Transatlantic Tolerance: UK Too Lenient on Corporate Crime

May 13, 2019

2 min read

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What's going on here?

A recent report from watchdog Corruption Watch has shown that the UK is weaker than the US in cracking down on corporate crime.

What does this mean?

Corruption Watch looked at the past decade of cases of corporate crime in the UK and compared it to what it found happening in the US. The watchdog analysed the penalties that were imposed on the misbehaving companies and whether any people involved were prosecuted. It found that between 2008 and 2018, in the UK there were no successful criminal prosecutions of a bank and there were £2.5 billion awarded in non-criminal fines. However, in the US, authorities achieved almost 20 criminal prosecutions against banks and awarded over £25 billion in criminal and non-criminal fines. It’s clear to see that there’s a big gap between the two.

The analysis concluded that “a company committing an economic crime in the US is far more likely to be hit with heavy criminal, civil and regulatory penalties than one in the UK.”

What's the big picture effect?

The reason for this huge difference between the two countries hinges on two main factors: i) weaker laws in the UK, and ii) a failure by regulators to impose heavy fines.

In the UK, the legal framework that exists now makes it much harder to prosecute corporate crime wrongdoers. The problem is that, for most crimes, a company cannot be prosecuted if the wrongdoer is a low-ranking employee. For most financial crimes (like money laundering or fraud) you need to have evidence against a “directing mind” who is a senior employee at the company before you can prosecute successfully. And this is where the problem lies. In instances where the wrongdoing was not done by a high-ranking employee, the organisation gets off scot-free.

Corruption Watch also looked at whether the Financial Conduct Authority (the UK’s financial regulator) was giving out fines that weren’t harsh enough. If the FCA isn’t being strict enough, banks aren’t really deterred from engaging in corporate criminal behaviour, as they factor in the fine merely as a cost of doing business.

Gareth Rees QC (a lawyer from US law firm King & Spalding) said that it is now time for the government to address this problem “once and for all”. He said that for “several years now, [the UK] has been discussing taking more action, being more robust, imposing bigger fines and tougher sentences, and this report shows nothing has changed”.

So what can we expect to happen next? Is the solution to impose bigger fines or to give law enforcement more power to prosecute companies regardless of the employee’s rank? Mr Rees doesn’t think it’s that simple. He suggests that what is needed is a “change to corporate culture” and more measurable ways of tracking behaviour. Then, any wrongdoer knows that they will be caught and “lose [their] reputation and career.”

Report written by Idin S

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