Government wants to restore faith in Britain's businesses by shaking up corporate crime laws

Oliver Gill
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2015 General Election - Crime And Policing
Is the balance set to change? The government is considering a shake-up of corporate crime laws to make prosecution easier (Source: Getty)

The government has unveiled plans to get tough on corporate crime in an attempt to hold businesses to account for any unscrupulous behaviour.

The Ministry of Justice is concerned the bar is set too high for proving criminal offences such as fraud, money laundering and false accounting, meaning many prosecutions are successful.

"Companies must be held to account for the criminal activity that takes place within them," said justice minister Oliver Heald. "I want to restore public faith in business and make sure we have the right tools available to crack down on corporate criminality."

Barry Vitou, a partner at law firm Pinsent Masons explained today's news was a watershed moment. He said:

The call for evidence looks like a victory for those who have been campaigning to block a reform of the fraud laws concerning corporate crime. There has been until now a broad consensus that the law needed changing.

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The government revealed a host of options remained on the table including introducing US-style "vicarious" liability – effectively holding companies responsible for the actions of their staff whether or not companies were aware of such actions.

Striking fear

The gravitas of such changes was stressed by Louise Hodges, a partner at City law firm Kingsley Napley. She said:

This would present the greatest regime-change and the mere fact of its inclusion will strike fear in the corporate world.

However, others noted the rationale behind the proposed changes. "Given the increasingly cross-jurisdictional nature of investigations, there are good reasons for bringing the UK more in line with the US,” said Elly Proudlock, counsel at Wilmerhale.

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The head of the Serious Fraud Office, David Green, has for many years argued that because of complex corporate structures, it is hard to prove management involvement in misconduct in multi-national firms in particular.

Current laws stipulate prosecutors must prove executives were either aware or approved any illegal actions.

Green has advocated making a businesses criminally liable for the actions of its staff unless it can show it has taken steps to prevent the fraudulent offending.

Red tape

"Although potentially attractive, the ability for a company to predict and protect itself against every possible fraud that could be committed leaves the discretion to prosecute wide open and corporates facing increasing compliance costs and red-tape," said Hodges.

Read more: Government to consider new crimes for companies

The government has asked for suggestions and responses to its plans by 24 March.

Corporate misconduct laws were previously shaken up in 2011 with the introduction of the Bribery Act.

Under current laws, companies are subject to unlimited fines and staff can face up to 10 years in prison if they are unable to show "adequate procedures" are in place to prevent staff and agents from committing bribery anywhere in the world.

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