Failure To Prevent Offence May Be Introduced In The UK In The New Economic Crime And Corporate Transparency Bill

• Law Firm: Herbert Smith Freehills
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Criminal Law, Corporate and Company Law, Money Laundering, White Collar Crime, Anti-Corruption & Fraud, Corporate Crime
• Author: Ms Susannah Cogman, Daniel Hudson, Brian Spiro, Kate Meakin, Robert Hunt, Elizabeth Head, Eamon McCarthy-Keen and Lucy Kelly
• Published date: 09 February 2023

The Economic Crime and Corporate Transparency bill (the "Bill"), which is currently progressing through Parliament, is reportedly due to include provisions introducing a new failure to prevent offence affecting corporates, following statements by a UK Government minister during debates surrounding the Bill. In this briefing we outline the background to this development and anticipated next steps.

1. Corporate criminal liability reform

There has been a long-standing debate regarding the desirability of reform to corporate criminal liability. The most substantive review of this topic to date is comprised in the Law Commission's June 2022 options paper. This discusses a range of potential reforms, from retaining the existing identification principle to introducing specific 'failure to prevent' offences, including failure to prevent fraud by an associated person (as well as computer misuse and human rights abuses), and various civil options. Importantly, the Commission ruled out a broad failure to prevent economic crime offence given the overlap with other failure to prevent offences and challenges faced by companies in adopting reasonable procedures to tackle broad economic crime.

Whilst the Law Commission identified a number of broad principles that it considered the law ought to reflect, the nature of the consultation meant that the options paper did not contain detailed proposals regarding the drafting of any new offences. Instead, it was anticipated that the Government would consider the options, select one or more for further consideration, and engage in more detailed consultation if it was considered that reform of the law was appropriate. On 10 January 2023, the Government, in its response¹ to the House of Commons Justice Committee, stated that it recognised the current law does not adequately hold organisations and their senior persons to account for offences committed by the corporation and their associated persons and that it would collaborate with others across Government to consider the options paper and determine a case for strengthening the law on corporate criminal liability, including the creation of an offence for failure to prevent fraud.

Additional background to the debate on corporate criminal liability reform, and a detailed discussion of the Law Commission's options paper, can be found here.

2. The Economic Crime and Corporate Transparency Bill

The draft Bill was published in September 2022 and will, when enacted, introduce a number of...