Last week, the British Labour Party, the main opposition party, published a policy review called ‘Tackling Serious Fraud and White Collar Crime.’
As might be expected, the review throws a number of political punches, in particular, the government’s recent proposals to cut red tape for business, by exempting facilitation payments, and the lack of resources for financial crime enforcement agencies.
The 11-page review (in pdf here) collates some quite useful comparative studies and information. It proposes the reform of corporate criminal liability law, the introduction of larger financial penalties and properly resourced enforcement agencies. It strongly suggests that the U.S. model for financial investigation and enforcement will provide the party with a template for future financial crime policy.
The review expresses dissatisfaction with the “identification principle” for establishing criminal liability. It expresses enthusiasm for the U.S.-vicarious liability principle but also refers to the Australian and Dutch corporate culture threshold tests.
It points out that due to lack of resources, the UK no longer has a rationalized counter-fraud agency and that latterly, the most meaningful investigative, and lucrative enforcement of financial crime, particularly in the case of domestic banks, has been carried out by the U.S. authorities.
The review also points out that the level of UK fines are dwarfed by those in the U.S. The SFO only managed to collect £13 million of £73 million outstanding fines in the last five years. The report expresses considerable enthusiasm for the manner in which the U.S. authorities can confiscate and retain proceeds of crime.
The discussion contrasts the manner in which U.S. lawyers are recruited to public practice with that of the SFO’s lack of appeal for young and talented lawyers.
No mention is made in the review of the potential abuses that exist in the U.S. through the vicarious liability system or of a self-perpetuating powerful investigative and enforcement system that can stifle business and hinder foreign direct investment in developing countries.
It’s also a little surprising that the review makes no proposals to introduce a EU-wide approach. Otherwise, the proposals will doubtless affect domestic companies’ competitiveness but there will be little leverage to ensure that companies belonging to other global trading blocs play by the same rules.
Alistair Craig is a commercial barrister practicing in London.