Senior managers who choose to turn a blind eye towards the corrupt practices of their companies and the employees they supervise may find themselves personally liable for allowing the company’s books to be altered to conceal the corrupt nature of the payments made – even if it could not be shown that they had actually engaged in the payment of bribes.
The approach adopted by the SEC, which focuses on the complicity of senior executives and their failure to ensure that the company maintains accurate books and records and implements appropriate internal controls, should not be surprising in light of the memorandum titled “Individual Accountability for Corporate Wrongdoing” issued in September 2015 by the US Assistant Attorney General, Sally Yates, to all US Department of Justice (DOJ) prosecutors and civil litigators. The “Yates Memo” is largely seen as a signal of intent by the DOJ to pursue and punish individuals for their role in corporate crime, in response to prior criticism that not enough had been done to hold individuals to account for their decisions which led to the financial crisis of 2007-2009.
This approach of targeting individuals in general, and senior executives in particular, was echoed in Singapore by Attorney-General VK Rajah SC (A-G Rajah) in an opinion editorial in November 2015, where he urged corporates to adopt a culture of compliance in order to combat commercial crime. In a portentous statement threatening to pierce the corporate veil, A-G Rajah warned that there was “no certainty of escape from liability” for those seeking to hide behind complex corporate structures.
Senior management cannot act in conscious disregard or be wilfully blind to corrupt practices in their organisations. The specific targeting of individuals by the authorities, through the use of “books and records” type and anti-money laundering offences, puts senior executives on notice of the need for them to prevent, detect and properly respond to corporate wrongdoing – and to set the right tone from the top.
As far as liability is concerned, this time it’s personal.
An earlier version of this article was first published on Thomson Reuters Accelus Regulatory Intelligence and Compliance Complete.