Creeping Corporate Liability for Criminal Offences
“Failure to supervise” types of offences, which allow corporates and other legal persons to be held criminally liable for offences committed by their officers, employees and agents are on the rise, both domestically and at EU level. Entities need to ensure that they put in place effective supervision mechanisms to avoid being convicted of such an offence, including appropriate policies and procedures.
Money laundering is the latest area to attract a failure to supervise type of offence. On 11 October 2018 the EU’s Council of Ministers announced that it had adopted a new money laundering directive (here). Among other things, the draft directive requires member states to ensure that a legal person can be held liable for money laundering offences committed for its benefit by a person under its authority, where the commission of the offence was made possible by the lack of supervision or control by a person having a leading position within the legal person.
A similar offence is set out in Directive 2014/75 on Markets Abuse, which was transposed into Irish law by the European Union (Market Abuse) Regulations 2016.
Moreover, pursuant to section 18(1) of the Criminal Justice (Corruption Offences) Act 2018, a corporate body can be held criminally liable for a bribery or corruption offence committed by its officers, employees, agents or subsidiaries, with the intention of obtaining or retaining business for the body corporate, or an advantage in the conduct of business for the body corporate. It is, however, a defence for the body corporate to show that it took all reasonable steps and exercised all due diligence to avoid the commission of the offence (see our briefing here).
Further developments in corporate liability are likely. In particular, the Law Reform Commission consulted on the issue of Regulatory Powers and Corporate Offences in early 2016 including on the question of whether it would be appropriate to have a test that corporate intention or knowledge could be established by reference to both the acts of its senior managers and decision makers and also to how the organisation’s policies and procedures are implemented. The Law Reform Commission is due to publish its Report on Regulatory Powers and Corporate Offences shortly.
The increased likelihood of a legal person being held liable for certain offences committed by those acting under its authority emphasises the importance of putting in place comprehensive and effective policies and procedures which cover the types of criminal offences which could be committed in order to benefit the legal entity, by persons under the entity’s authority. These policies and procedures must also be communicated and their implementation monitored.
Ensuring the existence and application of relevant policies and procedures will not only serve as a defence in the event the legal entity is prosecuted for a relevant offence, but also reduce the likelihood of the legal person becoming the victim of a crime on the part of a person under its authority. Moreover, many companies are being considerably more circumspect when choosing their business partners and are increasingly likely to require those partners to have robust policies and procedures in place. This is also the case where such companies are considering prospective mergers or acquisitions. In short, making sure your policies and procedures are comprehensive and up-to-date is likely to come with a host of benefits.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.
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