The UK Government Introduces Reforms to the Identification Doctrine

The U.K. government announced on 15 June 2023, plans to modernise the identification doctrine, a rule that applies to the attribution of corporate criminal liability due to the actions of individuals within the corporation. Under the current regime, corporate criminal liability is established only where a criminal offence can be attributed to an individual who, at the time, was the “directing will and mind” of the company. U.K. prosecutors have faced significant difficulties establishing corporate criminal liability under this test because most executives engaging in problematic conduct are able to argue that other organisational superiors are the true directing will and mind, as modern corporate structures will usually involve a board or similar managing body. The government has acknowledged this in a factsheet detailing its plans to expand attribution for corporate liability to be established through the actions of “senior managers” through an amendment to the Economic Crime and Corporate Transparency Bill (“Bill”).

While the government’s plans remain subject to legislative scrutiny and potential amendments, it is important to unpack the significance of the proposed reforms.

The Proposals

The government’s intention is that the actions of senior managers acting within their “actual or apparent scope of authority” will be capable of triggering corporate criminal liability. While the scope of authority has not been defined yet in the proposal, the definition of senior manager has been adopted from the Corporate Manslaughter and Corporate Homicide Act 2007 (“Act”) to mean an individual who plays a significant role in:

1.  
   1. the making of decisions about how the whole or a substantial part of the activities of the corporation are to be managed or organised, or
   2. the actual managing or organising of the whole or a substantial part of those activities.

If this proposed definition becomes law, then senior managers would include individuals that make operational decisions that shape corporate policy in a specific area. The Ministry of Justice had stated in guidance issued in connection with the Act that senior roles covered may include regional managers in national organisations and the managers of different operational divisions.

The reform would apply to specified economic crime offences such as money laundering, sanctions offences, bribery, fraud, and terrorist financing. The government has confirmed that the reform would operate alongside the new failure to prevent fraud offence (examined in our previous alert), and that prosecutors would look at what the senior manager’s roles and responsibilities are within the organisation –  the level of managerial influence that individual might exert –  rather than theindividual’s job title.

Comment

The proposed reform would result in an increased risk of enforcement action against companies, as the list of individuals whose actions could result in attribution of criminal liability to the company would expand. Companies with complex organisational and operational structures should consider which individuals would be classed as “senior managers” under the proposed legislation and update their compliance programmes accordingly, in order to ensure that such individuals have appropriate financial crime awareness.

It is important to know that the reform is not intended to have retrospective effect.