UK banks and businesses could face multimillion pound fines for defrauding their customers in a crackdown on white-collar crime to be announced by Labour.
Under plans to be unveiled later this week, companies whose staff mis-sell products such a payment protection insurance or engage in financial manipulation such as the Libor-rigging scandal could be prosecuted even if the fraud was not directly authorised by senior management.
Those firms found guilty could face fines calculated on turnover – running into millions of pounds – while a new 14-year sentence for individual fraud would also be introduced.
UK authorities have come under increasing criticism in the wake of financial crises for their lax attitude towards white-collar crime. Last year, for example, not a single fine was imposed on a company or individual as a result of investigation by the Serious Fraud Office. In contrast, the US has always taken a much tougher line on corporate crime. In particular, the Libor scandal was exposed because of investigations by the US Justice Department – despite the fact that much of the manipulation took place in London.
In the US, Barclays was fined $360m by the US authorities but only £60m by the Financial Services Authority. The Swiss Bank UBS agreed to pay $1.5bn to the US but only £160m to the UK. In addition, the British bank HSBC was fined $1.92bn for offences including laundering money from Mexican drugs cartels while Standard Chartered was fined $327m for breaking sanctions on Iran, Burma, Libya and Sudan.
Under the plans the current test for corporate fraud – which requires a senior executive to have been personally involved or to have authorised the fraud for a company to be prosecuted – would be abolished. In its place would be a new test whereby a corporation can be held criminally liable for the illegal acts of its employees.
Labour’s shadow Attorney General, Emily Thornberry, said that the behaviour of the banks over Libor was outrageous. “But it was the Americans who took the lead... because of the weakness of our laws in this area.”