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Clifford Chance

Regulatory Investigations and Financial Crime Insights

Reform of corporate criminal liability – unresolved

On 7 May 2019, the Government published its response to the House of Commons Treasury Committee's March 2019 report "Economic Crime - Anti-money laundering supervision and sanctions implementation" – but deferred again on addressing calls for reform of the corporate criminal liability framework.

On 8 March 2019, the Treasury Committee concluded in a detailed report that it was wrong for the Government not to reform the corporate criminal liability framework for economic crime.

Among other matters, the Treasury Committee noted that ensuring there are prosecutions of corporate entities will help ensure the UK is a "hostile" environment for economic crime, and raised doubt as to whether the current framework allowed law enforcement to achieve these goals, comparing the position in the UK to that in the US.

Similar comparisons have featured heavily in other calls for reform of the framework in recent months. In November 2018, SFO Director Lisa Osofsky told the House of Lords Bribery Committee that her preference was for the UK to move to a US-style system under which corporates can be held vicariously liable for the actions of their employees. She noted that if that was not possible, her fall back preference would be a broad "failure to prevent" offence for economic crime, similar to those in section 7 of the Bribery Act 2010 and sections 44 and 45 of the Criminal Justice Act 2017 relating to tax evasion.

The US comparison was also central to a report from NGO Corruption Watch, "How the UK Lags Behind the US in Policing Corporate Financial Crime", published the day before the Committee's report, which considered the UK's corporate liability laws for economic crime to be "antiquated and ineffective" compared to those in the US, and called for the Government to introduce new legislation with a failure to prevent economic crime offence.

Despite these calls, the Government has so far remained tight lipped. In its response to the Treasury Committee report last week, the Government noted simply that the Ministry of Justice had conducted a call for evidence in 2017 on the case for reform of the law of corporate liability for economic crime, that analysis of the responses had concluded, and the Ministry would respond shortly. It gave no steer as to when we should expect this response.

For now, the position remains uncertain. But as the calls for reform get louder, the prospect of change increases. Clearly, reform of the corporate criminal liability framework in the way envisioned by those applying pressure to do so would require many companies to make significant investment in, and adaptation of, their compliance programmes, and therefore is a subject that we will continue to monitor closely.

The House of Commons Treasury Report can be found here.

The Government Response can be found here.

Corruption Watch's report can be found here.