By Annette Hughes & Joshua Levy
The UK government is considering making it an offence for a commercial entity to fail to prevent economic crimes. If implemented, the proposal will have serious implications for Australian companies carrying on a business or part of a business in the UK.
Under similar groundbreaking provisions in the UK Bribery Act 2010, a company can be prosecuted for failing to prevent acts of bribery perpetrated by an employee, or by any other person deemed to be associated with the company (such as agents, or third parties with apparent authority).
The penalty for breach of this provision is a fine - an unlimited sum. The only available defence is that the entity had ‘adequate procedures’ in place to prevent persons associated with the company from engaging in the conduct.
What constitutes adequate procedures in any given case depends on a variety of matters, such as the nature of the risks, the types of risk assessment and due diligence undertaken, the proportionality of policies and measures in place and the response to issues identified.
Despite criticism that this measure was overly burdensome and unfair on companies, UK Attorney General Jeremy Wright has now signalled that the measure may be widened so that companies could also be prosecuted for failing to prevent economic crimes, such as fraud and money-laundering.
At the recent Cambridge symposium on economic crime, Attorney General Wright stated that “the government is considering proposals for the creation of an offence of a corporate failure to prevent economic crime, modelled on the section 7 Bribery Act offence.”
The idea was apparently first raised last year by David White, the director of the UK Serious Fraud office. The plan appears to have cross-party support, with Labour shadow attorney-general Emily Thornberry endorsing the proposal, stating “we have to make companies vicariously liable for the acts of their employees.”
