In this issue
Failure to Prevent Economic Crime to Become An Offence (This Time)
The SFO's Current Direction and Priorities
Market Abuse Regulation: The Key Changes
Clean Hands: Legal Audits
Corporate Criminal Liability: a changing landscape
Terrorism Financing: Institutions be warned!
R v Harvey - An opportunity to challenge historic confiscation orders?
A New Global Forum for Asset Recovery
New Edition of Blackstone's Guide to POCA 2002 published
Corporate Criminal Liability: a changing landscape
Rupert Bowers QC
Rupert Bowers QC


Rupert Bowers QC

Until relatively recently corporate criminal liability was very much the exception, usually confined to cases of manslaughter by gross negligence in cases of industrial accident. The landscape is now changing rapidly and there is a concerted agenda to make corporate bodies accountable in criminal law for economic offences. At the recent Anti-Corruption Summit the Prime Minister announced a consultation on a new offence of failure to prevent economic crime (see Ben Newton's article) which would appear to be very clearly contemplating a regulatory offence by omission rather than pro-active commission.

As Siobhan Grey QC mentions in her piece elsewhere in this edition, Matthew Wagstaff (Joint Head of Bribery & Corruption at the SFO) set out his organisation’s vision for the future use of Deferred Prosecution Agreements (‘DPA’) when he addressed the annual Information Management, Investigations Compliance eDiscovery conference on 18th May. There has still only been one case in which a DPA has been used since they became available in February 2014 -SFO v Standard Bank ILC [2016] Lloyd’s Rep FC 91 (click here for a copy of the judgment).

Readers may remember the intention behind DPA's was set out in the Government response published on 23 October 2012 (House of Commons, Official Report, column 50WS) Ministry of Justice consultation in May 2012. As was stated in that response:

“The objective is that the DPA will allow prosecutors to hold offending organisations to account for their wrongdoing in a focused way without the uncertainty, expense, complexity or length of a criminal trial.”

A DPA permits an indictment to be preferred before the Crown Court but then allows the proceedings to be deferred upon certain terms, involving a monetary settlement and other conditions. If the conditions of the agreement are met within a specified time, then the prosecution is discontinued. A DPA must be endorsed by the Court as “fair, reasonable and proportionate” on an application made in private by the prosecutor. The agreement may not be with an individual, only with organisations.

As Mr Wagstaff acknowledged “the rationale behind the introduction of DPA’s is simple: they are intended to avoid lengthy and expensive prosecutions with all the prolonged uncertainty this can bring…”. Mr Wagstaff also acknowledged that DPA’s relied upon self-reporting and highlighted the danger of not so doing from whistle-blowers, disgruntled competitors and investigative journalism. He recommended early engagement with the SFO once a company had “real” and not “fanciful” concerns and thereafter ‘genuine unequivocal co-operation’, adopting the words of the DPA Code of Practice. The language he used was cautionary to corporate bodies, particularly given the audience he was addressing. However, one should not underestimate how keen the SFO may be to embrace this new regime.

In Stanbic Leveson LJ recognised that such agreements are unfamiliar in the area of enforcement of the criminal law in the United Kingdom, and he was at pains to make it clear that the Court retained control of the process, deploying appropriate scrutiny of the terms of any such agreement, lest the public be concerned that such agreements represented a “private compromise” without independent consideration of the public interest.

Despite the Court’s concern that the public might reach that conclusion, the reality is of course, that this is exactly what they are. DPA’s confer a considerable advantage to both sides in terms of avoiding the expense of a criminal trial. To the organisation, the possibility of an agreement once there is an investigation acts as a sizeable carrot to make amends for any failings which have become apparent, which may also be likely to mollify or console shareholders or customers. To the SFO, the risks that have become so apparent in trying to prosecute such large cases is averted. Everyone is a winner; save perhaps the public, who will be concerned that large and wealthy organisations may not buy their way out of jail. Hence the Court’s concern to try to address this outward appearance.

One may wonder whether the Court in Stanbic did protest just a little too much at its role in the endorsement of such agreements. It is hard to imagine a situation, given that such situations are likely to be rare in any event, that a Court would refuse to declare that a DPA was appropriate on the basis that there should instead be a public prosecution with all the problems that have beset the SFO in obtaining convictions in such cases in recent years. The particular features of the case indicate the sort of circumstances that will pertain when the Court is asked to endorse an agreement. In this case Standard Bank was not directly responsible for the unlawful conduct, though its internal system of regulation was lacking. No individual at Standard Bank had acted unlawfully, and Standard Bank had been pro-active in investigating and reporting its own conduct to the authorities. In such circumstances, it is not difficult to see the problems that an alternative criminal prosecution would face. In such circumstances, wherever the public interest may be thought to lie in the public prosecution of crime, there are distinct and obvious advantages to both parties involved of entering into a DPA.

The proposed introduction of an offence of failure to prevent the corporate facilitation of tax evasion is also significant. This heralds the introduction of a strict liability offence of offshore tax evasion where there is no requirement to prove dishonesty against an individual, and a new corporate offence, also of strict liability. This new offence is modeled on the offence under section 7 of the Bribery Act 2010 which removes the requirement to identify the ‘directing mind’ of the company and proving that he or she was sufficiently proximate to the events in question. Company X will be guilty of an offence if Y (a person “associated with” X) commits a “tax evasion facilitation offence” when acting in the capacity of a person associated with X. It will be a defence for the company X on any prosecution to show that it had ‘reasonable procedures’ in place to prevent Y from committing tax facilitation offences.

Notwithstanding the certain circularity in which the new offence is currently framed, one can see how the way in which this new offence is structured points the company in the firing line towards entering into a DPA if it accepts that at the relevant point in time its procedures were not reasonable, and therefore that it could not avail itself of the statutory defence.

Rupert Bowers QC




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