The Home Office has unveiled plans for a major shake-up in corporate accountability, with stringent measures targeting businesses involved in fraud, money laundering and bribery.
The proposed changes represent the most significant reform of the identification doctrine, a legal principle used to hold companies criminally liable for offences, in over half a century.
The proposal, part of the Economic Crime and Corporate Transparency Bill, will redefine who is considered the ‘directing mind and will’ of a business to include senior managers. Thus, companies could be held criminally liable and face hefty fines if their senior managers commit an economic crime.
Security Minister Tom Tugendhat commented on the reform, stating: “Alongside our new Failure to Prevent Fraud Offence, these measures demonstrate our commitment to improved transparency. We will ensure that those responsible for economic crime, whether individuals or companies, can be brought to justice.”
Traditionally, the identification doctrine has been applied to board members such as chief executives. However, complexities in management structures often obscure the identity of key decision-makers within companies. This has created a high threshold for prosecutors seeking to establish who fits the criteria of a ‘directing mind’.
Addressing this issue, Kevin Hollinrake, Minister for Enterprise, Markets and Small Business, said: “This reform will help small business owners play on a level playing field with corporate giants, whilst holding larger companies to account for committing economic crimes.”
The changes aim to mirror the reality of modern business structures more closely and to hold senior managers accountable for their decision-making powers, rather than merely considering their job titles. This could potentially expose corporations to liability for economic crimes committed by senior managers.
Echoing the Government’s commitment, Lisa Osofsky, director of the Serious Fraud Office, said: “We welcome the range of measures introduced by this bill – including the expansion of our pre-investigation powers and the ‘failure to prevent fraud’ offence – which, together with a review of the disclosure regime, would strengthen our ability to hold corporate criminals to account.”
The new reform is another significant step in the Government’s strategy to tackle economic crime. This includes the recent introduction of the Failure to Prevent Fraud offence, which mandates that businesses must have measures in place to prevent fraud or risk incurring unlimited fines.
