Criminal investigations and prosecutions of both entities and their directors are on the increase across Europe and elsewhere. Strict liability offences under the new UK Criminal Finances Act 2017, which make companies and partnerships criminally liable if they fail to prevent tax evasion by an associated person, could herald a raft of new prosecutions, and use of new tools such as deferred prosecution agreements (DPAs).
Plans are afoot in many jurisdictions to widen offences against corporates. For example, in the UK, it has been suggested that further "failure to prevent" offences, and other forms of economic crime, may also be introduced soon as the Government seeks to make it easier to hold corporate bodies, and their directors and officers, accountable. The broadening of corporate criminal offences inevitably has an impact on directors and officers, who may increasingly find themselves at odds with the company when wrongdoing is alleged, and subject to individual prosecutions.
With businesses becoming more and more global, the chance increases that an organisation may find itself subject to multiple prosecutors for any wrongdoing. The importance of strong global processes cannot be underestimated, nor can the importance of adequate insurance to meet the costs of defending criminal investigations and prosecutions, which otherwise can be on the business critical scale. Whilst entity cover is typically available for US securities claims under a D&O policy, given the potential exposure to criminal investigation and defence costs, we are likely to see further product development in this area, both in the US and internationally, to provide standalone entity cover for this risk.
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