
The key options from the Law Commission focus particularly on economic crime and include:
- Retaining the existing identification doctrine – though it’s criticised as, in its current form, being easier to convict small businesses. In addition, allowing conduct to be attributed to a corporation if a member of its senior management engaged in, consented to, or connived in the offence; and possibly bringing CEOs and CFOs within the meaning of senior management.
- A new offence of failure to prevent fraud offences by an associated person, such as an employee or agent. Corporates would have a defence if it could prove, for example, it had in place reasonable prevention procedures in the circumstances.
- A new offence of failure to prevent human rights abuses.
- A new an offence to prevent ill-treatment or neglect.
- A new offence to prevent computer misuse (but as part of the current review of the Computer Misuse Act 1990)
- Make publicity orders available in all cases where a corporate is convicted of an offence.
- Introduce a civil regime of administratively imposed monetary penalties. In some cases, it would be a defence if the company can show it took reasonable precautions to prevent wrongdoing.
- A regime to introduce civil actions in the High Court, based on Serious Crime Prevention Orders, involving power to impose monetary penalties.
- A new reporting requirement on corporations to report on anti-fraud procedures (based on section 414CB Companies Act 2006 and section 54 Modern Slavery Act 2015).
What does this mean?
Should businesses be worried about increased regulation? They may take some reassurance from the fact that when asked to undertake a review, the Commission agreed to consider the challenges and explore potential options which would avoid “disproportionate burdens upon business”.
While any moves by the Government in response to the suggested options will undoubtedly take a long time to play out, it’s a timely reminder that robust corporate compliance is not an option for any business.
The Law Commission’s options paper on Corporate Criminal Liability can be found here
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