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“Where does the buck stop?” and curbing “boardroom excess” are just some of the quotes seen in newspapers following David Cameron’s and Theresa May’s statements aimed at getting tough with those who commit corporate fraud.

It was after the publication of the Panama Papers that the then Prime Minister David Cameron committed to widening the criminal liability of corporate fraudsters. Now, under the proposed legal framework, companies who fail to prevent the fraudulent actions of their employees will be subject to criminal sanctions.

First Steps

On the 13th October 2016 the Criminal Finance Bill took its first steps through the House of Commons. The intention behind the Bill is to improve the government’s ability to tackle money laundering and corruption, in part by creating corporate offences where a person associated with a company facilitates an economic crime.

The Need for Accountability

With the almost complete lack of prosecutions in the LIBOR scandal and Tesco’s gross overstatement of profits, the need to strengthen the government’s power in this area is clear. The former case provides a stark example of the failings in the UK system as highlighted by the Attorney General “the weaknesses in our current law result in other jurisdictions holding British companies to account when ours has not.”

Such deficiencies serve to further the need to pierce the corporate veil created by the concepts of corporate personality and limited liability, something which has been attempted by the recent introduction of the register of persons with significant control (not just directors and shareholders) over companies.

Criminal Liability

Even with the Bill being in its early stages there is a clear distinction between the company as a corporate body and those potentially liable for the actions or omissions leading to economic crime. Such a distinction means that, at this stage, the proposed new offences will not impose criminal liability on individuals.

This position is in contrast with the strong sanctions which some commentators had hoped for and which are available under The Bribery Act 2015. Within the last year there have been a number of successful corporate prosecutions under the Bribery Act, including in a company fine of £1.3m and a 3 year jail term for a marketing director.

Positive Obligation to Prevent Fraud

However, in placing a positive obligation on companies to prevent fraud or face criminal sanction the proposals do represent a stronger stance. Further to this the possible introduction of Unexplained Wealth Orders, requiring people suspected of criminal activity to explain disproportionate riches, does allow for greater powers of investigation and seizure against individuals. Not to be overlooked is the inclusion of power for the police to delay company merger transactions for up to 6 months for the purposes of investigating suspicious activities.

Despite what some may see as a weakening of the government’s commitment to curve boardroom excess, the proposed legislation represents a positive step towards protecting stakeholders from fraud, encouraging good business practice and ultimately providing a safer environment for investment.

The proposed extension to corporate fraud provisions are set to be far reaching and businesses of all sizes will need put in place strong systems to ensure their efforts are compliant in preventing fraudulent actions by people connected with the company.


DTM Legal can assist with putting in place policies and precedents to ensure compliance. To speak to someone about this please contact Alison Brennan on or 01244 354800.


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