In Short

The Situation: Following years of lobbying by senior prosecutors and other commentators, the UK government seems set to introduce an offence of a corporate failing to prevent economic crime.

The Result: With the exception of bribery and tax offences, a corporate can currently be held criminally liable only for economic crimes committed with the guilty knowledge of those who are the directing mind and will of the company (the "identification principle"). The latest government proposals suggest such liability may be expanded such that corporations may be liable for other economic offences committed for the benefit of the company, including fraud.

Looking Ahead: Such a development would increase the risk of successful prosecution of corporates in circumstances where employees and others have committed offences with the intention of benefiting the company or its clients. Corporates will need to ensure they have sufficient internal systems in place to mitigate the risk and potential liability arising in such circumstances.