Corporate Economic Crime

Stephen Pound Excerpts

Tuesday 3rd November 2015 Westminster Hall

[Stephen Pound (Ealing North) (Lab)]

I beg to move,

That this House has considered the matter of prosecuting corporate economic crime.

It is hardly necessary for me to point out what a pleasure it is to serve under your auspices, Mr Stringer, and I am sure that I speak for every person in the room when I say that it is marvellous to be here on this crisp autumnal morning. As the fog lifts from our city, I intend to cut through some of the fog around Government policy on the prosecution of economic crime. I have every confidence that the Minister will be able to illuminate this dark part of the legislative process. I called this debate to focus on economic crime and on whether our law enforcement agencies and related prosecuting authorities have the necessary tools to prosecute such crimes.

All current indicators seem to show that economic crime, such as fraud, tax evasion or bribery, are on the rise. City traders, previously perceived as paragons of virtue, are being convicted of rigging key bank lending rates, and some of our biggest banks and institutions are under investigation, challenging the very fabric of our society. This debate is clearly timely and important and comes at a point when the Government are sending out, if I may say, extremely mixed signals about their approach to holding individuals and companies to account for wrongdoing. It gives me no pleasure to say that they appear to have U-turned on a key manifesto pledge. It is widely accepted that a major issue in corporate economic crime in this country is how we can hold companies to account for their actions, and in particular make corporate wrongdoing a criminal offence. The UK’s corporate criminal liability framework is widely considered to be inadequate and lags far behind that of the US.

The Government have made some promising signals about finally getting to grips with the matter, with the Attorney General promising in September 2014 to introduce a corporate liability offence, a promise repeated—may I say, carved in stone?—in the Conservative’s manifesto. Yet, having heard nothing since the election, we learned just over a month ago that the Government no longer see any need for such an offence, even claiming that no such economic crimes go unpunished, which is a slightly Panglossian perspective that I hope to challenge in the next few paragraphs of my speech. Given what we know about economic crime, the impact that it has on businesses and the difficulties that law enforcement agencies face in prosecuting individuals and companies for such crimes, the decision is extremely disappointing. I hope that when the Minister has listened to the many concerns raised in the debate, he will be able to reassure hon. Members that he will look again at the proposals.

It is always a good idea to define what one is talking about. In response to the fairly reasonable question, “What is economic crime?” I turn, as sadly do so many people in the Labour party nowadays, to PricewaterhouseCoopers. Its economic crime survey defines economic crime as

“the intentional use of deceit to deprive another of money, property or a legal right.”

That includes money laundering, bribery, tax evasion and fraud, and such acts can be committed by employees of companies. The financial services industry, according to a recent Treasury risk assessment, is seen as being at most risk of harbouring money-laundering activities. I will return later to how we can prosecute or deter such activities, but one way is to hold companies liable if they have not adequately prevented such activities, and to make it an offence to have not prevented economic crime. For those present who sat through the debates on the Bribery Act 2010, this will be familiar territory.

The Government announced in late September that they were no longer pursuing proposals to introduce a corporate liability offence, on the basis that such an offence is unnecessary. That came to light in a fairly roundabout way following a written question from the hon. Member for Gower (Byron Davies),who is a prominent member of the all-party parliamentary group on anti-corruption, requesting an update, to which the Under-Secretary of State for Justice, the hon. Member for South West Bedfordshire (Andrew Selous), replied:

“The UK has corporate criminal liability and commercial organisations can be, and are, prosecuted for wrongdoing. The UK Anti-Corruption Plan tasked the Ministry of Justice to examine the case for a new offence of a corporate failure to prevent economic crime and the rules on establishing corporate criminal liability more widely. Ministers have decided not to carry out further work at this stage as there have been no prosecutions under the model Bribery Act offence and there is little evidence of corporate economic wrongdoing going unpunished.”

That prompts the question whether there is any evidence of economic crime going unpunished, and how prevalent economic crime is. The figures speak for themselves. KPMG’s twice-yearly fraud barometer—riveting reading that I recommend to all Members—reports that fraudulent activity in the UK totalled £385 million in the first half of 2015, which is up 22% on last year. The Government’s National Fraud Authority—a marvellous title—has reported a £52 billion-a-year loss to the UK economy from fraud. Indeed, the Attorney General himself has identified the growing threat of economic crime in this country. In a 2014 speech announcing his intention of pursuing the case for a new corporate liability offence, he observed that

“in the modern global economy, economic crime is more pervasive than ever before…the evolving nature of economic crime means we need to continue to find and develop new ways to expose and combat it.”

More high-profile cases of economic crime are being alleged or prosecuted. This summer saw the first prosecution of a UBS City trader following the LIBOR scandal. Tom Hayes was found guilty of rigging global LIBOR interest rates and sentenced to 14 years in prison for conspiracy to defraud in a case brought by the Serious Fraud Office. Two more British traders are also standing trial in New York for their alleged role in a scheme to rig LIBOR. That followed the extraordinary revelations in February that the Swiss private banking arm of HSBC, which is headquartered in London, had helped over 100,000 wealthy individuals to evade and dodge tax all over the world. HSBC has admitted to that. In spite of all that, the number of defendants prosecuted by the SFO and City of London police—as I presume everybody knows, as well as investigating crime, it is often the lead agency in such matters—has fallen by a fifth since 2011, from 11,261 then to 9,343 last year. According to the Financial Times, the fall in prosecutions has been largely put down to both a lack of resources, given the significant spending cuts of the past five years, and the fact that agencies are ill-equipped to pursue and prosecute white-collar crimes.

How do we make sure our law enforcement agencies are properly equipped to ensure that those who commit economic crimes are held accountable, punished and ultimately deterred? The answer many turn to is some form of corporate liability offence, which essentially makes it a crime if a company fails to prevent acts of economic crime, such as fraud and bribery. However, with one exception, such an offence does not exist in the UK. Instead, current UK corporate liability law is based on the identification principle. Again, this will be familiar territory to those who remember the passage of the 2010 Act. To prove that a company is guilty of an economic crime, the prosecutor must show that a person who is the directing or controlling mind of the company intended to commit, or had knowledge of, the criminal act. That requires identifying somebody at the most senior level in a company as being responsible. In the modern, globalised world in which we live, where companies span numerous national borders and jurisdictions, that is no small task; it is virtually impossible. Many believe that it sets the bar far too high for prosecutors to prove corporate liability. There is one exception: bribery, in which that burden of proof is essentially reversed.

Thanks to section 7 of the 2010 Act, which the previous Labour Government introduced, commercial organisations can be held liable if they are found to have failed to prevent bribery by their employees; unsurprisingly, that is known as the “failure to prevent” principle. As such, companies are required by law to prove that they have carried out adequate procedures to prevent acts of bribery by their employees. That acts as their statutory defence. Many see section 7 as a model that could be used to hold corporates criminally liable for all kinds of economic crime, not just bribery. The director of the SFO, David Green, has made it clear on a number of occasions that he would support such a move. In 2013, he said:

“A more sensible and just approach might be that embodied in Section 1 of the Bribery Act 2010. This creates the offence of a commercial organisation ‘failing to prevent’ bribery by its employees, with a statutory ‘adequate procedures’ defence. Extending this approach, a Corporate, or certain types of Corporate (such as banks and companies listed on stock exchange) could be liable for failing to prevent certain types of criminal offence by their employees subject to a statutory defence.”

Until recently, that view was echoed by the Attorney General, who said a little more than a year ago, in his first major speech in the role:

“Government officials are considering proposals for the creation of an offence of a corporate failure to prevent economic crime, modelled on the Bribery Act section 7 offence.”

That promising start from the Attorney General did not last, and the Government have now decided that no such offence is required, despite the fact that the leading prosecuting authority for white-collar crime, the SFO, clearly favours such an offence.

What people had to say about that decision can help us to understand how important many see a new corporate liability offence as being to strengthening the ability of law enforcement agencies to prosecute white-collar crime. Robert Amaee, a former head of anti-corruption at the SFO, said:

“This retraction by the government is unlikely to be welcomed by the prosecutors who have been calling for an extension of the law on corporate criminal liability. I expect that there will be renewed enthusiasm for revisiting this topic once the SFO has shown that it can bring successful prosecutions under the existing failing to prevent bribery offence.”

Alan Sheeley, head of civil fraud and asset recovery at Pinsent Masons, said:

“The new criminal offence of failure to prevent bribery might not have resulted in any dedicated prosecutions as yet, but its impact on the attitudes and policies of businesses of all sizes has been staggering. I would have expected the potential legislation of failing to prevent economic crime to have the same impact if and when implemented. Frankly, this seems like a wasted opportunity by the UK government to target economic crime and, at the same time, reinforce the role of the UK as a leader in tackling economic crime in global financial markets and businesses.”

The Conservative manifesto, a document that I study with great interest and care when I have difficulty getting to sleep at night, states:

“We are also making it a crime if companies fail to put in place measures to stop economic crime, such as tax evasion, in their organisations and making sure that the penalties are large enough to punish and deter.”

Without commenting on the rest of the Conservative manifesto, that was a sensible proposal that seemed to be supported universally. It is therefore disappointing that the Government have seemingly performed a screeching handbrake turn.

Only the month before last, the Treasury published its long-anticipated “UK national risk assessment of money laundering and terrorist financing activities”. We need only look at the report’s conclusions to understand the importance of equipping law enforcement agencies, and of ensuring that prosecuting authorities have the tools in the armoury to prevent and punish economic crime. The report stated:

“The size and complexity of the UK financial sector mean it is more exposed to criminality than financial sectors in many other countries, including abuse enabled by professional enablers in the legal and accountancy sector...The UK’s response is well developed, but more needs to be done to ensure it is commensurate with our status as a well regulated global financial centre.”

I speak as a London MP, and about 60% of the offences we are discussing take place in my city. More clearly needs to be done; that is the key.

A criminal offence of failing to prevent economic crime would enable agencies and authorities to do more; as we have heard from the director of the SFO, it would clearly help him and his teams to do more. In our increasingly interconnected, digital world, economic crime is arguably more prevalent than ever before, as the Attorney General has conceded. The tools at our disposal and the resources available to our agencies and authorities must evolve to keep pace with developments.

I hope that the Minister can today say proudly that the option of introducing a criminal offence for failing to prevent economic crime is still on the Government’s agenda and that they intend to propose one in due course. I hope the Minister will be able to provide that reassurance today, because given the events of 2007-08 and everything that followed, the public have a right to expect that those who defraud, launder money or commit other white-collar crimes are brought to justice.

In common with many Members of Parliament, I have a fantasy. My fantasy—don’t worry, Minister—relates to the marvellous “The Comic Strip Presents” television series. “The Strike” showed how Hollywood would imagine the miners’ strike. Al Pacino played Arthur Scargill, and Jennifer Saunders played Meryl Streep. At one stage a young Arthur Scargill entered the Chamber of the House of Commons and made an impassioned speech in favour of the mineworkers, whereupon the Speaker, who was apparently Leader of the Opposition and Head of Government at the same time, said, “You have convinced me, Sir. We will throw out all our existing policies on pit closures and reverse everything. We will do precisely what you, young Scargill, have asked for.”

I would not put myself in the place of Al Pacino or Arthur Scargill, but how wonderful it would be if the Minister said, “Having considered the matter, I will break free from the shackles of this Government and from the rigid centralism that permeates the Conservative party. I accept that a point has been made and that we need to do something. We will act; we will overturn the previous policy U-turn, and we will revert to the noble words in the Conservative party manifesto. We will introduce that crime.” The nation would be happy; the City might not be utterly delighted in the first instance, but it would be delighted as our reputation improved; and, above all, the SFO and decent people who care for the probity of our financial services in these islands would look to the Minister and thank him, were he to make that statement today.

--- Later in debate ---

[Stephen Pound]

My hon. Friend makes an important point when she talks about existing legislation but an absence of will. When deferred prosecution agreements were introduced, as part of the Crime and Courts Act 2013, we could have gone the way of the United States, which uses them with great skill and effectiveness, but for some reason not a single DPA has been signed off in this country. Does she agree that that is an example of where the legislation exists, but the will demonstrably does not?

[Kate Osamor]

That is a fantastic point, and I totally agree.

I end by urging the Government both to honour their manifesto pledge to tackle economic crime and to reassess their rejection of extending the Bribery Act to cover all kinds of economic crime.

[Richard Arkless (Dumfries and Galloway) (SNP)]

It is a pleasure for me, too, to serve under your chairmanship, Mr Stringer. I thank the hon. Member for Ealing North (Stephen Pound) for introducing the debate. I also thank the hon. Members for Neath (Christina Rees), for Aberavon (Stephen Kinnock) and for Edmonton (Kate Osamor) for their thoughtful and insightful contributions.

The debate is predicated on the widely held public view that the bankers seem to have got away with it over the last five, six or seven years. Whether that is correct or not, it is certainly the widely held public perception. The urgings from the Opposition and the Conservatives’ manifesto pledge seemed to indicate that they were inclined to address that widely held view. I welcome that, and it is right that the issue is addressed. As we have heard from Opposition Members, corporate economic crime has increased over the last few years, and there is a question about whether both the means and the inclination and the will to tackle it exist.

I speak on behalf of the Scottish National party, of course, and section 7 of the Bribery Act applies only to England and Wales, not to Scotland. Most of the prosecutions that could be brought by the Serious Fraud Office or another entity relate to subjects—financial crime and financial regulation—that are reserved functions. However, Scotland has a long and well established criminal court system, which could bring charges for individual crimes to bear on individual directors, but as we have heard, those tools may not be up to the job. The SNP would be very interested, to say the least, in Government proposals on this point, but we recognise that there are difficulties. We, too, live in a jurisdiction where the prevalent public perception is that the bankers have got away with it. My constituents, like people across Scotland, are demanding that something be done.

I should declare a slight interest as a former practising lawyer, qualified on both sides of the border. Having come to this debate fairly recently, one difficulty I would point to is the difference between holding a company, as opposed to an individual, criminally liable. I am not saying that we could not get around that problem in law, but it strikes me, as a legally qualified person, that there are difficulties involved in bringing an entity into the realms of criminal liability. However, if the Government come up with proposals to get round that, I would certainly look at them.

The message to the Government from the SNP and Scotland is that if they do consider giving Scotland more tools to address these reserved issues, they should carefully consider the provisions that already exist in Scots law and make sure that the principles of Scots law are not set aside. It is in that spirit of co-operation that I come to the debate, and I am very interested to hear what the Minister has to say. We welcome moves to tackle this issue, but we are cautious about how they can be achieved.

When it comes to how the bankers have apparently got away with it, the message I hear from my constituents and from people across Scotland is really about actions and consequences. Over the last five to eight years, many ordinary people have, they would argue, suffered enormous consequences as a result of the actions of others. The public’s view in Scotland—I suppose this is replicated across the rest of the UK—is that there are people in the financial services industry who are earning huge sums and have suffered no consequences as a result of their actions or the actions of the company they are employed by. On the face of it, that needs to be addressed. We in Scotland are very interested to hear what the Minister has to say about what seems to be a substantial tide of opinion. Of course, we recognise that there are difficulties, which need to be addressed in any proposals.

[Stephen Pound]

The hon. Gentleman brings a wealth of experience and knowledge to the matter, which is welcome. In the context of what he was saying about perceptions, is he aware that in the summer BIS consulted the business community about whether to water down Labour’s Bribery Act guidance to businesses? That surely sends completely the wrong signal to business. Does the hon. Gentleman agree that when there is consultation on whether even a measure as modest yet effective as the Bribery Act 2010 is potentially dilutable—if there is such a word—it sends an appalling signal?

[Richard Arkless]

Yes, wholeheartedly. The public perception is real and tangible, and in my view it is entirely based in fact. The Government’s reluctance to continue on the road, and the suggestion that the 2010 Act, which does not apply to Scotland, might even be watered down, sends entirely the wrong message. If we can convince the public that we are serious about the issue, the trust in financial services that has evaporated in the past five to 10 years can, I hope, be restored. The reason Parliament thought it right to bail out the banks was their intrinsic role in the economy, and that has not changed; however, the public need to have confidence in the financial services sector. For the time being, they do not have such confidence, and I will be interested to see what the Government will propose.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I congratulate my hon. Friend the Member for Ealing North (Stephen Pound) on securing this important debate on prosecuting corporate economic crime, and on his argument, which he put forward with his customary elegance. The debate is timely, in the light of recent announcements by Ministers. I congratulate all the hon. Members who have taken part in the debate, who made powerful contributions and set out strongly the arguments that the Government should listen to. Each of them made important points, to which I shall refer. I do not mean to diminish the Minister’s presence when I say that I am disappointed that neither of the Law Officers could attend the debate. I hope that is not a sign of Government obfuscation on these important issues.

Like my hon. Friend the Member for Aberavon (Stephen Kinnock), I am not here to bash bankers. The City of London is the world’s second-largest financial centre and a major contributor to the UK economy. Its success is clearly founded on the professionalism and integrity—for the most part—of those who work in the sector. That is why we cannot allow its reputation to be undermined by the actions of the minority who engage in fraud, corruption and market manipulation. Yet despite the events of 2007 and 2008, and all that has followed—parliamentary commissions, Select Committee inquiries and the setting up of new regulators—economic or white-collar crime remains a serious problem in the UK. We need only look at the horrifying spectre of LIBOR rate rigging to be reminded of why the Government cannot rest on their laurels in this matter; yet the ability of our law enforcement agencies and prosecutors to tackle such pernicious crimes remains limited.

As my hon. Friend the Member for Ealing North pointed out, the Government gave some promising signals. They announced the introduction of a senior managers regime to hold named executives to account for their actions, and they pledged to introduce a new corporate offence of failure to prevent economic crime. It is disappointing that that was not, as my hon. Friend pointed out, etched in stone, but it was in the manifesto for all to see. Both proposals were seen as vital to prevent the repetition of the failings of the past and bring the UK regime into the 21st century. However, in both cases, the Government have backtracked.

What do we know about the reasons for the Government’s change of heart about the corporate liability offence? According to a response to a written question to the Ministry of Justice,

“there is little evidence of corporate economic wrongdoing going unpunished”,

despite the fact that according to the Financial Conduct Authority banks have paid an estimated £1.8 billion in compensation for mis-selling financial products such as interest rate swaps and have already set aside an additional £27 billion to compensate for payment protection insurance mis-selling. That is not to mention the £4.4 billion lost each year to tax evasion, according to the latest estimates from Her Majesty’s Revenue and Customs, or the countless banks and financial institutions that are being investigated by the Serious Fraud Office for various types of misconduct, but have not yet been prosecuted. Why have the Government concluded that no action is required? I hope that the Minister can enlighten us.

Some recent disclosures are cause for concern. Last month, the Treasury published the national risk assessment, the first comprehensive assessment of the risks of money laundering and terrorist financing—both from within the UK and flowing through it. It is the first assessment of its kind and has been highly anticipated since the Government committed themselves to producing it, in their 2014 anti-corruption plan. The Government’s assessment of the risks posed by elements in the financial sector is clear:

“The size and complexity of the UK financial sector mean it is more exposed to criminality than financial sectors in many other countries, including abuse enabled by professional enablers in the legal and accountancy sector”.

Nevertheless, the report notes that the UK has “significant intelligence gaps” with respect to money laundering, despite what is judged to be a serious threat from, for example, the legal, banking and accountancy sectors. The conclusions are not encouraging:

“The UK’s response is well developed, but more needs to be done to ensure it is commensurate with our status as a well regulated global financial centre.”

The message is clear: far more needs to be done. I would therefore welcome reassurance from the Minister that something is being done. The aim must be to ensure that the appropriate measures are in place to deter behaviour that facilitates or contributes to the committing of economic crime. That would not only encourage good practice and the right corporate culture, but mean that wrongdoers were held accountable, which would be a deterrent. There is widespread concern that the UK’s current corporate liability regime is not up to the job. That is the view of the Law Commission and the OECD’s working group on bribery, both of which have produced seminal work on the subject. Both concluded that the current regime does not allow the UK to hold corporations and key persons within them to account effectively for their part in economic crimes.

In its extensive work on the UK’s corporate liability measures, the Law Commission described the present regime as

“an inappropriate and ineffective method of establishing criminal liability of corporations”.

It also noted the unfairness inherent in the identification doctrine, explained by my hon. Friend the Member for Ealing North, which makes it far easier to prosecute smaller companies, where the “directing mind” is more easily determined, than large corporations with much more diffuse chains of command.

[Stephen Pound]

My hon. Friend raises a point that has given me pause for thought. Does she agree that there is such a thing as a corporate culture in certain companies—I think that there is ample evidence of such behaviour—and that if, often, the culture is not in the interest of probity or the wider public, it is difficult to identify the person of whom an example should be made? If the culture is allowed to fester and permeate, inevitably it spreads. Does my hon. Friend agree that there is an issue of identifying an individual, pour encourager les autres at the very least?

[Catherine McKinnell]

My hon. Friend makes an important point that goes to the heart of the argument. My hon. Friend the Member for Aberavon argued cogently that, ultimately, we need a better way of establishing responsibility for the actions of a company and those who serve within it. It is not enough for those at the top to wash their hands of responsibility for the actions of the officers and employees who operate, act and work under the company’s name.

There needs to be much greater clarity about the legal framework. Many bodies, including the Law Commission, have called for that. What is even more key is that the Government seem to share that view. In a consultation undertaken in July 2015 on the introduction of a new corporate offence of failure to prevent tax evasion, the Government concluded:

“Under the existing law it can be extremely difficult to hold the corporations to account for the criminal actions of their agents”.

That observation has been made by the Government and Ministers on several occasions, as well as by my hon. Friends in their contributions today.

The Law Commission, the OECD working group and the director of the Serious Fraud Office point to section 7 of Labour’s Bribery Act as a potential solution. As my hon. Friend the Member for Ealing North set out in his speech, section 7 of the Bribery Act makes it an offence to fail to prevent bribery. It places the onus on companies to prove that they have put in place adequate procedures to prevent bribery and is widely seen as a far more effective way of holding companies and the individuals within them to account, which is why many want to see that model extended to other types of economic crime.

[Catherine McKinnell]

My hon. Friend makes an important point and anticipates my next point. First, I want to clarify exactly where the Government seem to be on this issue.

The Government’s recent announcement has caused much confusion among those who care about this issue, because it seems to be very much at odds with what they have been saying and the messages and signals they have been sending out. In his first speech as Attorney General over a year ago, the right hon. and learned Member for Kenilworth and Southam (Jeremy Wright) suggested that he was considering the section 7 proposal. We then discovered, in an answer to a written parliamentary question, that it had been dropped. We need clarity from the Minister today about exactly why that decision was made and what the Government will do to ensure that our concerns are addressed if they are not proceeding with that proposal.

The director of the Serious Fraud Office, David Green, has made clear his support for the expansion of section 7 of the Bribery Act. He has described how useful it would be to better facilitate the use of deferred prosecution agreements. My hon. Friend the Member for Neath (Christina Rees) set out eloquently how deferred prosecution agreements work and their potential importance in dealing with some of the issues that have been highlighted. It is no secret that the Serious Fraud Office director favours the use of DPAs, which are currently more widely used in the United States. To clarify, they provide for a corporation to avoid prosecution by entering into an agreement with a number of conditions attached, which may include paying a financial penalty, paying compensation or co-operating with future prosecutions of individuals. In doing so, they avoid prosecution. The aim is to hold key individuals to account, to secure significant financial penalties from companies that have committed wrongdoing and, ultimately, to prevent future wrongdoing by encouraging or mandating reforms within those companies.

Deferred prosecution agreements are not without their critics, but they have been widely used in the US for the past 20 years or so and brought in some $4.2 billion to the Department of Justice in 2014 alone. One key problem with importing the use of DPAs to the UK is that they are intended to be a carrot, while the stick is the prospect of prosecution for corporate economic offences.

[Stephen Pound]

My hon. Friend is giving us a masterclass, and it is greatly appreciated. I am sure that she, like me, felt her heart leap when the American authorities started to act against FIFA using their Foreign Corrupt Practices Act. Does she agree that we can learn much, for once, from the American example and the action they took against the appalling, utterly corrupt situation regarding FIFA? I am not remotely comparing any British business to FIFA—it would be hard to find anything outside the Augean stables or the seventh circle of hell that compared to that organisation. The Americans seem able to achieve things that we cannot. Is that because of the quality of the excellent US Attorney General and her staff, or should we be learning from the American legislation?

[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.

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[The Parliamentary Under-Secretary of State for Justice (Mr Dominic Raab)]

I am grateful for your advice, Mr Stringer, and it is a great pleasure to serve under your chairmanship. At the outset, I should say on behalf of the Solicitor General that he is caught up in the Immigration Bill Committee, and although I understand the chagrin about that of the shadow Justice Minister, the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), my hon. and learned Friend is attending to important business there.

I pay tribute to the hon. Member for Ealing North (Stephen Pound) for securing the debate and for delivering a tenacious, eloquent speech in his usual fashion. He made some excellent points. I fear that he may have rather lost me at Arthur Scargill, even if other Opposition Members were rather more enthused, but none the less, he made some very important points. I also formally recognise the important contributions from the hon. Members for Neath (Christina Rees), for Aberavon (Stephen Kinnock), for Dumfries and Galloway (Richard Arkless), for Edmonton (Kate Osamor) and from the shadow Justice Minister.

I think that we all agree that the prosecution of corporate economic crime is vital and can be complex. We have heard about some of the challenges this morning and there are others, but there are opportunities, too, and we should be mindful of seizing them as best we can. One issue has been the identification principle, which applies in many instances of economic crime and sets a clear bar that must be met before a corporate can be found criminally liable. Technical challenges around the disclosure of material, for example, can also be very significant, not least given the huge volumes of material that need to be sifted and potentially disclosed in many of these cases.

Much has been made of section 7 of the Bribery Act, which makes it an offence for corporates to fail to prevent bribery in certain circumstances. As important as that provision and model is, I did rather feel that hon. Members have pinned a huge amount of confidence—I would not say blind faith—in a model and provision which has not yet secured any convictions, although I appreciate that it was authored under a previous Government. To be clear—I am not saying that the hon. Member for Neath was suggesting this—I do not think that anyone seriously blames the Government for failing to enforce that. Prosecutions in this country are rightly independent from Government interference and we want to see full use made of the measure. I just say—the hon. Member for Ealing North will perhaps want to address this point—that Opposition Members have pinned rather a lot on a measure that has not yet delivered a prosecution, much as we wish it will in the near future.

[Stephen Pound]

I entirely agree with the Minister’s point, but there has, in fact, been one self-referred case under section 7 of the Bribery Act. It took place in Scotland and I am not entirely sure how the jurisdiction applies, but it was a self-referred case using precisely that template.

[Mr Raab]

I am grateful for that intervention. I stand better informed than I was before, but obviously I cannot comment on individual prosecutions or cases until they are in a position to conclude.

Much has been made of the Conservative manifesto commitment, rather caricaturing the nature of what was very clearly stated and ignoring the fact that we are specifically further considering legislation relating to tax evasion. As hon. Members will know, but this is an opportunity to remind them, the consultation on that closed on 8 October. I am sure that further announcements will be made in due course.

The shadow Justice Minister made some of her most powerful points on deferred prosecution agreements, which were introduced in the last Parliament and represent a significant opportunity for prosecutors to take action. I think that they rather refute the suggestion that this Government have been either lax or demonstrating inertia in trying to develop the tools we need to deliver convictions and accountability in this area.

It is also worth saying that, as a basic principle, we should try to exercise existing law enforcement powers to the full before we go back to Parliament and ask for more. I fear that it was rather the epitaph of the previous Labour Government to legislate hyperactively and leave the statute book littered with offences that were not really ever used in practice, so I make no apology for saying that we really ought to be crafting criminal legislation on the statute book that will deliver convictions in practice.

The hon. Member for Aberavon, who unfortunately is no longer in his place, made an interesting speech. He widened the debate to talk about systemic risk, which is an important point, and expressed some of the concerns about the 2007-08 financial crisis that are understandably still feeding calls for further action to be taken now. In that context, I highlight the action that has been taken on the banks by the coalition Government and this Conservative Government in relation to capital ratios, the bank levy and regulating to ensure proper separation between the investment and retail arms of banks. He was absolutely right to make that point, but the whole system of regulation on systemic risk looks fundamentally different today from when the Labour Government left office in 2010.

Going back to the identification principle, we have heard that the law on corporate and criminal liability has that very much at its heart. The identification principle means that a corporate is criminally liable only if a person who is its controlling mind and will is criminally liable. In most cases, there will be liability only if a director is criminally liable. Hon. Members made perfectly reasonable points about that and about the related difficulties and challenges. Many other assertions were made about the state of the current law, such as that the evidential threshold is too high and that it makes it easier to prosecute smaller businesses than larger corporates and particularly difficult to prosecute large and complex multinational corporations. Those are all valid points, rather inherent, though, in trying to regulate and enforce offences in this sector. We certainly do not want small businesses to be hammered while the big ones get off scot-free. That is absolutely the wrong approach and one that we are mindful of the need to avoid.

Other points made about the current state of the law are that it can result in corporates escaping prosecution where there is criminal wrongdoing on behalf of a corporate and the corporate benefits; it does not do enough to deter economic crime in the UK or to promote good corporate governance; and it puts UK prosecutors at a disadvantage compared with some law enforcement agencies overseas where the attribution of corporate criminal liability does not have such a high threshold. The hon. Member for Ealing North made the point about the United States very well. Some have called for a much broader vicarious liability for companies, closer to the US model.

I recognise the point that a different approach, combined with the DPAs introduced in 2013, could have a powerful impact. We need to consider the criminal legal basis along with the prosecutorial tools. That combination is the key to getting more convictions and plea bargains under the DPA arrangements. Notwithstanding the common desire for accountability and convictions, we need to take half a step back and acknowledge the need to be careful to guard the basic principles of justice that we all, at least notionally and rhetorically, hold dear—the presumption of innocence and the burden of proof—and ensure that we have a focused, targeted law enforcement system.

The Bribery Act 2010 contains the much-discussed new offence of failure to prevent bribery by a person associated with the company, which allows prosecutions of corporates for failure to prevent bribery in cases in which the identification principle threshold could not be reached. There have been suggestions for further change by extending the Bribery Act model to other areas. Under that legislation, a commercial organisation is guilty of an offence if a person associated with it bribes another person while intending either to obtain or retain business for the organisation, or to obtain or retain an advantage in the conduct of its business. The legislation sets out that it is a defence for the organisation to prove that it had in place adequate procedures designed to prevent people from undertaking such conduct. That is the balance struck.

The legislation relates specifically to bribery—a very serious economic crime—and is designed to encourage more responsible corporate behaviour. Extending section 7 as some have suggested could criminalise commercial organisations that fail to prevent other types of economic crime, including fraud and tax evasion; I am sure that hon. Members can think of other examples. Some people have urged the Government to go even further and advocated a more dramatic change, calling for legislation to create an offence of vicarious liability. That would be far more like the US model.

As I think was mentioned, the Government published last December the “UK Anti-Corruption Plan”, which included the commitment to consider the case for a new offence of a corporate failing to prevent economic crime. Much has been made of the statement made on 28 September by the Under-Secretary of State for Justice, my hon. Friend the Member for South West Bedfordshire (Andrew Selous), that we will not be carrying out further work on this specific point at least at this time. It is important to understand the reasons for that. Again, they have been rather caricatured, although not intentionally; I would not say that.

The reasons for not taking the work forward at this stage are as follows. First, the UK has corporate criminal liability and commercial organisations can be and are being prosecuted for wrongdoing. Secondly, as I have mentioned, there have been no prosecutions under the Bribery Act offence, so it is not as though we have a huge amount of concrete practice to learn from—in fairness, that point was also made by the hon. Member for Neath. Thirdly, as a result of that and the information and evidence that we get as we look at whether the case is made for new offences, there is little concrete and specific evidence of the wider corporate economic wrongdoing that we should now target that is currently not unlawful and could reasonably be caught by a proposed new offence. If hon. Members want to tell me about a specific area and tailored offence, I will be all ears.

--- Later in debate ---

[Stephen Pound]

Inevitably, this has been an interesting debate; it could not have been otherwise. I hope that the Minister will not consider me ungracious if I say that he has offered hon. Members thin gruel rather than a great Damascene conversion. To get the silly stuff out of the way first, I must just say that it was Peter Richardson playing Al Pacino playing Arthur Scargill, just as it was Dawn French playing Meryl Streep playing Mrs Scargill.

I think I know where the Government are coming from. On one hand, they are trying to create a thriving, vibrant business and economic sector, which continues to be as successful as it already is and becomes even more so. On the other hand, they do not want to over-legislate in any way that would restrict that sector. That goes back to what Adam Smith wrote about the actions of business people when they gather together. The 18th century has been characterised as oligarchy tempered by riot, which is the inevitable logic of a completely unregulated financial sector.

I say to the Minister that there is a real problem of perception. Everybody thought that the days written about in books such as Michael Lewis’s “Liar’s Poker”, which was written in the late ’80s about Salomon Brothers, “The Bonfire of the Vanities” and “Barbarians at the Gate” had gone. We thought that the macho, only-wimps-eat-lunch days of the City had gone. Particularly given the wise and thoughtful words of the Archbishop of Canterbury, Justin Welby, about his time as a City trader, many of us hoped that a different ethical standard was emerging from the City. Sadly, though, the evidence tends to suggest otherwise.

I entirely understand why any pro-business Government —to be honest, a Government that is not pro-business is not worthy of being called a Government—would want to provide succour and support to an incredibly successful sector, which is one of the most important in our economy. However, I gently say to the Minister that the public are not with him. They simply do not see it that way. They see an unregulated financial sector in which individuals go unpunished for wrongdoing. Individuals in the sector make vast, obscene, eye-watering amounts of money. Yes, the odd knighthood may be stripped away, but that is as nothing compared with the sort of punishment meted out to some poor woman who forgets to pay her TV licence and gets hauled up and banged in chokey. The problem of perception is that individuals in the financial sector seem to be getting away with it.

If only we could have an entirely ethical City, we would all be happy. We have not got one, however, so there has to be regulation. Should that be light touch and suggestive legislation in absentia of the sort that the Minister has referred to, or should it be the slightly more rigid and structured legislation that the country is ready for? When the Department for Business, Innovation and Skills tried to consult this summer on whether the Bribery Act should be watered down, it sent out a desperately wrong signal.

I do not count an enormous number of people in the City as my personal friends, but I know quite a few and I do not think that they want to exist in this wild west, free-booting, cowboy economy in which there are no rules and regulations, and anything goes. I think that they want the support of some sort of regulation, because it is good for image, good for business and good for the country. Ultimately, we have to have an ethical economic sector in this country. There is no alternative. I deeply regret that the Minister has not given us that pathway and that signpost.

Motion lapsed (Standing Order No. 10(6)).