For several years the Serious Fraud Office has been preaching an extension of the strict corporate liability provisions contained within Section 7. This would create liability for companies that fail to prevent other forms of economic crime, such fraud and market manipulation.
Those who follow my blogs will know that I, too, am a strong supporter of the idea. In fact, in a previous blog I predicted that the current government would implement such changes before the end of this parliament.
The government did contemplate the idea but shelved its considerations in 2015. Then, quite unexpectedly, David Cameron announced at the London Anti-Corruption Summit in May 2016, that the government would launch a formal consultation on the suggestion.
That consultation process has yet to begin as the government has been pre-occupied with introducing a new offence of facilitating tax evasion. This new tax offence will adopt the Section 7 strict liability principle.
In the meantime, supporters of the suggestion to extend Section 7 beyond bribery and tax evasion are keeping up the pressure to ensure Cameron’s London Summit promises are not forgotten. Transparency International, for example, has launched its Database of Promises made at the London Anti-Corruption Summit with the intention of holding promise-makers to their word.
In September I had the privilege to speak at the Cambridge Economic Crime Symposium, as a guest of the Chartered Institute for Securities and Investment. Although I presented details of the new ISO anti-bribery standard to delegates, the discussion soon moved away from ISO 37001 to a general debate on extending corporate liability for other forms of economic crime.
In a keynote speech to the Symposium, David Green, Director of the Serious Fraud Office, focused on the legal concept of the ‘Identification Principle’ (that requires prosecutors to show that a ‘controlling mind’ of a company was involved in the corporate criminality under consideration) as justification for extending the strict liability principle of Section 7.
“In a world of increasingly complex corporate structures, the identification principle can hobble the prosecutor in those cases where it is right to prosecute the company.
The principle is illogical in that, at present, it is the only route to liability for all major economic crime offences (fraud, false accounting, money laundering) except bribery and (soon) tax evasion.
The principle operates unfairly: it is always easier to identify the controlling mind in a small company than in the case of a large corporation.
It also creates unhelpful incentives for senior executives: on the one hand, to distance themselves from knowledge of operations in fraud cases, on the other, to preach compliance in bribery cases so as to demonstrate adequate procedures.”
Section 7 holds companies liable for bribery committed for its benefit. In essence, it is an offence of poor corporate culture and governance. The Prime Minister, Theresa May, has stated a need for a more compassionate and honest form of capitalism, most recently at the G20 Summit in China. Her specific intention to get tough on irresponsible corporate behaviour was conveyed to the Cambridge Economic Crime Symposium on her behalf by Jeremy Wright, the Attorney General. The government’s commitment to consult on the proposal to extend Section 7 remains on the Ministry of Justice website.
UK PLC is not divorced from society. I remain convinced that an extension of the strict corporate liability concept enshrined within Section 7 of the Bribery Act will happen and that this modernisation of the UK criminal law will be one of the drivers for a new form of capitalism in the UK.