UK Government Creating New 'Failure To Prevent' Offences

The UK Bribery Act 2010 broke new ground by expanding corporate liability beyond the traditional "directing mind" model and establishing strict corporate criminal liability for the wrongful acts of an "associated person," albeit subject to an affirmative compliance defence. This new model, although so far only modestly used in corruption cases, appears to have won supporters in the UK Government who intend to expand it beyond the corruption context. Following a public consultation in the early part of last year, in October 2016, the UK Government presented its Criminal

Finances Bill ("Bill") to Parliament.

The Bill introduces two new criminal offences for a body corporate or partnership (referred to in the Bill as a "relevant body"), wherever incorporated or formed: (i) of failure to prevent the facilitation of UK tax evasion offences; and (ii) of failure to prevent the facilitation of foreign tax evasion offences by a person with whom the relevant body is associated, provided that the person commits the facilitation of tax evasion offence in their capacity as the relevant body's associated person.

The Bill is expected to pass through the House of Commons (the lower chamber) in Q1 2017 before being introduced in the House of Lords (the upper chamber). It is not expected to come into force before Q3 2017 at the earliest.

On 13 January 2017, the UK Government published its long-awaited consultation on the merits of expanding the corporate economic crime offences beyond failing to prevent bribery and the facilitation of tax evasion offences, in order to better hold companies to account for the criminal wrongdoings of their employees, agents and representatives.

The Rt Hon Sir Olver Heald QC, Justice Minister, noted the importance of ensuring that corporates are:

"properly held to account for criminal activity that takes place within them, or by others on their behalf and at their behest. It is equally important to foster and promote economic crime prevention as part of corporate good governance. Good corporate governance is a means to create a business environment of trust, transparency and accountability in order to promote investment, financial stability and sustainable economic growth."

At present, corporate criminal liability for economic crime is governed by common law rules, known collectively as the "identification" doctrine, which require prosecutors to show that those individuals who are the "directing mind" of the company knew about...