Law ‘outdated’ in fight with corporate fraud

PROSECUTORS ARE being “hamstrung” in their pursuit of corporate fraud because of the outdated legal system, the head of the Serious Fraud Office has warned.

Lisa Osofsky, inset, said the “identification principle” meant cases could only be brought against a company if the “controlling minds” at the top of the organisation could be charged.

Giving evidence to the Commons Justice Committee, she said in practice it meant that while small companies where the entire board could be put in the dock could be prosecuted, the “big boys” escaped.

“I am worried that we won’t always to be able to pursue the fraud cases we want because we are hamstrung by the identification principle, which is a principle that says that, if we don’t have the top two, three, four controlling minds in the dock, we cannot hold the corporate liable for fraud and other sorts of economic crime,” she said.

“That is an old law that was developed at a time when two, three, four people ran companies in our country. It ought to not only be the tiny little SMEs that are only run, by two three, four people where you can get the whole board held accountable and in the dock.”

Ms Osofsky, a former FBI lawyer who took over as SFO director, said while individuals within an organisation could be charged, often they were acting for the benefit of the company while getting very little themselves from their criminal activity.