In World Economy News 14/01/2017
Britain is considering introducing a tough U.S.-style anti-corruption regime for multinational companies and their senior executives by making them liable for failing to prevent the economic crimes of staff and agents.
Ministers on Friday unveiled a range of proposals on how to crack down on corporate fraud, money laundering and false accounting as part of a consultation on how to repair public trust in businesses and improve accountability after companies have paid billions of pounds in fines for misconduct.
“Corporate economic crime undermines confidence in business, distorts markets, and erodes trust,” said Justice Minister Oliver Heald. “Companies must be held to account for the criminal activity that takes place within them.
The “call for evidence”, that runs to March 24, seeks views on suggestions that include introducing U.S.-style “vicarious liability”, that makes companies guilty through the actions of staff, introducing corporate criminal negligence charges for economic crimes and merely toughening regulatory regimes.
Much of the political debate over the last two years has centred on broadening a section of the Bribery Act that criminalises a company’s failure to put in place adequate compliance systems for staff and agents.
Some companies have already taken action.
“We’ve introduced a new code of conduct,” said a senior executive at an international mining company.
“(But) it’s almost impossible to cover every contingency. When you’re dealing with people, sometimes things can go the wrong way.
SMALLER FRY PUNISHED
David Green, head of the UK Serious Fraud Office, has argued since his appointment in 2012 that the current law, under which companies and their senior executives can only be prosecuted if they can be shown to be aware of or have condoned misconduct under the “identification principle”, is stacked against him.
He says the complex hierarchies of large multinationals create an incentive for executives to distance themselves from knowledge of wrongdoing lower down. This makes it easier to prosecute small companies with simple management structures, which is inherently unfair, he argues.
But initial plans to extend corporate criminal liability were shelved by former prime minister David Cameron’s government in 2015 before being reintroduced at an anti-corruption summit last May and reaffirmed by the Attorney General last September.
Advocates of tougher laws hope they will prompt firms to proactively manage staff conduct, investigate and bring wrongdoing to the attention of authorities and assuage concern that corrupt bosses evade prosecution.
Critics say they are unnecessary, risk businesses striking cosy deals with authorities and add too great a regulatory burden on firms already trying to navigate Brexit.
“This could have unintended consequences,” said one executive at a blue-chip company in London.
“Companies could pull out of some countries (because of governance concerns)… and just focus on OECD nations, leaving the rest of the field open to less scrupulous players.”
The consultation comes after the Bribery Act came into force in 2011, under which companies with assets in the UK face unlimited fines and bosses up to 10 years in jail if they fail to show they have “adequate procedures” in place to prevent staff and agents from committing bribery across the world.
According to consultancy PwC’s latest Global Economic Crime Survey, around 44 percent of UK organisations already expect an increase in compliance costs over the next two years.
Source: Reuters (Reporting by Kirstin Ridley, additional reporting by Barbara Lewis; Editing by Susan Fenton/Keith Weir)
