In November 2020, the UK government asked the Law Commission to consider how to reform corporate crime laws to make it easier to prosecute companies and senior executives. The impetus was the failure in 2019 to secure fraud convictions against former executives of retailer Tesco, even after the company admitted to overstating its profits in a deal to secure a deferred prosecution agreement with the Serious Fraud Office.
On June 10, the Law Commission returned with 10 options for reform to consider:
- Retain the current general rule of criminal liability applied to corporations as it stands, which means that culpability can only attach to the “dominant mind” of the corporation.
- Allow attribution of conduct to a company if a member of its senior management (i.e. chief executives and chief financial officers) engaged in, consented to, or was in collusion.
- Introduce an offense of failure to prevent fraud by an employee or agent that would apply when the company has not put in place the appropriate prevention measures.
- Introduce an offense of failure to prevent human rights violations.
- Introduce an offense of failing to prevent abuse or neglect.
- Introduce an offense of failure to prevent computer misuse.
- Make publicity orders available in all cases where a company is found guilty of an offence.
- Introduce an administratively imposed pecuniary penalty regime.
- Bringing civil actions in the High Court, based on Serious Crime Prevention Orders, with the power to impose pecuniary penalties.
- Introduce a reporting obligation for large companies regarding anti-fraud procedures.
There were more than 5,000 convictions for corporations and other bodies in 2020, the Law Commission noted. However, due to the difficulty of trying to identify senior officials who made the decision to engage in wrongdoing, there is widespread concern that UK law does not fully hold companies accountable for corporate crimes. .
Legal experts on white-collar crime believe that reform along the lines proposed by the Law Commission would have a significant practical impact on how businesses are treated by the criminal justice system. They added that the proposals reject as “inadequate” the US model of vicarious liability, under which companies can generally be held criminally liable for any criminal activity by an employee, representative or agent. acting in the course of their employment or agency.
Instead, the Law Commission’s options are based on existing UK legislation and call for the possible extension of the identification principle, as well as the elaboration of the concept of ‘failure to prevent’ offences. introduced under the Corruption Act 2010.
Alun Milford, criminal litigation partner at law firm Kingsley Napley, said the options “give the government clear and practical options for reforming the current legal landscape”.
He added: “Given the potential significance of the reforms that could flow from this document, now is the time for companies to ensure that this issue is central to their forward-looking work.”
Tom McNeill, a senior partner in the commercial crime practice at law firm BCL Solicitors, said the proposal to expand potential ‘controlling mind’ prosecutions to senior management represents a ‘significant change’ in terms of corporate accountability for individual wrongdoing.
But he added that there are legitimate concerns about “whether it is right to hold companies criminally liable for the actions of individuals, particularly via a failure to prevent the offence, where even conscientious organizations that have taken significant measures to prevent fraud and/or other economic crimes will find it difficult to defend themselves.