04 October 2016

A new corporate offence of failure to prevent "economic crime" has been proposed, disposed of, and proposed again within the past 12 months. However, following the Attorney General's speech at the Cambridge Symposium on Economic Crime, the media appears to have suggested that the government’s intention is to make directors and/or other senior managers criminally liable for offences committed by their employees.

The reality is that the new offence is expected to make corporates, not directors or senior managers, criminally liable for their failure to prevent economic crime by persons that act on their behalf, namely employees, subsidiaries, agents, representative and sub-contractors.

Moreover, corporate criminal liability will be strict: it will be no defence for the corporate to say that it did not participate in, or have any knowledge of, the criminal activities of its representatives. Instead, it is expected that the only defence available to the corporate will be that it had put in place sufficient procedures to prevent economic crime.

The proposed corporate offence follows the same model established by the 'failure to prevent bribery' offence found in Section 7 of the Bribery Act 2010 and also the ‘failure to prevent the facilitation of tax evasion’ offence expected to be brought into force during 2017.

This strict liability corporate offence model achieves two things. First, it circumvents the significant difficulties in establishing corporate criminal liability. Under the common law, a corporate can only be found guilty of a criminal offence by satisfying the "directing mind and will" test. That is, the directors or senior managers must be actively involved in the criminal activity in order to impute liability to the corporate. Second, the requirement for the corporate to establish procedures designed to prevent economic crime shifts some of the practical burden (not to mention cost) of prevention and policing on to the corporates themselves.

It remains to be seen whether the current government will go ahead with adding this burden to the list of those already felt by British businesses.

Key contact

David Hall

David Hall Partner

  • Dispute Resolution
  • Banking Disputes
  • Business Crime and Regulatory Investigations

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