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Criminal liability of accounts staff in a "Slush Fund" Case

Jonathan Fisher QC, explores the ramifications of section 46 of the Serious Crime Act 2007 in a corporate bribery or tax evasion case  following two recent Court of Appeal decisions.white-collar-crime-portal-money-2-150x150

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Criminal liability of accounts staff in corporate crime cases no longer depends on traditional principles of secondary liability under the common law. The statutory offence in section 46 of the Serious Crime Act 2007 imposes a wider liability.

Commentary

An issue which often arises in corporate crime cases is whether accounts staff commit a criminal offence when they arrange for payments to be made into a slush fund on a manager’s instructions. Historically, much has depended upon the extent of their knowledge. If accounts staff appreciated the slush fund was used to pay bribes, it is difficult to see how they can avoid criminal liability as a secondary party. But the position is less clear where a cloud of ambiguity hangs over the use to which the monies in the slush fund were being put.

Suppose, for example, the accounts staff suspect a slush fund is used for some unlawful purpose, such as either paying bribes or making cash top-up payments to company employees in order to reduce a tax liability, criminal liability on the part of the accounts staff is less clear-cut. For a person to be liable for aiding and abetting under the common law, a prosecutor would have to show that the secondary party knew of the principal’s offence and wilfully encouraged its commission (R v Bainbridge [1960] 1 QB 129; Maxwell v Director of Public Prosecutions [1978] 1 WLR 1350). At the very least, a secondary party is required to know the particular type of criminal conduct which was intended. But this begs the question as to what is meant by the “type” of offence. Are theft and burglary the same “type” of offences because they are both offences arising under the Theft Act 1968, or are they conceptually different since burglary requires unlawful entry onto another’s property whereas theft does not? In the Law Commission’s view, the “type” of offence is too amorphous a concept to found a secure foundation for attributing criminal liability as a secondary party (Participating in Crime, Law Commission No 305, paragraph 2.57, page 38).

Section 46 of the Serious Crime Act 2007 was introduced to overcome this difficulty by providing that a person commits a criminal offence if (a) he does an act capable of encouraging or assisting the commission of one or more of a number of offences, and (b) he believes (i) that one or more of those offences will be committed (but has no belief as to which); and (ii) that his act will encourage or assist the commission of one or more of them. For the avoidance of doubt, section 46(2) spells out that it is immaterial for the purposes of section 46(1)(b)(ii) whether the person has any belief as to which offence will be encouraged or assisted.

The effect of section 46 is to place all the focus on the extent of a person’s mental awareness relating to the commission of particular crimes. But applied to our case example, does this mean that in order to be guilty of the section 46 offence the accounts staff must believe that each identified offence - bribery and tax evasion - will be committed, or is it sufficient that the accounts staff contemplate that each of the offences may be committed, but they are not sure which one?

In R v Sadique [2011] EWCA Crim 2872, which involved the supply of either Class A or Class B controlled drugs, the Court of Appeal held in an interlocutory appeal that it would be sufficient if a defendant believed at the time of doing the act that one or more offences would be committed, even though he had no belief as to which. But that said, the Court of Appeal proceeded to say there should be a separate count in the indictment in respect of each of the alternative offences in respect of which the prosecutor alleges that the defendant’s belief was held (judgment, paragraphs 82 to 90). The Court reached this conclusion because it was concerned about the different sentencing considerations which would follow, depending upon whether the defendant’s assistance was given in connection with the supply of a Class A or Class B controlled drug. The obvious difficulty with the Court’s approach, however, is that it completely undermined the operation of section 46 since there was no certainty of belief as to a Class A or Class B controlled drug was involved in the supplying offence. Indeed, if it was applied section 46 would have been rendered redundant.

A differently constituted Court of Appeal recently disavowed this approach in R v Sidique [2013] EWCA Crim 1150. As the Lord Chief Justice explained, the entire thrust of section 46 is directed to the encouragement or assistance of offences in the belief that one or more of a number of offences will be committed and the Court was not bound by the earlier obiter observations directed to procedural matters relating to the indictment (paragraph 21).

The lesson for the corporate defence practitioner is a simple one. Whereas it used to be possible to give the potential liability of accounts staff no more than a cursory consideration where they implemented instructions to transfer company monies in circumstances where  unlawful activity was suspected but the accounts staff were not sure what type of criminality was in question, the position today is rather different. Section 46 of the Serious Crime Act 2007has significantly extended the scope of criminality liability. Although the offence is typically prosecuted in cases involving the unlawful supply of drugs or crimes of violence, the wide reach of the statutory offence means that it has significant ramifications in corporate cases where issues involving bribery and tax evasion are concerned.

Biographical note

Jonathan Fisher QC is a leading barrister specialising in white collar crime and regulatory cases. He is recommended in the legal directories as a leading barrister in his specialist areas of practice and has been described as "high-flying", "bringing great commercial acumen to his cases", “an experienced and active silk with a diplomatic and thoughtful style”, and “once in the heat of battle he tells it as it is and pulls no punches ....". In addition to full-time practice as a leading Queen’s Counsel, Jonathan is a Visiting Professor at the London School of Economics where he is responsible for modules in Corporate Crime, Financial Crime and International Economic Sanctions on the LLM programme.

When criminal property is not criminal
The views expressed in this article represent those of the author and not Bright Line Law.

The White Collar Centre