The face of corporate criminal liability in the UK is changing. DLA Piper’s Laura Ford offers an insight into managing the risks.
The face of corporate criminal liability in the UK is changing. Typically, prosecutors have to prove that the most senior individuals in the business were involved in offending in order for liability to bite the company itself. With a new raft of criminal offences now focussing on a company’s failure to prevent crimes being committed, however, the number of companies being pursued in relation to serious criminal conduct is on the rise.
Failing to prevent bribery has been a criminal offence since 2011. The UK saw four disposals in relation to that offence within an 18 month between 2015 and 2017 (three by way of deferred prosecution agreement and one by way of prosecution). By contrast, the Serious Fraud Office successfully prosecuted just four companies in the entire period 2000 to 2014.
The success of the “failing to prevent bribery offence” appears to have been a driving factor in the UK Government’s consideration of whether to introduce a much broader offence of the failure to prevent economic crime, which would cover crimes such as fraud, false accounting and money laundering. The government consultation on that offence ran until 31 March 2017 and the jury is still out as to when – or whether – it will become law.
In the meantime, a new corporate criminal offence of failing to prevent the facilitation of domestic and foreign tax evasion has been brought into force. We are now six months on from its inception, and many businesses, including those in the manufacturing sector, are still grappling with how to respond to it.
It is a defence to both of the current failure to prevent offences to have in place adequate or reasonable procedures designed to prevent commission of the offence. For any business with more than a minimal risk of committing bribery or the facilitation of tax evasion, such procedures will involve: completion of a risk assessment; drafting of policies and procedures to meet the specific risks identified; training for at-risk individuals; regular communication from the board and other senior management on the importance of compliance; and regular monitoring and review of the effectiveness of the procedures.
Manufacturing businesses can be at particular risk in relation to both bribery and facilitation of tax evasion offences. They often engage in large, complex transactions; they operate overseas and with foreign supply chains; they supply to governments, or in connection with government contracts and often engage agents to act on their behalf in dealings with customers or other third parties. Such businesses would be well placed, therefore, to commit a proportionate amount of resource to managing these risks and ensuring the existence of a defence, should that ever be required.
The key driver behind this sea change in the approach to corporate criminal liability is a desire by the government to put the onus back on businesses to ensure they operate in an honest and ethical manner. There has been a significant increase in the focus on internal compliance programmes since these offences came into effect, which can only serve to improve the reputation of businesses operating in the UK.
The first contested trial in which a company’s compliance procedures were used as a defence to bribery charges took place recently; that defence failed. The question still remains, then, for all those trying to stay on the right side of the law, as to what their procedures would need to look like in order to ground a successful defence.
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