"Failure to prevent" The modern trend for corporate criminal offences

In early November this year, the new Director of the Serious Fraud Office (SFO) provided evidence to a House of Lords committee on the Bribery Act 2010. At the end of November, the SFO's Joint Head of Bribery and Corruption spoke at The Lawyer's "Managing Risk and Litigation Conference". In both speeches, the SFO supported extending the scope of "failure to prevent" offences that currently only apply to bribery and tax evasion.

In recent months, the SFO have encouraged and promoted the extension of "failure to prevent" offences to wide swathes of economic crime. The SFO position is that they are otherwise hamstrung in prosecuting corporate entities for economic crimes and an extension is the best way to get "companies in the dock". The SFO clearly consider the new "failure to prevent" offences as highly effective - so effective they want them to cover a wider range of economic crimes.

Historically, many criminal offences could only result in a corporate prosecution if someone who was the "directing mind and will of the company" was involved in some way (e.g. a Director).

However, the "failure to prevent" offences introduced over the last few years don't follow this principle - corporates can now be held liable for failing to prevent their employees, contractors and agents from committing such offences. The burden is shifted to the  corporate to demonstrate they had the appropriate systems in place. Insufficient processes and procedures can result in a risk of prosecution with the legal fees, PR damage and financial penalties that follow.

Prosecutors will always prefer to make use of offences they find user-friendly. The SFO's support of "failure to prevent" offences indicate that these offences are unlikely to go away. With the failure to prevent bribery offence in place for some time, and the similar tax evasion offence recently coming into force, corporates of all sizes need to focus on the adequacy of their processes and procedures now in order to limit the risks they are exposed to.

Looking to the future, corporates would be well advised to audit their processes and procedures in relation to a broad range of economic crimes, and consider how they manage corporate crimes at a senior level to avoid what is an increasingly favoured tool of prosecutors.

Send us a message