The ever changing landscape of corporate criminal liability for economic crime - what does this mean for financial institutions?
14 March 2017
Many commentators, regulators and policy makers believe that broadening corporate criminal liability is a step in the right direction. Others argue that the current state of UK corporate criminal liability makes it more difficult to successfully prosecute large corporates with complex management structures. Apart from certain statutory offences, prosecutors are required to identify the “directing mind and will” of a corporate and to attribute the relevant conduct to that directing mind.
In respect of this criticism and as part of the whole push for transparency and accountability, on 13 January 2017 the Ministry of Justice launched a consultation on the case for reform of the law on corporate criminal liability for economic crime. The deadline for responses to the call for evidence is 24 March 2017. PwC will be submitting a one firm response to this call for evidence.
It is argued by some that the introduction of a strict liability offence for corporates under the UK Bribery Act 2010 and the failure to prevent tax evasion offences under the forthcoming Criminal Finances Bill have paved the way for reform of the law on corporate criminal liability. In line with this legislation many expect that the government will reform the law on corporate criminal liability for economic crime and as part of that reform introduce an adequate/reasonable procedures defence for corporates.
So what does this mean for financial institutions? We expect that financial institutions will be required to navigate increased responsibilities whilst still managing sector specific regulation and the additional burden of implementing the Senior Managers and Certification Regime. They may be required to adapt and possibly broaden their internal policies and procedures so that they can successfully assert the adequate/reasonable procedures defence. In respect of economic crime it is likely that they may have to implement and adopt even more robust due diligence procedures and increase monitoring, training and reporting. With greater obligations will come greater scrutiny by regulators and an increased workload for already stretched compliance and legal teams.
Therefore, although change is necessary and perhaps expected by some, there can be no doubt that it will place an increased burden on financial institutions.
Regulatory & Commercial Disputes, PwC
Regulatory & Commercial Disputes, PwC.