A particular focus of the House of Lords report was the workings of a new corporate enforcement model of making companies criminally liable for failing to prevent certain economic crime. The House of Lords was supportive of the corporate failure to prevent model, holding companies to account for criminality connected to their businesses. This model may be expanded to all economic crime because the UK Government will shortly respond to a consultation on reforming criminal law to make it easier to prosecute companies. The proposed reforms, if implemented, would bring UK law closer to the US, where companies are criminally liable for economic crimes of employees and agents which are connected to the business.
Internationally, the US continues to lead the fight against economic crime through offering leniency deals for companies which self-report violations and by paying whistleblowers significant financial rewards. Last week the US Securities & Exchange Commission paid a whistleblower $4.5 million for reporting bribery violations by a Brazilian medical devices company. As a result of the tip-off, the Brazilian company paid $30m to resolve alleged breaches of US bribery laws.
Many larger companies appreciate the increased risk of companies being caught up in and liable for crimes such as bribery, failing to prevent tax evasion, fraud, money laundering, and sanctions breaches. However, smaller companies can find compliance challenging due to a lack of expertise and resource.
The House of Lords report considered that the UK government should publish clearer anti-bribery guidance for businesses, particularly small and medium-sized firms, and provide better support on corruption issues in the countries to which UK companies export. Unfortunately, the UK government disagrees and argues that it is not for the government or the prosecution agencies to suggest the procedures to be put in place. Instead, it recommends that companies consult legal and compliance professionals.
This reluctance to publish guidance is in contrast to the US approach. The US guidance “Evaluation of Corporate Compliance Programs” recommends that business answer three “fundamental questions”. Is the company’s compliance programme well designed? Is the programme being applied earnestly and in good faith? Does the company’s compliance programme work in practice?
The guidance, written in plain English, is a useful reference for companies to follow in introducing a compliance programme or assessing how effective an existing programme is. Emphasis is given to the importance of a conducting a financial crime risk assessment, having a code of conduct which is supported by appropriately tailored training and communications, and ensuring that there is an effective whistleblowing and investigation process. There is a need for those charged with a compliance programme’s day-to-day oversight to have sufficient authority, stature, independence and resources. It notes that regardless of a company’s size, compliance personnel “must be empowered”.
In a time of increased criminal enforcement against companies, the US guidance is to be welcomed. Companies would be well served to conduct an honest and critical assessment of the answers to the three questions posed. It should be a straightforward exercise and the answers may be illuminating.
- Tom Stocker, head of white collar crime & compliance at Pinsent Masons.