Companies that benefit from fraudulent behaviour could soon be prosecuted if proposals to beef up laws against corporate offending, currently being considered by ministers, go through.
The proposals borrow a criminal liability test from bribery cases, whereby companies can be prosecuted for “failing to prevent” corrupt payments, even if top executives had no immediate involvement in the dishonesty.
They follow the tough US approach to corporate offending and would give the Serious Fraud Office the power to reach financial settlements with offending companies, known as deferred prosecution agreements (DPAs).
The use of DPAs would enable organisations suspected of financial crime to avoid prosecution indefinitely on fulfilment of certain conditions, which could include a financial penalty.
However, business lobbies are already unhappy with the 2010 Bribery Act, which they say puts UK small and medium-sized enterprises (SMEs) at a competitive disadvantage with their foreign competitors in the international market.
Therefore, they are likely to react badly to the implementation of increased powers to prosecute companies, even where there is no evidence that the people at the top are involved in dishonesty.
Critics complain that the requirement to show that businesses have in place “adequate procedures” to prevent corruption amounts to an onerous red tape burden and claim that the proposed legal reforms would criminalise what amounts to negligence.
However, legal experts who are keen on reform say that DPAs would not be effective unless there was a credible threat of criminal prosecution for firms accused of a high degree of negligence.
The Director of the SFO and Director of Public Prosecutions have published a consultation on a draft Code of Practice explaining how they intend to use DPAs, which closes on Friday 20 September 2013. It is expected that DPAs will be available to prosecutors from February 2014.