The world of financial crime risk management is changing fast with the most innovative organisations exploring behavioural sciences to provide deeper insight into mitigating the risk of misconduct.
The criminal prosecution of corporate misconduct is also going through some fundamental changes. In February 2015 the American concept of a Deferred Prosecution Agreement (DPA) was added to the armoury of UK prosecution authorities. This heralded a significant step-change in the UK’s approach to tackling corporate wrong-doing.
Prosecutors are now able to agree a penalty and remedial actions with a company caught breaking certain laws, subject to the agreements of the courts, without pursuing a formal criminal prosecution.
At the end of 2015 the first DPAs were agreed and, perhaps unsurprising, related to violations of the UK Bribery Act (UKBA). The UKBA introduced the concept of strict liability for companies that benefit from bribery committed by anyone acting on behalf of the company. This strict liability principle circumvented a problem that has beset prosecutors for many years. For a company to be held criminally responsible for law-breaking by employees, prosecutors have to show that a ‘controlling mind’ of the company was involved. This is known as the ‘Identification Principle’ and is now no longer required to prosecute companies under the UKBA, although it remains for other offences.
The UK government has toyed with the idea of extending this concept of strict corporate liability beyond bribery to other forms of corporate misconduct, but seems to have shelved the idea for the moment.
We expect to see a number of DPAs agreed during 2016. These, too, will probably feature violations of the UKBA. How the DPAs are designed and publically reported upon will influence the debate on the benefits of companies self-reporting wrongdoing. Whether you love or loath DPAs, we remain committed to the view that being able to evidence a genuine effort at preventing corporate wrong-doing, and in particular bribery, is the best defence.