Offences concerning directors and officers of a company. Fraud and corruption in the United Kingdom – the present and the future
| Date | 04 January 2008 |
| Published date | 04 January 2008 |
| DOI | https://doi.org/10.1108/13590790810841671 |
| Pages | 22-37 |
| Author | G. Scanlan |
| Subject Matter | Accounting & finance |
Offences concerning directors
and officers of a company
Fraud and corruption in the United Kingdom –
the present and the future
G. Scanlan
City University, London, UK
Abstract
Purpose – The purpose of this paper is to consider the present and possible future nature of the legal
regime regulating and seeking to control fraud and corruption on the part of directors and officers of
companies in the UK.
Design/methodology/approach – This paper outlines aspects in the present and future fight
against fraud and corruption on the part of directors and officers of companies, particularly with
regard to public and listed companies in the UK.
Findings – The paper emphasises the need for the UK Government to secure adequate resources for
the investigating and enforcement authorities to ensure that the law of fraud and corruption is
effectively enforced, rather than pursue a policy of constant enactment of new legislation which is
increasingly complex and ineffective.
Originality/value – The paper considers the creation of a new generic offence to supplement
the new generic offences created under the Fraud Act 2006, based on the established principle of
the fiduciary duty, a duty owed by all directors and officers to their companies. These offences
could form the central core of a future legal regime regulating the conduct of directors and
officers.
Keywords Fraud, Corruption,United Kingdom, Organizations
Paper type Research paper
Introduction
This paper will consider how the law relating to fraud and corruption may evolve in
England and Wales as a means of counteracting dishonest and corrupt conduct on the
part of directors and officers of companies. In doing so, the paper will also consider
how conduct which amounts on the part of such individuals to a serious breach of duty
with regard to their company may form the basis of a proposed generic offence[1].
In addressing these issues, consideration will first be given to the policies which have
shaped the present law governing fraudulent and corrupt activity on the part of
directors and company officers both substantive and procedural.
The legislative obsession
Perhaps, the most consistent policy of successive British Governments over the past
20 years which has shaped this area of the law, has been an obsession with enacting
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-0790.htm
The author offers thanks to Professor T. Prime of the University of Manchester for his helpful
comments on the early drafts of this paper.
JFC
15,1
22
Journal of Financial Crime
Vol. 15 No. 1, 2008
pp. 22-37
qEmerald Group Publishing Limited
1359-0790
DOI 10.1108/13590790810841671
legislation to deal with the fraudulent and corrupt activities of both organised crime,
terrorists and those who are the directing minds of companies, particularly with regard
to public and listed companies[2]. This obsession has led to a plethora of statutory
provisions which has been indifferently or unsuccessfully enforced on the part of the
relevant enforcement authorities[3]. Failure of any legislation to counteract a particular
area of criminal activity merely results in government proposals for further legislation,
rather than an increase in resources allocated to the relevant enforcement agencies so
that these agencies may be in a position to enforce the present legislative reg ime with
vigour and some confidence of success.
The perception of the success of the fight against fraud and corruption
This approach to the problem of fraud and corruption on the part of the UK
Government has led to a perception by the public that the law proscribing the activities
of organised crime, and terrorists in the UK is ineffective. This perception is even more
pronounced in the case of the law which seeks to regulate the financial services
industry, and the directors and officers of public and listed companies, with the public
firmly convinced that the law relating to the regulation of public and listed companies
is particularly under resourced, given little priority by the UK Governmen t, which is
regarded as too intimately associated with the interests of the city, and consequentially
ineffective[4]. Furthermore, there is a public perception, repeatedly confirmed by the
financial press that the relevant authorities in the UK given the task of the enforcement
of the law regulating fraud and corruption are toothless, both with regard to the
city and with respect to public companies and their officers[5], and that the relevant
authorities are incompetent and outgunned by the legal teams which defend those
accused of such offences[6]. Furthermore, the government as legislator in this field is at
best seen as indecisive and at worst interested in producing legislation dealing with
fraud and corruption as an aspect of gesture politics, in order to score over the
opposition or attract favourable press coverage[7]. The recent sniping between the
government and opposition over the need for further legislation to deal with the threat
of terrorism is a prime example of such activity and brings all the parties involved into
disrepute.
The fight against fraud and corruption – an inadequate response
The public perception therefore is that the UK enforcement authorities as agents in the
fight against fraud and corruption are inadequate organs when investigating and
prosecuting those involved in serious and complex fraud or corrupt activity[8].
Sentencing policy
Even when enforcement of the laws relating to fraud and corruption by the UK
authorities is successfully achieved and individuals are prosecuted and convicted, the
consequential sentences imposed upon those convicted of serious fraud or corruption
offences are often regarded, and are perceived as inadequate[9].
The future
These matters are serious and need to be addressed by the UK Government in the
future if the UK is to keep its financial services industry and its corporate enterprises,
particularly its public and listed companies properly and effectively regulate d.
Fraud and
corruption
in the UK
23
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