In his third report to the Cambridge Symposium on September 2, the Director of the SFO suggested that the proposal to amend s.7 of the Bribery Act 2010 to cover financial crimes was “gaining traction.”
I will also continue to speak in favour of amendment of S7 of the Bribery Act to create the offence of a company failing to prevent acts of financial crime by its associated persons. That would significantly increase our reach on corporate criminality, and is an idea that appears to be gaining traction.
S.7 introduced a strict liability offense for commercial organizations if an associated person engaged in bribery for its benefit, subject to a defense that it had put in place adequate precautions to prevent such conduct.
The suggestion that such an offense should now be extended to include financial crimes has serious ramifications, particularly, for less well resourced SMEs.
Views have already been expressed by commentators that the current offense of failing to prevent bribery, subject to putting in place adequate preventative procedures, may provide a get out for large corporations which have the resources and clout to haul in high profile lawyers and well known firms of lawyers and accountants so as to give the appearance that adequate precautions have been put in place. If a similar offense is now extended to cover all financial crimes, it may provide a bonanza for those in compliance and monitoring but not necessarily for those businesses less able to carry the costs.
The Director’s support for a strict liability financial crimes offense is perhaps more symptomatic of the difficulties facing a financially strapped enforcement agency in prosecuting conventional offenses. The speech acknowledged that with the “recalibrated” SFO engaging with “the top strata of economic crime,” enforcement of the lower tiers of fraud was “patchy.” In fact, apart from launching some major investigations, the report failed to highlight one positive or substantial achievement or outcome in the last few years. Mention was made of Bruce Hall’s sentencing and £3 million ($5 million) confiscation payment but without any reference to the Dahdaleh trial fiasco; it sought to turn the Tchenguiz debacle, a £4.5 million ($7.4 million) damages payment and costs, into a positive achievement; and described the Treasury’s hand to mouth financing as “blockbuster funding.”
In reality, the Treasury has not provided anything remotely like what a specialist national fraud enforcement agency actually requires to perform its enforcement role. So it’s against that background and the attendant difficulties facing the SFO that its Director is lobbying to reform corporate liability law by way of an amendment to s.7 of the Bribery Act. Needless to say, the introduction of strict liability offenses for an associated person’s financial crimes, subject to an adequate preventative procedures defense, may prove somewhat controversial once its ramifications are fully appreciated.
David Green QC’s report to the Cambridge Symposium on September 2, 2014 is here.
Alistair Craig, a commercial barrister practicing in London, is a frequent contributor to the FCPA Blog.