knowledge 25 October 2018 |

Tackling White-Collar Crime, New Agency and Regulatory “Toolkits” with Bite – LRC Suggests Significant Reform

The Report makes over 200 recommendations for reform in the area of regulatory powers and corporate offences with the aim of ensuring that:

• financial and economic regulators have a complete range of powers in their regulatory toolkit to carry out their functions effectively; and
• the general principles on corporate criminal liability reflect the reality of modern corporate decision-making and adequately address “egregiously reckless risk-taking”.

The Appendix to the Report contains 4 Draft Schemes of Bills intended to implement the recommendations for reform in the Report.

The Recommendations

Corporate Crime Agency (“CCA”)

A statutory CCA should be established as a more effective process to investigate  serious corporate criminal offences. The CCA should comprise multi-disciplinary personnel to ensure that it can deal with the complexity of issues that arise in the context of corporate offending. The CCA should be mandated to investigate corporate criminal offences on its own initiative, as well as those that come to the attention of relevant financial and economic regulatory bodies (such as the Central Bank of Ireland and the Competition and Consumer Protection Commission). 

To complement the CCA’s investigative role, a dedicated unit should be established in the Office of the Director of Public Prosecutions (“DPP”). The new unit would liaise closely with the CCA and would ensure that the most efficient processes are in place to prepare a prosecution on indictment in accordance with the relevant principles and rules applicable to such a trial. Both the CCA and the dedicated unit should be properly resourced.

The Core Regulatory "Toolkit"

Financial and economic regulators should each have a regulatory "toolkit" that includes 6 “core” powers, including the power to impose administrative financial sanctions or to enter into regulatory compliance agreements.  A Regulatory Guidance Office should be established with a remit to provide guidance and information on regulatory matters, with membership drawn from Government Departments and regulators. 

Deferred Prosecution Agreements

Deferred Prosecution Agreements ("DPAs") should be introduced on a statutory basis, under the control of the DPP. The statutory system should be modelled on the UK DPA system which requires court approval for any proposed DPA. 

Under a DPA, prosecution is suspended for an agreed period, in exchange for the defendant complying with certain conditions during that period. If these conditions are complied with, the prosecution will be brought to an end without the defendant receiving a conviction.  

Test for Corporate Liability

The common-law identification doctrine for attributing liability to a corporate body should be replaced by a new test that reflects the reality of how modern corporate bodies, especially large ones, actually operate, that is by delegating corporate policy-making not just to one senior manager but to many managers. The precise calibration of this model will depend on the nature of the fault element of an offence; that is, whether it is a subjective fault offence, an objective fault offence, or a no fault offence.

Test for Derivative Managerial Liability

A new statutory scheme should be introduced allowing for derivative liability to be imposed on a managerial agent in relation to that agent’s culpable contribution to any offending on the part of the corporate body. Under this scheme, upon proof of a managerial agent’s culpable contribution to the substantive offending by the corporate body, the managerial agent shall be liable to be prosecuted on the same basis as if he or she was guilty of the corporate offence. The LRC also recommends that the prosecution be able to raise a rebuttable presumption that the managerial agent has the required level of fault, and that he or she contributed to the substantive offending.

Due Diligence Defence

A due diligence defence should be available for corporate bodies and senior managers in the case of strict liability corporate offences. The aim here is to encourage companies to put suitable risk prevention policies and procedures in place. This is consistent with the current regulatory approach. 

The fact that a corporate body, in advance of taking a particular action, obtained legal advice that this action complied with the law should not be a defence in criminal proceedings and should only be a factor in mitigation of sentence (as is currently the case). 

However, if a regulator clearly indicated that the action was legally compliant, this should either prohibit prosecution or provide a defence. This is subject to the caveat that this approach should be applied only on a case-by-case basis, such as under competition law, and only where the regulatory advice appeared authoritative and reasonable. 

Fraud Offences

The fault elements in the fraud offences in the Criminal Justice (Theft and Fraud Offences) Act 2001 should be expanded to include subjective recklessness. Under this proposal, the fault element that corresponds to the conduct element of each offence would be that a defendant must have acted “knowingly, intentionally, or recklessly” regarding the perpetration of the relevant conduct, or the bringing about of the relevant result. The LRC considers that this would clarify that egregiously reckless risk-taking is clearly prohibited under the 2001 Act. Because of this recommendation, the Report recommends against the enactment of an offence of “reckless trading” reasoning that such an offence could have a chilling effect on legitimate, entrepreneurial, risk-taking.