LONDON (Reuters) - The British government opened a long-awaited consultation on how to crack down on corporate fraud, money laundering and false accounting on Friday, in what it billed as an effort to repair public trust in businesses and improve accountability.
Government ministers floated suggestions that ranged from introducing tough, U.S.-style laws that punish companies for the crimes of their staff to holding companies accountable for failing to prevent staff from committing such crimes and merely strengthening regulatory regimes.
”Corporate economic crime undermines confidence in business, distorts markets, and erodes trust,“ said Justice Minister Oliver Heald. ”Companies must be held to account for the criminal activity that takes place within them.
The “call for evidence” seeking views on whether further reform is needed to combat corporate criminality, after banks and other institutions have paid billions of pounds in fines for fraud and dishonest activities, will run until March 24.
UK prosecutors have long argued that it is hard to prosecute companies in Britain because of high legal hurdles. In English law, a corporation is only criminally liable if senior bosses are culpable under the “identification principle”.
Initial plans to extend corporate criminal liability were shelved by former prime minister David Cameron’s government in 2015 before being reintroduced at an anti-corruption summit last May and reaffirmed by the Attorney General last September.
The consultation comes after the draconian Bribery Act came into effect in 2011, under which companies with assets in the UK face unlimited fines and bosses up to 10 years in jail if they fail to show they have “adequate procedures” in place to prevent staff and agents from committing bribery across the world.
David Green, head of the UK Serious Fraud Office, has argued since his appointment in 2012 that English law is stacked against him. He says the complex hierarchies of large multinationals create an incentive for executives to distance themselves from knowledge of wrongdoing lower down.
Business lobby groups, however, might latch on to the suggestion that corporate economic crime could be dealt with in the regulatory sphere. They have argued that law changes are unnecessary and add too great a compliance burden on firms attempting to navigate a future post-Brexit Britain.
According to consultancy PwC’s latest Global Economic Crime Survey, around 44 percent of UK organizations already expect an increase in compliance costs over the next two years.
Reporting by Kirstin Ridley; Editing by Susan Fenton