Pressure growing on UK government to rethink policy on failure to prevent economic crime, says expert

Laura Dunseath, a specialist in business crime and corporate internal investigations at Pinsent Masons, the law firm behind Out-Law.com, said the UK government will likely need to "review the statements it made" earlier this year when it "decided not to carry out further work" on proposals to criminalise businesses that fail to prevent economic crime.

Dunseath said recent comments made by shadow Attorney General Catherine McKinnell were the latest to call into question the government's justification for its decision.

In an article published by the Politics Home website, McKinnell said comments the Crown Prosecution Service (CPS) issued on the law on corporate liability in the UK late last week show that "prosecutors are not properly equipped to deal with corporate wrongdoing". She called on the government to "act accordingly".

McKinnell said: "I have therefore written to the Attorney General this week calling for a full and transparent review of the UK’s law on corporate liability and whether it is fit for purpose."

On Friday last week the CPS announced that it had decided not to pursue prosecutions in relation to corporate liability at News Group Newspapers or against 10 people at Mirror Group Newspapers for alleged phone hacking.

In a statement the CPS said that existing UK laws on corporate liability "makes it difficult to prove that a company is criminally liable if it benefits from the criminal activity of an employee, conducted during their employment".

Companies can generally only be found liable for the acts of their employees or agents if the offender was a "directing mind" and the act was the "will of the company", except in the case of corporate manslaughter offences, to which a separate legal regime applies. An exception to this general principle was established by the Bribery Act, which created a new offence of "failure to prevent" bribery by people working for or on behalf of a business.

The government had looked into extending those section 7 provisions of the Bribery Act to other economic crimes, such as fraud or money laundering offences but backed away from doing so in the autumn. In reaching that decision the government had said that there was no evidence that corporates were getting away with economic crime and cited the fact that, at that stage, the section 7 Bribery Act offence of failure to prevent bribery had not been used in practice.

However, since then, in a UK first, the Serious Fraud Office (SFO) settled a court-approved deferred prosecution agreement with ICBC Standard Bank which arose as a result of the bank’s lack of adequate procedures to prevent bribery during a period in 2012-2013. The SFO has also subsequently announced that it has charged Sweett Group with failing to prevent bribery, contrary to section 7 of the Bribery Act.

"These latest comments from the shadow Attorney General, together with the recent proceedings under section 7 of the Bribery Act, and the fact that last month the SFO had to drop their prosecution of Olympus Corporation due to a technical legal argument, which highlighted the deficiencies in UK legislation in regard to corporate prosecutions, have created a perfect storm for the UK government," Dunseath said. "It will be interesting to see whether this leads the government reconsidering its previous position on the issue of introducing a new criminal offence of failure to prevent economic crime."