Corporate liability for money laundering – Im asked on numerous occasions under what circumstances can a corporate body itself be subject to criminal liability?

From my understanding (as a non-legal practitioner) there are two main types of corporate criminal liability at common law:

• Vicarious liability. For certain offences, companies can be held criminally liable for the unlawful acts of their employees and agents under the principle of vicarious liability. Vicarious liability generally applies to strict liability offences. It is most commonly imposed by statute and tends to feature in quasi-regulatory areas of criminal law such as health and safety, food and drug safety and environmental law.
• The identification principle, or “directing mind” liability.

For serious offences that do not impose strict liability, a company will only normally be criminally liable where the commission of the offence can be attributed to someone who at the material time was;

1. the “directing mind and will” of the company (Lennard’s Carrying Co. Ltd v Asiatic Petroleum Co Ltd [1915] A.C 705, at 713) or
2. “an embodiment of the company” (Tesco Supermarkets Ltd v Nattrass [1972] AC 153, at 170E).

The reality is it will normally only be senior officers of a company, at or close to board level, whose acts are capable of being imputed to the company in this way.

Other offences

Certain specified criminal offences, such as insider dealing and the cartel offence, only apply to individuals and are incapable of being committed by corporations.

The Bribery Act 2010 (Bribery Act) and the Corporate Manslaughter and Corporate Homicide Act 2007 (Corporate Manslaughter Act) are two important statutory exceptions to the common law position.

The Corporate Manslaughter Act deals only with corporate conduct that results in a person’s death and is therefore outside the scope of this guide. For an overview of the Bribery Act, see Questions 5-12.

Conclusion

It is difficult to prosecute companies for criminal offences because the threshold for criminal liability attaching to a corporate entity is high.

Under the UK’s Anti-Corruption Plan published in December 2014, the Ministry of Justice committed to examining the case for a new offence of corporate failure to prevent economic crime and to look at the rules on establishing corporate liability more widely.  Further to the plan on the 12 May 2016, the UK government announced New proposals to crack down on ‘economic crimes’ such as fraud and money laundering are to be considered later this year.

Justice Minister Dominic Raab advised:

The Ministry of Justice will consult on plans to extend the scope of the criminal offence of a corporate ‘failing to prevent’ beyond bribery and tax evasion to other economic crimes. Police and other law enforcement agencies can struggle to prosecute corporations for money laundering, false accounting, and fraud under existing common laws. The consultation will seek views and evidence to assess whether changes in the law could allow the courts to more effectively prosecute corporate economic crime.

The government is finding new ways to tackle economic crime, and we are taking a rigorous and robust approach to corporations that fail to prevent bribery or allow the tax evasion on their behalf. We now want to carefully consider whether the evidence justifies any further extension of this model to other areas of economic crime so that large corporations are properly held to account.

The consultation, published this summer, will explore whether the ‘failure to prevent’ model should be extended to complement existing legal and regulatory frameworks.

The consultation follows the recent announcement by the Prime Minister to bring forward a criminal offence for corporations who fail to stop their staff facilitating tax evasion and two recent prosecutions for the offence of failure of a commercial organisation to prevent bribery on its behalf. Read more here