Is the current law on corporate criminal liability about to get more teeth?

On 3rd November 2020, the Government published its long-awaited response to its January 2017 call for evidence on the question of reforming the law on corporate liability for economic crime. The Government found the evidence inconclusive overall, so it has asked the Law Commission to draft an Options Paper, to assess how effective the current law is relating to corporate criminal liability and where improvements can be made.

The Government response can be read here. 

Sam Tate, Head of our White Collar Crime Team, and Lucy Kerr share their key expectations regarding the next steps in this process:

1. The long-standing "Identification Principle" will be the focal point of the review as it is the fundamental route to corporate criminal liability at present, whereby a company may only be held criminally liable through the individuals that represent its "directing mind and will".  

2. The Identification Principle has proven to be a great obstacle to the prosecution of companies in recent years (especially large ones) for economic crimes.  The failed prosecution of Barclays Bank by the Serious Fraud Office in 2018 will no doubt be a significant influence on reassessing this area of law, where even the CEO and CFO of Barclays Bank did not constitute the company's directing mind and will. 

3. There has, nonetheless, already been some significant movement in the law on corporate criminal liability in the last decade with the introduction of the offences of: (i) failing to prevent bribery under the Bribery Act 2010; and (ii) failing to prevent corporate tax evasion under the Criminal Finances Act 2017.  

4. The House of Commons Treasury Committee report in March 2019 urged reform to the existing economic crime law, so it is anticipated that a new wider "failure to prevent" offence will be a key option put forward by the Law Commission. However, the mechanics of any such offence for new categories of economic crime, such as fraud, will need to be approached with caution. Unlike bribery, the corporate is often the victim of a fraud offence at the hands of its employees, rather than being a beneficiary. In addition, for money laundering offences any adequate procedure defence will need to dovetail with FCA requirements or risk creating confusion and unnecessary complexity. Getting these and other issues right will be important to avoid burdening companies with unwieldy regulation as they adapt to the twin impacts of COVID19 and Brexit.

5. The publication of the Law Commission report is not expected until late 2021.  Therefore, whatever options are put forward, we expect that any changes to the law will be slow to appear and not occur until 2022 or even later.