Labour will change the law to crack down on corporate fraud, party announces

The law will be changed to make it easier to prosecute major corporations for fraud, Labour’s Emily Thornberry announced at the Labour Party conference in Liverpool today.

The Shadow Attorney General accused the government of “waving the white flag to white collar crime”, and will publish figures showing that – since she originally called for a change in the law in 2013 – just seven companies in the UK have been convicted of corporate fraud.

At present, investigators must prove that the executives who control a company are complicit in any fraud before the company itself can be prosecuted, an increasingly impossible task within the vast and complex management structures of today’s multinational corporations.

Labour will pledge to scrap that requirement and introduce a new law to hold companies to account for the fraud committed by their employees.

Options will include the most stringent US law, known as ‘Respondeat Superior’, meaning ‘Let the Master Answer’.  

In a report titled ‘Turning the tide on Corporate Fraud’, Labour also announced plans to:

• Explore new funding models for the Serious Fraud Office, including allowing it to keep more of the proceeds from successful cases to fund future investigations

• Restore a ‘convictions first’ culture to the SFO, replacing the current approach where financial settlements are seen as the default outcome of even successful investigations

• Review the disclosure requirements in cases of corporate fraud, making them fit for the digital age, rather than a deliberate obstacle to mounting prosecutions

• Stem the loss of senior SFO staff to corporate law firms, ensuring that the ACOBA committee is asked to vet all such moves and place appropriate restrictions on them

• Transform the SFO’s recruitment model, encouraging the recruitment of investigators and prosecutors driven by a public service ethos to tackle corporate crime

• Get ahead of the curve on emerging fraud threats, conducting a comprehensive audit of the current laws and powers available for tackling fraud in the age of cybercrime.

The Rt Hon Emily Thornberry MP, Labour’s Shadow Attorney General, said:

“Fraud is now the UK’s most commonly-experienced crime, an epidemic that the government has ignored and dismissed. It’s time to get tough on fraud, and that must start at the top.

“Too many company bosses have stolen from their workers, undercut their competitors and cheated the public purse in recent years because they know fraud is difficult to prove.

“The government’s response has simply been to wave the white flag to those white collar criminals, and allow the Serious Fraud Office to give up on seeking corporate convictions.

“Labour will make a different choice. We will change the law to make it easier to convict fraudulent companies, and change the culture at the SFO to make that their goal.

ENDS

Notes to editors:

1. Labour’s new paper, ‘Turning the tide on corporate fraud’, will be available on https://www.emilythornberry.com/ after the Shadow Attorney General’s conference speech – and is attached.

2. Since the publication of the Shadow Attorney General’s last green paper on tackling corporate fraud in 2013, the Serious Fraud Office (SFO) have secured just 7 successful convictions of corporate entities for fraud, from a total of 26 prosecutions pursued.

3. In 2014, the government authorised the use by the SFO of US-style Deferred Prosecution Agreements (DPAs), where companies admit fault, pay a fine, and agree an action plan to correct their practices, subject to the implementation of which prosecution can be avoided. 11 such DPAs have subsequently been signed between 2015-21.

4. While companies entering a guilty plea at trial for corporate fraud will normally receive a reduction of a third in the normal criminal penalty, companies agreeing a DPA can normally expect a reduction of half, meaning that less revenue is collected for the public purse through the agreement of DPAs than through the successful prosecution of fraudulent companies.

5. Among the SFO staff to take posts with corporate law firms since 2010 have been its former Director, Sir David Green; two former General Counsel; four former heads or co-heads of its Bribery and Corruption divisions; two former heads of its Fraud Division; the former heads of its Assurance Division and its International Assistance Division; and at least 20 other more junior staff. Of all these moves, only Sir David Green’s was vetted by the Advisory Committee on Business Appointments (ACOBA), who imposed a six-month delay before he could take up his post and other restrictions on his use of knowledge gained at the SFO.

6. In June 2022, the Law Commission produced an extensive analysis of the problems with the current rules on corporate criminal liability, and examined options for reform, including some of those set out in Labour’s 2013 green paper and again in the report published today. To date, there has been no substantive response from the Attorney General’s Office either to the analysis or options set out by The Law Commission.