The Bribery Act 2010 was the first piece of legislation to introduce the “failure to prevent” model (where a company can be liable for failing to prevent bribery committed on its behalf by its “associated persons”). The Criminal Finances Act (see panel) followed suit last year with its “failure to prevent” the facilitation of domestic and foreign tax evasion” offence, again with a similar “reasonable procedures” defence. It is a model which the departing director of the Serious Fraud Office has repeatedly called to be extended to other forms of economic crime.
The inevitable result of this is an increasing tendency for a company’s compliance procedures to be central to any corporate defence, and therefore a key focus of the investigating and prosecuting authorities. Attesting to and evidencing those procedures will very often fall to senior members of a company’s legal and compliance functions.
The SFO is showing an increasing willingness to use its so-called “section 2 powers” (which include the power to compel any person to attend an interview and answer questions relevant to its investigation), with the result that it is no longer uncommon for members of a company’s legal and compliance functions to find themselves answering questions under compulsion as potential witnesses in an investigation into their employer. Given the considerable challenges that this can present, not least in terms of protecting the company’s privilege, it is essential that specialist legal advice be sought before any interviews take place.
In the regulatory sphere, where the focus has shifted in recent years towards holding senior individuals accountable for corporate failures, the Financial Conduct Authority (“FCA”) controversially announced in 2016 that it was considering whether GCs and Heads of Legal should be designated as Senior Managers for the purposes of the new Senior Managers and Certification Regime. It appears to have parked the issues for now, but has said it will re-visit it in its 2019- 2020 business plan. The merits of the proposal are beyond the scope of this briefing, but the FCA’s desire to explore it is perhaps a further indication of the increasing focus of regulators on companies’ legal functions.