The government wants corporate executives charged when their

staff carry out offences such as fraud and money laundering. How can you make

sure you’re not one of those prosecuted?

The government wants to take the fight against business

crime right into the boardroom in a way that has not been seen before.

Attorney General, Jeremy Wright, has said the government is

considering prosecuting those at the top of a company if any of its staff commit

fraud or money laundering. Until now, such “failure to prevent” offences have

only covered bribery (under the Bribery Act) and tax evasion. Extending their

scope will place huge responsibility on those running a company.

So what can senior executives do to prevent themselves being

prosecuted for the wrongdoing of those they employ?

Adequate measures

These latest proposals are about punishing breaches of the

law. But the Attorney General says they are also an attempt to promote a

culture of corporate responsibility – an attempt to encourage prevention of

wrongdoing rather than just reacting to it and prosecuting it.

At the moment, it is difficult for the authorities to

prosecute corporate executives for wrongdoing carried out by their staff. When

an employee is found to have, for example, laundered money, the evidence trail

can rarely be followed all the way to the top of the company’s staff structure.

Just last month, US bank Wells Fargo dismissed 5,300

employees as a result of a scandal involving large-scale mis-selling of bank

accounts and credit cards. The bank is contrite and has paid $185 million to

settle the matter. Yet the question remains, what could and should have been

done to prevent it? And who in the boardroom should be to blame?

If the new proposals outlined in this article are

introduced, any such cases arising in the UK are likely to see senior company figures

in the dock.

This, however, will not be necessary if certain steps have

been followed. Those in the boardroom will become liable for the crimes of

their staff if they had not taken adequate measures to prevent those working

for them breaking the law. But if they have taken adequate measures then they

have a defence.

Putting it simply, they need to design out the problem: take

careful steps to reduce the potential for employees to indulge in business

crime.

Potential

The potential for wrongdoing being committed by any staff at

a company has to be assessed and then acted upon. Senior staff must introduce

new procedures or change existing ones so that it is as difficult as possible

for any employee to commit the offences covered by the new proposals.

If need be, executives can hire business crime lawyers to

investigate the possibility of offences being committed and then suggest ways

in which this can then be designed out. This is done by making sure the

potential for wrongdoing is removed from the way the company functions. Changes

to the way individuals and departments work – both independently and with

colleagues and third parties – can make it harder for illegal acts to be

committed. Importantly for senior executives, these changes provide a strong defence

should the new proposals become law and they find themselves investigated

regarding offences committed by staff.

Encourage

However, if staff do still break the law, the company needs

to have clear and appropriate whistle blowing procedures in place. Such

procedures must be regularly reviewed and publicised if they are to be of

value.

Encouraging staff to report their suspicions of wrongdoing

and assuring them that their concerns will be investigated can go a long way to

developing an anti-crime culture in a workplace.

Developing such a culture of legal compliance is another way

in which senior company figures can show investigators that they should not be

prosecuted if their staff have broken the law. Being able to show that you have

carefully devised and thoroughly implemented such measures will be a robust way

of defending yourself should you ever be investigated.

Vulnerable

The key is to know what potential there is for your

workforce to commit business crime and then take action to both prevent it and,

should it still happen, allow staff to report it. Failure to do either of these

will leave you very vulnerable to prosecution under these new proposals.

These proposals are not a gimmick. They are the government’s

way of making sure that those in senior positions do not try and get by doing

the bare minimum when it comes to tackling business crime. A failure to pay

attention to - or take action regarding - the illegal behaviour of your staff

is now more likely to lead to you being prosecuted for their wrongdoing.

The challenge in business now is to make sure everything

possible has been done to prevent staff bringing legal trouble on themselves,

the company and the individuals running it.