Bosses could be prosecuted for failure to prevent the fraudulent activities of their employees
The attorney general Jeremy Wright QC has called for new laws which could result in a significant expansion of ‘white-collar crime’. The changes would mean that senior executives could be prosecuted for economic crimes carried out by their employees. The plans, which are yet to be officially unveiled, would expand the proposed criminal offence of ‘failure to prevent’ from tax evasion and bribery, to include the wider acts of money laundering and false accounting. The aim is to cultivate a more answerable, transparent corporate environment by ensuring that bosses are properly held accountable for any financial criminal activity which takes place under their watch.
The holes in the current legislative regime were highlighted back in 2012 when the LIBOR rigging scandal hit the headlines. The UK authorities could hold individual employees responsible for their actions, but lacked the judicial powers to penalise the institutions that they worked for. The current regime in the UK makes it practically impossible to hold corporate boards to account for misconduct because it is rare that proper evidence in the form of a paper trail can be found that far up the corporate ladder. In contrast, in the US the law makes the prosecution of an organisation much easier. If the proposals go ahead, the UK system will be more akin to the US system where the institutions, as well as the individuals, can be reprimanded for wrong doing.
The attorney general speaking last month commented:
“when considering the question: where does the buck stop and who is responsible for economic crime? It is clear that the answer is to be found at every level, from the boardroom down…The intention of the government actions I have described is not only to prosecute and to fine for breaches of the law, but to promote a culture of corporate responsibility so that we are addressing the threat earlier on and not just reacting to it through investigation and prosecution.”
The specifics of these proposed reforms are not yet known but Downing Street has said that its bill will be announced in due course.
Throughout her short leadership, Theresa May has vowed to end boardroom excess and tackling corporate crime at all levels will no doubt be a central focus of this. These reforms, along with May’s other proposals such as increased transparency on pay all indicate that her leadership will be dominated, in the short term at least, by the message that big businesses need to change.