Gardaí urge new offences in overhaul of white-collar crime

New criminal offences including "reckless trading" and "causing a financial institution to fail" should be introduced as part of an overhaul of white-collar and corporate crime legislation, according to the Garda Síochána.

In a submission to the Law Reform Commission, the Garda said an offence of "reckless trading" should be introduced based on the findings of the Nyberg and Honohan reports into the financial crisis.

Reckless trading, a civil offence under the Companies Act 1990, is where a director is knowingly a party to the carrying on of any business in a reckless manner. This includes allowing a company to incur liabilities without having reasonable grounds to believe those debts would be paid.

Likewise, an offence of “causing an institution to fail” should be legislated for, said the Garda. The offence, already in force in the UK, would apply to senior managers in an institution who fail to stop decisions being taken when aware they could lead to the organisation’s failure.

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Minor breaches of the law could be dealt with through a civil sanction such as a fine, with criminal prosecution pursued only if the matter is not settled, said the Garda. Fines should only apply to low- and mid-range offences. “The more serious offences should be left to criminal sanction,” states the submission.

The views were expressed by Chief Supt Mark Curran writing on behalf of the then acting Garda commissioner Donal O'Cualáin. The commission is due to publish a report this week with recommendations on how to reform white-collar crime legislation and regulation.

The Garda also called for better co-operation between agencies dealing with corporate crime. “Separate regulators may be conducting investigations independent of each other without the other’s knowledge,” it said.

A single overarching body should be established to organise co-operation, stated the submission, noting the Criminal Assets Bureau as an example of an effective inter-agency approach.

Corporate officers who break the law should not be able to use ignorance of the law as an excuse, said the Garda.

Substantial penalties

Deferred Prosecution Agreements (DPAs) are one of the methods under consideration for how to deal with financial crimes committed by corporate bodies. Under such agreements, a firm which admits to illegality is not prosecuted for a set number of years.

The prosecution is later dropped if the company fulfils various requirements, usually including a fine and consent to its operations being monitored.

In its submission, which was obtained by The Irish Times, the Garda said there is "merit in the deferred prosecution model". It added that new legislation detailing all aspects of the model would be required.

The agreements have been introduced in the United Kingdom and the United States as a way of avoiding complex and costly trials with uncertain outcomes. They also avoid the risk of large companies with many employees going out of business because of a prosecution.

The fines imposed can be substantial. In the US, HSBC Bank paid a $1.9 billion (€1.65 billion) fine as part of a DPA for helping Mexican drug cartels launder money.