23Sep

The Government has unveiled proposals that could see company directors prosecuted if their firms commit fraud, even if the criminal activity is perpetrated by a rogue member of staff without the knowledge of senior management. Custodial sentences may be handed down in serious cases. It all comes as part of a proposed crackdown on ‘white collar crime’.

The Criminal Finance Bill would make company boards liable for cases of money laundering, false accounting and fraud – at present they can only be held responsible for instances of bribery.

Investopedia defines ‘white collar crime’ as “a non-violent crime committed for financial gain.”

It goes on to say that “securities fraud, embezzlement, corporate fraud and money laundering are examples of white-collar crime.”

Prime Minister Theresa May MP is reported in the press as being the main driver of the Government proposals. The topic has always been of interest to Mrs May, who was instrumental in setting up the new National Crime Agency in 2011 when she was Home Secretary. At the time, Mrs May said:

“A lot of people feel that there hasn’t been enough emphasis on what one [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][might] call middle-level, financial fraud.”

The Attorney General, Jeremy Wright, who provides legal advice to the Government, said:

“The threat of economic crime and its impact is too great not to act. It threatens prosperity and the rule of law and public confidence in our ability to uphold these values.

“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.”

Barry Vitou, a prominent fraud lawyer, commented:

“The present regime makes it practically impossible to hold corporate boards to account for corporate misconduct because evidence of that misconduct must be found at the highest level. In practice, the evidence trail usually dries much lower down the corporate tree.

“There is no responsibility for the damage caused by failing to prevent economic crime.”

Financial services firms should be used to the idea of individual accountability. In some ways this is merely an extension of what will happen across financial services from 2018, when all firms will be subject to the Senior Managers & Certification Regime. This Regime requires managers to ensure procedures are being complied with correctly in their business area. If there is an issue in a particular area of the firm, the relevant senior manager for that area could be accountable to the regulator, the Financial Conduct Authority, for that failing.

The Government is also proposing new requirements regarding employees’ representation on company boards, and regarding remuneration policies. Only days before she became PM, Mrs May said:

“We’re going to have not just consumers represented on company boards, but workers as well.”

A consultation document on the proposals is expected to be issued shortly.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]