UK corporate-liability reforms likely to face more delay following government review

05 July 2019 00:00 by Martin Coyle

Companies in the UK look unlikely to get new economic-crime prevention requirements soon, as the government is considering shifting pursuit of the reforms to the Law Commission, MLex has learned.

The UK government is currently scrutinizing how to tackle corporate economic crime amid concerns that current laws make it too difficult to punish companies for wrongdoing.

The Ministry of Justice, which is leading a review that has been stalled for the last two years, has been looking at whether to extend the law used to tackle corporate bribery — the "failure to prevent" model — to other forms of economic crime such as fraud and money laundering.

That long-awaited review of the UK’s laws to tackle corporate economic crime isn’t likely to result in any concrete proposals, as the government is considering passing responsibility for the issue onto the Law Commission, MLex understands.

The government’s likely failure to issue any solid reforms will come as a blow to campaigners who have long argued that UK prosecutors lack the right tools to tackle corporate misconduct.

MLex understands that instead of issuing new plans to tackle corporate criminality, the government will instead give the task to the Law Commission, an independent body that reviews laws in England and Wales. That has prompted fears that future reforms will be further delayed and effectively kicked into the long grass.

Under the Bribery Act 2010, companies can be prosecuted for failing to prevent bribery. Campaigners have called for these provisions to be extended to other forms of economic crime, arguing that it is too hard to prosecute corporate wrongdoing under the UK’s current laws.

The Serious Fraud Office has found it particularly difficult to hold companies to account as it must pinpoint a “controlling mind," or the most senior executives being responsible for misconduct, before being able to charge companies with criminal offenses.

In May 2016, at an anticorruption summit hosted by the UK, former prime minister David Cameron said the government would consult on extending the failure-to-prevent model used to tackle bribery and tax evasion to money laundering and fraud.

This commitment was later downgraded to a call for evidence, with the Ministry of Justice asked to take responsibility for the policy. Little has been heard on the topic since March 2017, when the call for evidence ended.

Prosecution issues

SFO Director Lisa Osofsky has previously said her office is “hamstrung” in its ability to go after large companies by the UK’s “identification principle.” This principle means that if the prosecutor can’t identify wrongdoing by the top two or three in a company, it's hard to charge the corporation.

The SFO failed in its bid to prosecute Barclays over suspected fraud linked to a multibillion-pound capital-raising deal with Qatari investors in 2008. In May 2018, a London court threw out the charges against the bank.

The Law Commission, in a recent report on the UK’s approach to tackling money laundering, said in light of the ongoing Ministry of Justice review of corporate liability laws, it couldn’t recommend any changes to make it easier to prosecute companies for money-laundering failures.

The government is expected to announce its position on the review soon, and this could tie in with an announcement on the government's new Economic Crime Plan.

The Economic Crime Strategic Board, which comprises members of government and some of the UK's biggest banks, is due to meet next week to sign off on that plan. Any announcement could be soon afterward, it is understood.

The Ministry of Justice, the Home Office and the Law Commission all declined to comment.

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