Transparency International has responded to the Law Commission consultations on reform of corporate criminal liability. The response notes:
- that reform is long overdue, given the difficulties in establishing corporate criminal liability;
- extending clear corporate liability to cover fraud and other economic crimes, such as money laundering, would significantly improve the prosecution tool kit;
- that the principles that govern attribution of criminal liability to non-natural persons should reflect, among other things, the gaps in the current system, and should include certainty, clarity, fairness and equality and provide credible deterrence;
- the identification principle is not a satisfactory basis for attributing criminal liability as it is unnecessarily restrictive and makes it very difficult to prosecute large companies as it requires evidence that a very senior person was complicit in the illegal activity – thus meaning smaller companies are unfairly at greater risk of prosecution. This principle can also incentivise senior management to turn a blind eye to activities of their representatives;
- it is essential that the identification principle operation be reformed in line with global trends, and that, in deciding on a model, it needs to be one that has been seen to work – specifically, the Australian model is not considered appropriate by the Australian Law Reform Commission, so should not be the base the UK uses;
- the US model of vicarious liability works well in the US and could be adopted to allow the SFO to prosecute companies for the criminal activity of any employee, representative or agent acting in the scope of their employment or agency, and TI believes this would be a good model to follow;
- the “adequate procedures” model of the Bribery Act is appropriate to protect companies where they have shown due diligence or had measures in place to prevent unlawful behaviour, and it would be important to clearly define what adequate procedures would be in the context of money laundering – TI suggests this should be based on the same principles as the MOJ guidance on the Bribery Act, and should also have particular focus on areas of high money laundering risk and a reporting requirement;
- similarly, TI supports the widening of the “failure to prevent” offence – noting the thousands of British firms that have been named in leaked SARs, mainly LPs and LLPs – but it says the introduction of this offence would not be a substitute for reforming the identification principle;
- there is no merit in extending civil powers, as the FCA’s significant civil powers have not shown themselves to be as effective a deterrent as a criminal conviction; and
- in terms of sentencing, the focus should be on rehabilitation or reform of the corporate body and effective compensation as well as consistency.