At the recent Cambridge Symposium, both David Green, director of the SFO, and the attorney-general, Jeremy Wright, referred to the introduction of law extending the “failure to prevent” corporate criminal liability to all economic crime. We are led to believe that it will be similar to s7 UKBA – which is already to be replicated in relation to failing to prevent tax evasion which was announced as part of the Queen’s Speech in May 2016. It will extend to all forms of economic crime – such as fraud, money laundering and false accounting. Section 7 UKBA is targeted at corporates – not necessarily the individuals on the boards.
Yes – as part of any defence to corporate liability under s7 UKBA or its copy-cat there is or will be the requirement for senior management to set the anti-crime tone from the top and to ensure these issues are communicated down through their businesses with effective and regular reporting lines back up to senior management.
Section 14 of the UKBA applies to senior officers of the company in that if the underlying offence – in this regard bribery or corruption - is proved to have been committed with the consent or connivance of a senior officer or a person purporting to act in such a capacity, then that senior officer or person (as well as the body corporate or partnership) is guilty of the offence and liable to be proceeded against and punished accordingly. Presumably some similar provision will also be enacted in relation to wider economic crime.
It is thought that several potential cases are being considered behind the walls of the SFO's headquarters
The success as some see it of the UKBA and potentially an extension across all economic crime is that s7 has made it easier for the prosecutor to obtain a prosecution against a corporate vehicle – previously the prosecutor had to establish that the directing minds or will of the corporate entity (i.e. the senior officers) were directing bribes to be paid which historically was very difficult to establish and/or prove.
With the introduction of the UKBA, the test has flipped. Rather than the prosecutor having to establish the involvement of senior management, the corporate entity has to establish that it had the adequate procedures in place to prevent such bribery even if such bribery or corruption was being committed within the rank and file – potentially by employees desperate to get bonuses or commission.
This has led to a rush to implement adequate procedures through policy documents and the subsequent training on and monitoring of compliance with such policies and procedures – at some cost to UK plc. However, this has not yet led to CEOs, CFOs and MDs being locked up – although prosecutions under the UKBA are still far and few between and are still being investigated by the stretched SFO.
It is thought that several potential cases are being considered behind the walls of the SFO's headquarters. The prosecuting authority appears to be gaining confidence. The introduction of Deferred Prosecution Agreements for corporates may well be the catalyst for this – on the back of the toughened regime resulting from the UKBA. There may soon be an increased number of corporate “settlements” which the under-funded SFO can point to which presumably would only escalate if the failure to prevent offence was introduced more widely across all economic crime.
One by-product of this though is that as individuals do not have the same luxury offered to corporates by DPAs, it is a pre-requisite that those involved in the underlying offence are “thrown under the bus”. Hence, surely, an increase in the number of individuals being prosecuted.
The cost to UK businesses will be significant though and some of the responses to the government’s consultation will surely prove to be illuminating if not expletive in nature. Many will wonder when the "regulatory-creep" will ever end and whether it really is worth doing business in the UK considering all the cost involved in assessing risk and implementing policies and procedures.
The UKBA is already possibly the world’s toughest piece of anti-bribery and corruption legislation, although this stands for nothing unless the authorities have the investment in manpower and finances to investigate and enforce the act.
This has been recognised, in part, by an improved ranking in the Transparency International Corruption Perceptions Index 2015. If the failure to prevent offence was extended across all economic crime in the UK then there would be no question that – at least in legislation – we would be head and shoulders above the rest of the world in trying to combat or prevent economic crime.
Ian Hargreaves is a partner at King & Wood Mallesons specialising in fraud, investigations and corporate crime