Corporate criminal liability refers to how companies can be prosecuted for crime. Incentivising companies to comply with the law is key to deterring corruption and money-laundering.
What’s the issue?
We advocate that senior executives and the companies they work for need to face investigation and sanction for corporate wrongdoing. It is essential that companies can be prosecuted for their role in breaching anti-corruption law because:
- Companies may profit and benefit from fraud, corruption and money laundering.
- Companies have the power to prevent corruption and money laundering occurring.
However, under the UK’s antiquated corporate liability regime it is almost impossible to prosecute large companies. The regime requires prosecutors to prove that the directors of a large company personally committed the crime. Given how global businesses are run, prosecutors have long said that this puts large companies beyond the law.
The regime as it stands:
- Fails to set a level playing field for all companies, as Small and Medium Sized Enterprises bear the brunt of prosecution.
- Incentivises poor corporate governance in large corporations who can effectively not be prosecuted because of the limitations of the regime.
What is the failure to prevent model?
The 2010 Bribery Act introduced a new form of corporate liability called Failure to Prevent which allows companies to be prosecuted for failing to prevent bribery. The model is unique to the UK.
However, it only applies to bribery and tax evasion, and not to other economic crimes such as fraud and money laundering.
This means that there is a different regime for holding companies to account for bribery and tax evasion as for fraud and money laundering which creates a distorting effect on economic corporate crime enforcement.
Failure to prevent is an important and effective new offence. However, it is not regarded by the courts or prosecutors as being as serious as committing the crime itself. It therefore carries lower penalties.
Even within the Bribery Act, the older corporate liability rules apply to the main offence of paying bribes. While it is easy for prosecutors to prosecute smaller companies for paying bribes, larger companies can only realistically be prosecuted for failing to prevent such bribes.
Ultimately, the UK’s corporate liability regime needs to change for all economic crime offences, even bribery, so that all companies, large or small, can be held liable for the crime itself and not just for failing to prevent it.
What does Spotlight on Corruption do?
We assess how companies are being held to account under the UK’s economic crime laws to ensure that the laws apply fairly. We also undertake in-depth research into how the corporate liability regime affects implementation of the UK’s anti-corruption laws.
Submission: Consultation on the Future Regulatory Framework for Financial Services – February 2021
Submission: Future of Financial Services Inquiry -February 2021
Policy Briefing: Amendment to the Financial Services Bill – January 2021
Submission: Treasury Committee Inquiry into Economic Crime – December 2020
Submission: Public Bill Committee on the Financial Services Bill – November 2020
The UK’s corporate crime rules – why urgent change is needed – November 2020
Blog by Susan Hawley
Corporate crime gap: How the UK lags the US in policing corporate financial crime – March 2019
Corruption Watch report highlighting the UK’s poor corporate liability regime by showing how the US imposed ten times the amount of penalties on New York banks than the UK did on London banks in the wake of the financial crisis.
Off the hook: Corporate impunity and law reform in the UK – September 2015
Corruption Watch report exploring the problems with the corporate liability regime and options for reform.