Simmons & Simmons’ response to the Call for Evidence on Corporate Liability for Economic Crime

The Call for Evidence

The Government opened a consultation on Corporate Liability for Economic Crime with a Call for Evidence on 13 January 2017, which, after a week’s extension, closed on 31 March 2017.

Amongst a range of proposals, this consultation raises the long-discussed prospect of extending the “failure to prevent” offence under the Bribery Act to cover other economic crimes. The proposed aim is to reduce economic crime by making it easier to convict larger companies where proof is currently needed of culpability by the company’s “directing mind and will”, typically its senior management.

The consultation proposed five possible models for change to the existing law on corporate liability, ranging from modifying the scope of who can constitute the directing mind of the company, through “failure to prevent” offences, to vicarious liability for the acts of all employees and agents, or the use of regulation in industries beyond financial services.

The consultation proposed that the following offences would be subject to any new form of corporate criminal liability:

• the common law of conspiracy to defraud
• section 1 of the Fraud Act 2006 (all primary fraud offences)
• section 17 of the Theft Act 1968 (false accounting), and
• section 327, 328 and 329 of the Proceeds of Crime Act 2002 (all the primary money laundering offences).

Simmons & Simmons’ Response

After consulting with a wide range of key clients, Simmons & Simmons submitted a full response to the proposals contained in the Call for Evidence.

In summary, our view on the suggestions in the Call for Evidence is:

• There are already extensive regimes, both criminal and regulatory, to hold both individuals and corporates to account for business misconduct.
• Changes already made to the law since 2007 have addressed those areas where there has been evidence of wrongdoing going unpunished.
• At present, we are not persuaded that there is evidence that the criminal aspect of corporate liability requires further reform.
• Any reform in this area must:
  • be targeted to address clearly identified risks or inadequacies in the current legal and regulatory framework, supported by evidence of the types and extent of the wrongdoing in question
  • be effective in reducing the level of offending through prevention, providing a more rigorous framework for prosecution and deterrence, again supported by evidence that there are solid grounds to believe that the reform will have the intended results, and
  • introduce reasonable and proportionate expectations on companies, taking into account existing measures for addressing misconduct by corporates and senior management and the risks faced by individual businesses.
• That will involve assessing the factual evidence to back up specific proposals, in relation to specific offences.
• If the "failure to prevent" model is to be extended, we believe it is not necessarily appropriate to take the approach from the Bribery Act and apply it to all other economic crime offences. Bribery covers relatively easily identifiable behaviour to which specific business areas and activities are particularly vulnerable. Businesses can address the risk of bribery by examining a relatively narrow range of situations and putting in place appropriate measures to address the risks arising. By contrast, fraud covers almost any dishonest acquisitive act or omission.
• No evidence has been put forward of the economic crimes identified by the Government being regularly perpetrated on behalf of corporates, or for their benefit. Indeed in many cases, a corporate is likely to be a victim of, or unwitting conduit for, fraud and money laundering.

Those principles have informed our detailed responses to the questions posed by the Government.