The landscape for tackling corporate crime in the UK is undergoing significant change, with a focus on empowering enforcement agencies to further hold large corporates to account for the conduct of their employees and associated persons. On 26 October 2023, the Government passed a piece of landmark legislation in the form of the Economic Crime and Corporate Transparency Act 2023 (the act), which we previously reported on in this April 2023 post and this October 2023 post. A few short weeks later, on 14 November 2023, the Criminal Justice Bill (the bill) was introduced to the House of Commons.
The act lowers the threshold for corporate liability (the ‘identification principle’) so that, for a corporation to become criminally liable, it is no longer required that the relevant offence be committed by the ‘directing mind or will’ of the company. The new threshold provides that a company will be liable if a ‘senior manager’ acting within their actual or apparent scope of authority commits a relevant offence.[1] The relevant offences are certain economic crimes (as listed in Schedule 12 of the act) and include offences such as fraud and theft. Under the act, a ‘senior manager’ is any individual who plays a significant role in the making of decisions about how the whole or a substantial part of the activities of the company are managed, or the managing or organising of the whole or a substantial part of those activities.[2]
With the introduction of the bill, the Government now proposes to widen this principle even further. Section 14 of the bill, as it currently stands, reads as follows:
Where a senior manager of a body corporate or partnership (“the organisation”) acting within the actual or apparent scope of their authority commits an offence under the law of England and Wales, Scotland or Northern Ireland, the organisation also commits the offence [¦].
Therefore, if the bill is brought into force, a company not only would face criminal liability if its senior managers commit certain economic crimes, but also may now face potential liability for all criminal offences.
This may not come as a surprise to those monitoring these developments closely, as the Government previously committed to wider reform of the identification principle as part of its Economic Crime Plan 2 and Fraud Strategy. It is expected that the legislative changes and Governmental strategic policy may result in an uptick of investigations and prosecutions for corporates as the UK enforcement authorities seek to flex their newfound powers. If the bill is brought into force, we also may see a greater frequency of corporate self-reporting to the UK enforcement authorities in a bid to secure deferred prosecution agreements.
The Government has requested views from stakeholders on the bill, with the call for evidence closing at the end of January 2024. All corporates conducting business in the UK would be well-served to continue monitoring developments.
It also is a good opportunity to ensure that compliance programmes are up to date and fit for purpose, given that corporates doing business in the UK are now potentially criminally liable for offences they previously may not have considered as a necessary part of their compliance strategy. If corporates have not already started reviewing their internal compliance procedures as a result of the passing of the act – which is highly recommended – then the bill and its proposals for further reform provide yet more reason to conduct a deep review of those internal compliance mechanisms.
[1] Section 196 of the act.
[2] Section 196 of the act.
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