My Lords, the Bill creates a second failure to prevent or facilitation offence for tax evasion, the first such offence being in the Bribery Act. It therefore makes sense to have an extended family of failure to prevent offences for other serious crimes for which the UK has spectacularly failed to prosecute large companies. The purpose of
this type of offence, along with a defence of due diligence, is to make companies have better prevention procedures as well as providing deterrent and punishment. These offences have a far-reaching effect on corporate governance and culture, encouraging own-up instead of cover-up, responsibility instead of denial. I do not know how many more times it is necessary to listen to the public outcry, but public trust in business is at an all-time low, as reported in the International Business Times in January. There is an urgent need to fix a problem we have known about for a long time.
Amendment 161 and Amendment 163—the alternative, narrower version—explore putting additional failure to prevent offences into the Bill and bringing them into effect later. I suggest creating an option in this way because it gives time to evaluate the recent call for evidence and because of the limited legislative opportunities due to Brexit. Amendment 161 is broader and more flexible and uses a statutory instrument to introduce further failure to prevent-type offences. I know that sounds a bit scary, so I encourage noble Lords to look at the whole of the amendment, because there are significant constraints on the SI’s content. First, as specified in proposed new subsection (11), the new offences “must” have the same safeguards and procedures that the Bill introduces for tax avoidance. Importantly, this will include due diligence defence and provision of guidance concerning procedures for preventing the offence.
Secondly, the new offences are not plucked from thin air. Proposed new subsection (12) states that they have to be from the serious crimes listed in the Crime and Courts Act for which deferred prosecution agreements are possible. That list can be added to under that Act, but it will always be for serious crimes. Thirdly, to compensate for the flexibility, proposed new subsection (13) provides that each SI should introduce only one offence. The idea here is that each receives individual consideration and scrutiny.
Amendment 163 is the narrowest way I can see to pursue the same objective. It creates four specific additional offences and provides for separate commencement from the general commencement provisions in the Bill. There is also a sunset clause so that, if the decision is not to commence, there is no hanging about. The four offences are those named in the Government’s call for evidence: common law fraud, statutory fraud, money laundering and Theft Act false accounting. These are the high-profile and costly areas where we have failed to prosecute large companies. As before, the defence guidelines and procedures follow the same pattern. That is important for businesses so that there is no additional complexity.
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In proposed new subsection (5) I put in an avoidance of doubt provision whereby the standard of proof for the due diligence defence is only to the civil standard. I believe this is how these defences are intended to operate—perhaps that is inevitably how the standards of evidence work—but I could not find it anywhere, so I would like to hear the Minister confirm that for the existing offences.
Those are the technical points, but why the urgency? First, we are not looking at unknown economic crimes—they are already criminal—but the modern large
corporation escapes justice unless guilt is pinned on a specific senior individual who is considered the directing mind. As long ago as 2010, the Law Commission in its consultation paper No. 195 at paragraph 5.84 called the identification doctrine,
“an inappropriate and ineffective method of establishing criminal liability of corporations”.
The Crown Prosecution Service legal guidance states under its evidential considerations in paragraph 21:
“The smaller the corporation, the more likely it will be that guilty knowledge can be attributed to the controlling officer and therefore to the company itself”.
At paragraph 34, concerning exclusion from participation in public contracts, the guidance states:
“A prosecutor should take into account the commercial consequences of a relevant conviction”.
No wonder it is only smaller companies that get pursued. I fear that we do not have equality before the law.
The Attorney-General, in identifying LIBOR as one of the cases the UK was not able to prosecute, noted the,
“clear implications for the reputation of our justice system”.
The Telegraph chief business correspondent said of LIBOR and forex in 2016 that we outsource,
“corporate accountability for criminality in the City to US prosecutors”.
It is not as if there is no financial incentive to fix it. In May 2016, the Annual Fraud Indicator put the cost of fraud to the UK economy at £193 billion, with the largest element being procurement fraud, estimated to be £127 billion a year, including from false invoicing.
Last week, in discussing Amendment 11, we debated money laundering, property, the role of banks and the sorry tale—far stronger action in the US, regulatory fines here, no culprits. Therefore, it seems particularly unfortunate that the crimes of fraud and money laundering, which feature in the high-profile failure to prosecute cases, have not yet been covered by failure to prevent offences. When will we truly be a failure to prevent jurisdiction, not a failure to prosecute jurisdiction? In replying on Second Reading, the Minister said that the call for evidence was part of a two-stage process, and that, should it justify changes, a consultation on a firm proposal would follow. However, I would say that the consultation was wider. There is plenty of evidence concerning failure to prevent offences. It is in use for bribery, is in this Bill for tax evasion, and is a Conservative manifesto promise. Why not give ourselves this option to get it done?
Fraud and money laundering cost billions, fund terror and misery and make us a low-justice country for big business—and could even be used against us in seeking trade agreements. There is urgency. I beg to move.