by: Alistair Osborne
Companies and banks that fail to prevent financial crime by their staff could face vast fines and be blacklisted from European contracts under a change to the Bribery Act being considered by the Government.
A proposed amendment put forward by David Green, head of the Serious Fraud Office, would give Britain’s fraud-busting agency wider powers to take direct action against corporates, enabling it to levy US-style fines and brand them with the stigma of abetting bribery.
Any such move by the under-fire SFO would be controversial because a bribery conviction would bar companies from bidding for certain contracts under European Union rules.
The mooted change to the Bribery Act, which came into force in July 2011, would have significant ramifications for the banks embroiled in the SFO investigation into the alleged rigging of Libor.
The proposed change has been discussed with Dominic Grieve, the Attorney General, and Oliver Heald, the Solicitor General, as well as the Law Commission, the statutory body that recommends law reform.
Under the Bribery Act, it is an offence for a company to fail to prevent acts of bribery by its staff. But prosecutors must show that the “controlling mind” of the company – its board – knew about the activity.
That is a far higher test than the one under US law, with most evidence – such as email trails – petering out before it gets to the board.
The SFO’s poor success rate in corporate prosecutions compared to US counterparts is a major source of frustration for a UK agency trying to rebuild its reputation after some high-profile blunders.
Speaking to The Telegraph, Mr Green said: “I recognise we’ll never get the principle of controlling mind easily changed in this country. But what I have been proposing is that section 7 of the Bribery Act could very usefully be expanded by a very small amendment.
“At the moment it is an offence for a corporate to fail to prevent bribery by its employees with a statutory defence of adequate procedures. I have proposed expanding that to a corporate failing to prevent acts of financial crime by its employees.”
He said the powers would only be used in “exceptional cases”, notably where a company had profited from the criminal conduct of its staff.
“If the public interest requires prosecution of more corporates or to make it easier to prosecute more corporates like banks – not the people but the bank itself – then it needs to be somewhat easier than the controlling mind test,” he said.
He added: “The sanction would be a financial penalty and the stigma. But it’s the stigma that is most important. Some say that certain banks had been rotten to the core. Why shouldn’t that be marked? Why should a big powerful corporate be able to chuck a few people over the side and just sail blithely on, paying a fine as they go on.”
Mr Green said the amendment would have a powerful deterrent effect because failure to implement adequate controls could expose a company to being blacklisted from European contracts. “If a company has a conviction for bribery it can’t compete in Europe for public contracts,” he said.
The SFO is currently engaged in a number of high-profile cases, including investigations into the alleged manipulation of Libor, contract bribery at Rolls-Royce and fraud at G4S and Serco over their contracts for the tagging criminals.
The workload has caused the agency to request extra “blockbuster” funding from the Treasury at a time when Mr Green is also trying to restore the SFO’s battered reputation after a series of slip-ups under his predecessor Richard Alderman.
They included the collapse of SFO’s case against property tycoons Vincent and Robert Tchenguiz and the loss of BAE Systems documents that turned up at storage facility also being used as a cannabis farm.
The SFO brought its first case under the Bribery Act last year, charging four individuals in connection with a £23m fraud at Sustainable AgroEnergy.
Mr Green, who insists he will not shirk from pursuing complex cases, said: “We are subject to unfavourable comparisons with the US and this small amendment would make it much easier to hold a corporate to account in these circumstances. Obviously it’s a matter for ministers and ultimately for parliament.”
A spokesman for the Attorney General’s Office said: “The Attorney General is aware of this issue. The difficulty of securing convictions on the basis of corporate liability is well known and has been considered fairly recently by the Law Commission. The Law Officers – the Attorney and Solicitor General – continue to consult with the Director of the SFO at regular meetings.”