The UK (Slowly) Inches Toward Corporate Criminal Liability Reform

In what some are calling potentially “radical and seismic changes,” on 3 November 2020, the UK government announced that it had finished a three-year examination of the case for reform of the UK’s corporate criminal liability laws and tasked the Law Commission, an independent body designed to recommend legal reforms, to conduct further analysis and make recommendations for improvement. The Law Commission has said that it aims to publish its recommendations in late 2021. With some limited exceptions (most notably, the section 7 offence under the UK Bribery Act 2010 and the facilitation of tax evasion offences under the UK Criminal Finances Act 2017), corporate criminal liability in the UK is based on the “identification principle.” This principle provides that a company can only be held criminally liable for financial crime offences if prosecutors can prove beyond reasonable doubt that the “directing mind and will” of the company committed or was aware of the misconduct. The “identification principle” has long been a thorn in the side of UK prosecutors. Most recently, it was cited as the reason that the SFO’s case against Barclays was dismissed: because senior executives, including the CEO and CFO, of the bank did not constitute the “directing mind and will” of the bank in respect of certain capital raisings in the 2008 global financial crisis. UK prosecutors frequently point to the fact that the “identification principle” has its roots in the Victorian era when companies were smaller and it was easier to identify the directing mind and will. They also point to the difficulties of following email trails that appear to evaporate the further up the management chain one goes. It is expected that the Law Commission will consider in more detail whether any new offences need to be created to make it easier for law enforcement agencies to prosecute crimes such as fraud, money laundering and false accounting. The publication of the Law Commission report is expected in late 2021 and, if there are to be changes to the law, one can expect them not to take effect until at least 2022 (and more likely to be 2023).