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Corporate criminal liability - Have you assessed the risk?

By Hannah Piper

Recent years have seen a new form of criminal liability emerge in the UK, whereby corporate entities can be guilty of failing to prevent the criminal acts of individuals associated with them. This type of offence poses a particular risk as it can be committed inadvertently: the corporate entity does not need to intend, or even be aware of, the underlying act.

Currently, there are two corporate ‘failure to prevent’ offences in force: failure to prevent bribery (under the Bribery Act 2010) and failure to prevent facilitation of the evasion of UK or foreign tax by a taxpayer (under the Criminal Finances Act 2017). For a corporate entity to be liable:

  • Bribery or tax evasion facilitation must have been committed by a “person associated with” the corporate entity.
  • An associated person is an employee or an agent or anyone who performs services “for or on behalf of” the corporate entity. This is broadly defined and could include subsidiaries in the UK and overseas.
  • For the bribery offence only, the associated person must have intended to gain some form of commercial benefit for the corporate entity.
  • Liability is strict. The only defence is if the corporate entity had in place “adequate” (bribery) or “reasonable” (facilitation of tax evasion) procedures designed to prevent associated persons from committing the relevant offence.

While many corporate entities already have anti-bribery and corruption or similar policies in place, UK government guidance makes it clear that these are unlikely to amount to a defence of a criminal prosecution for the failure to prevent offences if they were not implemented following a thorough risk assessment. At a minimum, the procedures must:

  • Be based on a thorough risk assessment of the corporate entity’s business activities and associated persons.
  • Be tailored to the particular offences.
  • Be relevant to the day-to-day roles of the corporate entity’s employees and other associated persons, who must be trained on how to follow them.

The reputational consequences and penalties that follow a criminal conviction can be serious. It is therefore essential for all corporate entities to undertake thorough and regular risk assessments and ensure that their procedures are sufficiently robust to be capable of amounting to a defence. They should also look out for the introduction of further offences, currently under consideration, for failure to prevent economic crime and failure to prevent human rights abuses.

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