In October 2020, in a speech to the Royal United Services Institute, Serious Fraud Office director Lisa Osofsky said that the introduction of a new corporate criminal offence for ‘failing to prevent economic crime’ topped her list of law reforms. The Law Commission is now seeking views on whether such an offence should be enacted.
If a new corporate offence is created, it will significantly increase the circumstances in which a company can be convicted of a criminal offence. In this regard, there is no doubt that the present rules of corporate attribution restrict the imposition of corporate responsibility for criminal conduct committed in a company’s name, as the recent failure to successfully prosecute Barclays Bank over the involvement of its senior employees in the Qatar matter demonstrates.
But Osofsky should not be under any illusion. The enactment of this new offence will not solve the SFO’s problems. It is no silver bullet. The new offence would add nothing new to the SFO’s ability to hold individuals liable for serious/complex fraud, or corruption.
Serious fraud or corruption is often committed by dominant individuals with scant regard for the rules standing in their way. If this is true for rules imposed by authorities such as the Financial Conduct Authority, how much more so will this be true for the non-observance of internal procedures directed at the prevention of fraud or corruption?
It is individuals who commit fraud. Unless the SFO improves its ability to hold individuals to account, the intense scrutiny and criticism of the SFO will continue.
For a corporate offence, the role of individuals necessarily hovers in the background. Although the legal personhood and personality of a company have long been recognised, a company’s acts are determined by its officers and employees. If a company fails to take adequate measures to prevent fraud/corruption, a corporate offence may be committed, but ultimately the fault lies with individuals. The failure here is not necessarily committed by a fraudster, but by the company officers and employees responsible for putting measures in place. The corporate offence enables these individuals to sidestep direct responsibility for their failure.
There are many reasons why cases brought by the SFO against individual defendants fail. The task of prosecuting serious fraud and corruption is challenging, and there are cases below the public radar where the SFO has been much more successful than commonly thought. In the last four years, the SFO reports a conviction rate of 62% in respect of all defendants who were prosecuted. The fact that there are some acquittals demonstrates that the criminal justice system works. Moreover, the model for investigating and prosecuting serious fraud or corruption cases promoted by the Roskill Report on fraud trials in 1986, which involves close collaboration between financial investigators, forensic experts, and lawyers, is a good one, and in the past 35 years since the SFO’s establishment, important lessons have been learnt. Recent experience suggests there is still more to be learnt.
The trial of former Serco executives collapsed because of a failure to disclose documents. The outcome has been described as ‘a disaster for the SFO’. There have been other failed prosecutions of individual defendants such as with Sarclad, Tesco, Güralp Systems Ltd, and Barclays Bank. These failures have led to one experienced member of the legal profession questioning Osofsky’s ability to lead the SFO.
And so, we see that the enactment of a new corporate criminal offence of ‘failing to prevent economic crime’ will certainly not serve as a silver bullet for the SFO. Indeed, there is a danger that the attention afforded to the discussion about expanded corporate criminal liability and the role of DPAs serves to distract from the main purpose of the SFO, which is to effectively investigate and prosecute individuals who are guilty of serious or complex fraud, or corruption.
Jonathan Fisher QC is Lead Counsel at Bright Line Law