Corporate Economic Crime

Debate between Christina Rees and Catherine McKinnell

Tuesday 3rd November 2015 Westminster Hall

[Catherine McKinnell]

My hon. Friend makes an important point. We should not shy away from learning lessons from any jurisdiction that manages to control risk, as my hon. Friend the Member for Aberavon highlighted, and to hold companies to account where wrongdoing has occurred. Where there are lessons to be learned from the US, we should learn them and do what we can to implement them within our own system. We could then hold ourselves up as a beacon for other countries and hold our heads high as a well-regulated, world-leading financial centre. That has to be our aim in all of this.

As my hon. Friend the Member for Neath pointed out, without the fear of corporate economic crime being prosecuted, there is little incentive for companies to enter deferred prosecution agreements and no incentive for companies to co-operate with the SFO to change their practices as mandated under a DPA. Unlike in the US, which has far stronger vicarious liability laws, there are still far too few corporate prosecutions in the UK under the current identification principle. No matter how much we may wish to learn from the United States—if that is what we see as the right way forward—without a strengthened corporate liability regime, we will be hampered in our efforts to implement such changes.

Finally, I turn to another area that shows concerning signs of backtracking by the Government and in which we would otherwise have seen individuals in companies held accountable for their own and others’ actions. In its 2013 report on the banking sector and how to prevent the failings that led to the 2008 crash, the Parliamentary Commission on Banking Standards similarly recognised the difficulty in identifying individuals and holding them to account. One of its key recommendations was to introduce a senior managers regime to hold named executives personally responsible for key risks in the bank. That issue was raised by my hon. Friend the Member for Aberavon, who made a powerful speech about encouraging better and more responsible management within companies to change bad practice where it is found. The commission recommended that the regime place a burden of proof on those named executives, who would have to show the regulator that they had done all they reasonably could to prevent failings or misconduct if they were to avoid sanction.

[Christina Rees]

Does my hon. Friend agree that even though we have the legislation in place in section 7, there is no will to use it? That is the problem. There has not been a single prosecution.

[Catherine McKinnell]

My hon. Friend raises a concern relating to the Bribery Act, but there are two ways of looking at the Act’s implementation and the fact that no prosecutions have yet happened under it. There is evidence that it has already brought about significant changes in corporate culture and that the managers tasked with the responsibility of ensuring that they have taken all the steps they could reasonably be expected to have taken to prevent bribery in their organisations have taken those steps. Some positives can therefore certainly be derived from the situation, but I agree that a very close eye needs to be kept on prosecutions. I note that there are already murmurings from the Government about backtracking on the Bribery Act and trying to weaken that legislation, and we must stay vigilant about that.

On the senior managers regime, the commission recommended that the regime place a burden of proof on those named executives. The recommendation was accepted by the Government and enshrined in the Financial Services (Banking Reform) Act 2013. However, the Bank of England and Financial Services Bill, which is currently in the other place, is set to reverse that burden of proof, meaning that instead, the regulator—the Financial Conduct Authority—will be required to prove that senior managers have failed in their duty to prevent misconduct or prudential failings. The onus will be back on the regulator, and not on the named senior executives. Is that just more backtracking from the Government, who seem to be going soft on economic crime? I would be grateful if the Minister provided reassurance that that is not the case.

Ministers urgently need to look again at their approach to tackling economic crime, because without change, the prospect of ensuring that justice is served to those who have mis-sold financial products, evaded tax, laundered money and defrauded seems as remote as ever, and the risk of the scandals of recent years being repeated has far from disappeared.