1 New models of corporate criminality and the problem of corporate fraud: prevention or cure? S.F. Copp & A. Cronin 1 Concerns over corporate behaviour in areas as seemingly disparate as homicide, manslaughter, bribery and tax evasion have led to experimentation with new models of corporate criminality, as distinct from individual criminality, to avoid obstacles to prosecution posed by the common law’s identification principle that effectively limits prosecution to small companies where an individual can be said to the company’s “directing mind and will”. Foremost amongst these has been the “failure to prevent” model introduced by the Bribery Act 2010. This has been perceived to have been successful in changing corporate behaviour, with widespread adoption of new corporate practices evidencing that compliance is taken seriously. As a consequence, it has been proposed that this model be extended to other areas of behaviour regarded as economic crimes. HMRC warmly endorsed the model and the Criminal Finances Act 2017, which received Royal Assent on 27 April 2017, contains new corporate tax offences, relating to the failure to prevent UK and foreign tax evasion that are expected to come into force by the end of September 2017. In early 2017, the Ministry of Justice issued a “Call for Evidence on Corporate Liability for Economic Crime”, with particular reference to its proposal to create “failure to prevent” fraud, false accounting and money-laundering offences. This article focuses specifically on the potential of the new model to combat corporate fraud and evaluates: the problem of “economic crime”; the historical development of the “failure to prevent” model of organis ational liability for bribery; its effectiveness in the context of the Bribery Act 2010; the relative ineffectiveness of the law in combatting fraud in a financial services context; and the appropriateness of the “failure to prevent” model to “economic crime”, specifically fra ud. In conclusion, it argues for the retention of the common law as a flexible and effective tool in appropriate cases. We argue that the “failure to prevent” model will be a useful extension of the law when combined with a due diligence defence as it may improve corporate behaviour in a range of typically larger companies where the common law is unlikely to assist. However, we argue that it is nonetheless severely limited in its application to criminal frauds because it is predicated on the commission of an offence by an individual. In such cases where the individuals involved in the conduct are not as individuals dishonest, it is argued that an additional mechanism is required to enforce the core criminal offences committed and reflect and stigmatise corporate culpability appropriately. The authors recommend this be done by way of a simple Criminal Practice Direction in relation to offending of this nature restating orthodox and well-established evidential presumptions in the criminal law. THE PROBLEM OF “ECONOMIC CRIME” 1 Dr S.F. Copp, Associate Professor, and Dr A. Cronin, Senior Lecturer in Law, Department of Law, Bournemouth University. This article builds on the authors’ response to the Ministry of Justice “Call for Evidence on Corporate Liability for Economic Crime” submitted to the Ministry of Justice on 23 March 2017. The law is generally stated as at 9 May 2017.
New models of corporate criminality and the problem of corporate fraud: prevention or cure?
Jul 06, 2023
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