Enhancing criminalisation of corporate conduct


LEGAL OPINION: Economic crime in modern society poses serious concerns for regulators and prosecutors. With the globalisation of the world economy, white-collar crime is increasingly transnational in nature. Due to their scale and reach, financial crimes can have systemic consequences, retarding growth in countries and eroding confidence and support for the global economy.

The proliferation of criminal offences and prosecutorial powers (at international and domestic levels) is a reaction to the spectre of financial crime. Across the US, the UK and Ireland we are witnessing the increased criminalisation of corporate conduct and simultaneous increased erosion of traditional criminal safeguards.

Typically, it takes a white-collar crime scandal or financial crisis to bring the subject back into public and political focus. The normal pattern is that there is a large public outcry for greater regulation following the revelation of a number of events of corporate wrongdoing, usually during or around a weak economy.

That financial crime swings in and out of political favour after major public scandals contributes to the problem of piecemeal, far-reaching and inadequately considered legislation, especially when enacted as a knee-jerk reaction to a recent high-profile event. Often the resulting legislative measures do not necessarily resolve the underlying problem.

Criminal law has strayed very far from its historical roots. Legislative reform, cultural sentiments requiring increased corporate accountability, and judicially initiated reform, have coincided. Many statutes today punish those whose acts are wrongful only by virtue of legislative fiat.

It is not surprising that the Law Commission of England and Wales has observed that the criminal law should only be employed to deal with wrongdoers who deserve the stigma associated with criminal conviction because they have engaged in seriously reprehensible conduct.

In the realm of corporate or white-collar crime, many jurisdictions have witnessed the erosion of traditional criminal safeguards. For example, regulatory statutes frequently make use of strict or absolute liability offences to avoid the burden of mens rea. Indeed, the hearsay rule, in particular when it comes to documents in business-related criminal trials, has been diluted.

Statutes attempt to pass the legal burden of proof onto accused persons in white-collar type-cases. Mandatory reporting obligations (such as on auditors, liquidators, receivers and banks in money-laundering cases) have existed for some time. However, the Criminal Justice Act, 2011, requires any person aware of a white-collar crime to report it as soon as possible.

There is no express protection for banker/client confidentiality or legal privilege, although in the latter case one would expect that the privilege remains extant. As a result, the failure of a lay and innocent bystander to report a white-collar crime has been criminalised.

The privilege against self-incrimination, it is believed, does not apply to documents or companies, but only to the oral testimony of a natural accused person. Yet, the privilege has been eroded, and not just in white-collar cases, when it comes to natural persons, by the use of adverse inference provisions.

In the US, the Dodd-Frank Act includes a whistleblower programme that provides monetary rewards to employees who report securities violations, such as illegal payments to foreign officials. In a recent European Court of Justice decision, it was held that documents seized during an investigatory raid were not subject to attorney-client privilege because in-house counsel lack professional independence from their employers.

In terms of international co-operation and evidence gathering, the primary legal tools available for the rendition of international fugitives and the acquisition of overseas evidence are extradition and mutual legal assistance treaties.

Increasingly, white-collar crime statutes contain an extraterritorial reach, such as the UK Bribery Act of 2010, the proposed Department of Justice’s draft scheme for a Criminal Justice (Corruption) Bill, 2012, the US Foreign Corrupt Practices Act, 1977, and the US Dodd-Frank Act, 2010. The US Department of Justice has shown a recent tendency to prosecute obstruction of justice offences over substantive offences and has even targeted, not just executives over corporations, but in-house counsel on obstruction of justice charges.

As a result of the proliferation of cross-border white-collar crime assisted by the phenomenon of globalisation, increased powers have been granted to enforcers.

We are moving towards a common judicial space for prosecuting white-collar crime because of the difficulties posed by the borderless, complex and rapidly evolving nature of modern economic and cyber crimes. Indeed, there are now a significant number of international organisations involved in tackling corporate crime.

Shelley Horan is a barrister practising in corporate and commercial law, an adjunct assistant professor of law in Trinity College Dublin, and is the author of Corporate Crime (Bloomsbury Professional, 2011).

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