‘Too Scared to Prosecute and Too Scared to Jail?’ A Critical and Comparative Analysis of Enforcement of Financial Crime Legislation Against Corporations in the USA and the UK
| Author | Nicholas Ryder |
| Date | 01 June 2018 |
| Published date | 01 June 2018 |
| DOI | 10.1177/0022018318773209 |
| Subject Matter | Articles |
The Journal of Criminal Law
2018, Vol. 82(3) 245–263
‘Too Scared to Prosecute
ª The Author(s) 2018
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DOI: 10.1177/0022018318773209
A Critical and Comparative
journals.sagepub.com/home/clj
Analysis of Enforcement
of Financial Crime Legislation
Against Corporations
in the USA and the UK
Nicholas Ryder
University of the West of England, UK
Abstract
This article has two aims. First, it critically considers the responses towards tackling corporate
financial crime in the USA. Secondly, it analyses the UK’s efforts to tackle corporate financial
crime and then compares them with the USA. The USA presents an interesting case study for
this article due to its robust and aggressive stances towards tackling financial crime and also
because it is one of the largest financial markets. Similarly, the UK has adopted a strong stance
towards tackling financial crime and is also regarded as one of the most important global
financial centres. Therefore, by comparing the two contrasting approaches towards corporate
financial crime, it is hoped that the best practices from each country could be adopted. The first
section of the article concentrates on the judicial response towards corporate financial crime
in the USA and it then moves onto highlight and critique the decision of the US Department of
Justice (DoJ) to alter its enforcement policy by moving away from indicting corporations to
using deferred prosecution agreements (DPAs). Here, the continued use of DPAs is ques-
tioned because they have had a limited impact on the future conduct of corporations who are
persistent reoffenders. The article sets out a wide range of arguments for why DPAs should
not be the enforcement weapon of choice for the DoJ. The final part of this section critiques
the ability of law enforcement and financial regulatory agencies to impose financial penalties and
bring civil actions for a wide range of financial crimes under the Financial Institutions Reform,
Recovery and Enforcement Act 1989. The second part of the article concentrates on the UK
and concisely assesses the doctrine of corporate criminal liability, thus identifying the con-
trasting judicial approaches with the USA. The next section discusses the use of DPAs for
Corresponding author:
Nicholas Ryder, Bristol Law School, Faculty of Business and Law, University of the West of England, Bristol, UK.
Email: nicholas.ryder@uwe.ac.uk
246
The Journal of Criminal Law 82(3)
breaches of the Bribery Act 2010 by the Serious Fraud Office. The section advocates that in the
UK, DPAs must be utilised for a broader range of financial crime offences, thus drawing on the
US model. The penultimate segment of the article identifies and comments on several alter-
native enforcement measures which could be used to counteract the limitations of the doctrine
of corporate criminal responsibility in financial crime cases. This distinctively includes the
Financial Conduct Authority’s Senior Managers and Certification Regime, its ability to impose
financial penalties and to revoke the authorisation of a regulated corporation. The article
concludes by making a number of recommendations and suggested reforms, thus further
developing the scope of this research.
Keywords
Financial crime, corporate criminal liability, financial crime, identification doctrine, deferred
prosecution agreements, HSBC
Introduction
Financial crime is synonymous with the seminal work of Professor Edwin Sutherland who famously and
somewhat controversially used the term ‘white-collar crime’ in his 1939 presidential lecture to the
American Sociological Society.1 He defined white-collar crime as ‘a crime committed by a person of
respectability and high social status in the course of his occupation’.2 Sutherland concluded that financial
crime was committed by ‘merchant princes and captains of finance and industry’ while working for a wide
range of corporations including those involved in ‘railways, insurance, munitions, banking, public utilities,
stock exchanges, the oil industry [and] real estate’.3 White-collar crime has also been referred to as ‘financial
crime’, ‘economic crime’ and ‘illicit finance’.4 The early interpretation offered by Sutherland has attracted a
great deal of debate among criminologists and commentators. Some have expressed their support for the
definition such as Benson and Simpson,5 while a majority of others have disputed the accuracy of Suther-
land’s definition including Bookman,6 Podgor7 and Freidrichs.8 Brody and Kiehl concluded that ‘many
scholars continue to redefine and develop a more useful and working definition of the term’.9
While commentaries on Sutherland’s definitions have concentrated on crimes committed by individ-
uals who are an employee, representative or agent of a corporation, very few have considered financial
crime committed by corporations. Corporations are juridical persons that through the legal process of
incorporation are endowed with a legal identity, which distinguishes them from its creators. The com-
mon law provides that corporations are qualified to breach certain offences under the criminal law
largely because of this legal procedure.10 A number of common law rules have evolved in order to
1. E. Sutherland, ‘The White Collar Criminal’ (1940) 5 American Sociological Review 1.
2. E. Sutherland, White Collar Crime (Dryden: New York, NY, 1949) 9.
3. Above n. 1 at 2.
4. For the purpose of this article we will use the term financial crime. It is interesting to note that these terms are somewhat
indiscriminately and interchangeably used although their meanings are different. See for example, R. Naylor, ‘Towards A
General Theory of Profit-driven Crimes’ (2003) 43(1) British Journal of Criminology 81.
5. M. Benson and S. Simpson, White-Collar Crime: An Opportunity Perspective (Routledge: New York, NY, 2009).
6. Z. Bookman, ‘Convergences and Omissions in Reporting Corporate and White Collar Crime’ (2008) 6 DePaul Business &
Commercial Law Journal 355.
7. E. Podgor, ‘White Collar Crime: A Letter From the Future’ (2007) 5 Ohio State Journal of Criminal Law 247.
8. D. Freidrichs, ‘Wall Street: Crime Never Sleeps’ in S. Will, S. Handelman, and D. Brotherton (eds), How They Got Away With
it: White Collar Criminals and the Financial Meltdown (Columbia University Press: New York, NY, 2013) 9.
9. R. Brody and K. Kiehl, ‘From White-Collar Crime to Red-collar Crime’ (2010) 17 Journal of Financial Crime 351.
10. Ministry of Justice, Corporate Liability for Economic Crime: Call for Evidence (Ministry of Justice: London, 2017) at 10. See
generally Salomon v Salomon [1897] AC 22.
Ryder
247
limit disproportionate abuse of power by corporations, including breaches of criminal law.11 A detailed
discussion of the incorporation process and a general commentary on the criminal liability of corpora-
tions are beyond the scope of this article. This research seeks to provide an original commentary by
comparing and contrasting the approaches in the USA and the UK towards corporate financial crime.
Corporate financial crime has been referred to as a ‘complex subject on many levels and efforts at
strict definitional exactitude rapidly become self-defeating’.12 Since the seminal definition of white-
collar crime by Sutherland, financial crime has attracted a great deal of research and commentary. For
instance, detailed research and related literature has been published on money laundering,13 terrorist
financing,14 fraud,15 market manipulation16 and more recently bribery.17 However, there is a defi-
ciency of literature on corporate financial crime within the UK and little that compares its enforcement
mechanisms with those in the USA. Most of the literature in this area initially concentrated on the
development of the doctrine of corporate criminal responsibility.18 Subsequent literature has focused
on the liability of corporations for breaching the Corporate Manslaughter and Corporate Homicide Act
2007,19 the creation of the failure to prevent bribery offences under the Bribery Act 201020 and the use
of deferred prosecution agreements (DPAs) by the Serious Fraud Office (SFO).21 There is little
published research on the Ministry of Justice (MoJ) call for evidence which has only recently been
covered by Wells.22
The international profile of corporate financial crime has substantially increased during the last three
decades. This is due, in part, to instances of corporate financial crime in the USA including the Savings
and Loans Crisis,23 the collapse of several large corporations including Enron and WorldCom,24 the
11. See generally R v P&O European Ferries (Dover) Ltd [1991] 93 Cr App R 72, 83.
12. T. Edwards, House of Commons Library Briefing Paper—Corporate Economic Crime: bribery and corruption, Number 7359,
22 March 2017, at 3 (The House of Commons: London, UK).
13. See generally P. Alldridge, Money Laundering Law: Forfeiture, Confiscation, Civil Recovery, Criminal Laundering and
Taxation of the Proceeds of Crime (Hart: Oxford, 2003); M. Gallant, Money Laundering and the Proceeds of Crime: Economic
Crime and Civil Remedies (Edward Elgar: Cheltenham, UK, 2005).
14. See generally J. Gurule, Unfunding Terror: The Legal Response to the Financing of Global Terrorism (Edward Elgar:
Cheltenham, UK, 2010); N. Ryder, The Financial War on Terror: A Review of Counter-Terrorist Financing Strategies Since
2001 (Routledge: London, 2015).
15. See A. Doig, Fraud (Routledge: London, 2006); M. Levi, Regulating Fraud:...
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