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Taking On White Collar Crime – LRC Recommendations for Enhanced Regulatory Powers

AUTHOR(S): Claire McLoughlin, Karen Reynolds
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution, Corporate Offences, Fraud and White Collar Crime, Regulatory and Investigations
DATE: 25.10.2018

On 23 October 2018, the Law Reform Commission (the “Commission”) published its Report on Regulatory Powers and Corporate Offences (the “Report”). The Report, which runs to some 800 pages and contains over 200 recommendations, follows on from the Commission’s Issues Paper on the matter, published in January 2016.  The Issues Paper prompted significant engagement by stakeholders and experts on financial and economic regulation and corporate offences, including submissions from the Central Bank (see our previous article here), and more recently an Garda Síochána.

The current political focus on combatting white collar crime, and enhancing Ireland’s reputation for effective enforcement on a European and international level, is apparent from the key recommendations set out in the Report.  These recommendations include that a properly resourced statutory Corporate Crime Agency be established; that that economic regulators should have the power to impose significant financial sanctions and to make regulatory enforcement agreements, to include redress schemes, and a reformation of fraud offences to address egregiously reckless risk taking.  This latter recommendation echoes the Central Bank’s recent proposals for enhanced powers to hold senior executives within financial services firms personally accountable at a regulatory level (read more on the Central Bank report on the Behaviour and Culture of the Irish Retail published in July 2018 and the Individual Accountability Framework here).

Headline details of the key recommendations from the Report are set out below, or read the Report in full here.

Key Recommendations

  • Corporate Crime Agency: Establishment of a new independent and multidisciplinary statutory Corporate Crime Agency The recommendation for a new independent agency echoes the proposal in the Government’s white collar crime package which was published in November 2017.
  • Special White Collar Crime Unit within the office of the Director of Public Prosecutions: Establishment of a dedicated prosecution unit for corporate offences within the Office of the Director of Public Prosecutions, to work closely with the Corporate Crime Agency.
  • Deferred Prosecution Agreements: Introduction of statutory Deferred Prosecution Agreements (“DPA”) based on the UK model, which are subject to court approval. The Court must be satisfied that (a) the terms of the DPA are fair and proportionate and (b) the approval of the DPA is in the interests of justice.
  • Regulatory Enforcement Agreements: All financial and economic regulators should be conferred with the power to enter into Regulatory Enforcement Agreements. While the negotiations leading to such an agreement should be on a “without prejudice” basis, the concluded agreement should be evidenced in writing and publicised.
  • Corporate Criminal Liability:  A generally applicable scheme of attributing criminal liability to corporate bodies.  The approach would differ depending on whether the offence involved subjective fault, objective fault or strict liability.  It is recommended that a due diligence type defence should apply.
  • Liability of Corporate Managerial Agents: A statutory scheme of derivative criminal liability for managers. The identification doctrine should be replaced by a new test reflecting that in modern corporate bodies policy-making is generally not delegated to one senior manager but, in reality, to many managers.  This recommendation is of particular note for managers in light of the recent the Irish Court of Appeal decision of January 2018 has clarified when prosecutions of individuals can occur – read more here.
  • Administrative Financial Sanctions: The Central Bank’s administrative sanctions procedure to be rolled out to other financial and economic regulators, subject to certain reforms. The sanction imposed would be subject to oversight by the High Court.
  • Enhanced and Standardised Regulatory Toolkit: A standard framework of core powers for financial and economic regulators in Ireland, including the power to issue warnings, enter and search premises and take documents, require persons to give evidence or produce documents, impose financial sanctions, bring summary criminal prosecutions and enter into compliance agreements or settlements.
  • Regulatory Guidance Office: Establishment of a Regulatory Guidance Office, consisting of members of Government Departments and Regulators, to provide guidance and information on regulatory matters.

Comment

If implemented, the Commission’s comprehensive recommendations will overhaul corporate enforcement in Ireland. The recommendations should also bring welcome consistency to the legislation in this area which has largely developed in a fragmented manner over the years. The recommendations set out in the Report lend further weight to the enhanced focus on combatting corporate crime resulting from the aftermath of the banking and financial crisis.  Although authorities have recently secured convictions of a number of high-profile senior bank executives relating to their actions prior to the crash, they are keen to build on this with additional resourcing and enhanced powers.

This is clearly a key area of focus for the government and builds on the proposals contained in its “Combatting White Collar Crime” package which was launched in November 2017. In particular, the recommendation to introduce DPAs is likely to be welcomed by the industry. Other jurisdictions, such as the UK, in which DPAs have been introduced, have experienced increased cooperation and transparency which has also led to improved corporate compliance. The introduction of DPAs is seen to have changed the prosecutor and defendant relationship to a more co-operative one which results in matters being resolved efficiently and effectively - to the benefit of all stakeholders.

If you would like to know more about the Report, or to hear what support Matheson can offer, please contact Karen Reynolds or Claire McLoughlin, Co-Heads of our Regulatory and Investigations team, or your usual Matheson contact.

This article was co-authored by Senior Associates Ciara Dunny and Theresa Henderson.

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