Recent International Trends in Business Crime Defence

01 April 2007

We have had Enron (Skilling jailed, Lay dead), Worldcom (Bernie Ebbers sentenced to a lengthy prison term), Parmalat (still in the throes of multi-jurisdictional litigation), YUKOS (the pursuit of Khordovsky and Lebedev, attempts to extradite numerous others), Oil For Food prosecutions in the US, and related investigations in a number of other countries, British Aerospace (a controversial premature end to one investigation with other investigations pending), Siemens (multimillion dollar irregular payments enquiry), Volkswagen (an executive convicted of bribing a union official) and Conrad Black (on trial in Chicago); this is a sample only. 

I could have gone on to recite the determination of the US government to pursue those breaching its Foreign Corrupt Practices Act, those conducting internet gaming and those involved in insider trading. As with earlier periods, the USA appears to be most robustly determined to visit business and financial irregularities with penal sanctions. The country that gave us the Sherman Acts, the SEC, the FCPA and the Patriot Act, is also the one with the most dedicated financial and human resources. Its writ has become increasingly extra-territorial, resulting in the use of a web of legal assistance treaties and the ready employment of requests for extradition and the freezing of assets at home and overseas. Not surprisingly, perhaps, the USA has the most numerous and the most focused collection of white-collar crime lawyers. 

Whereas elsewhere, with few exceptions, specialist lawyers are comparatively thin on the ground, the USA has a white-collar bar sited both in the largest ‘white shoe’ firms, as well as in hundreds, if not thousands of niche practices. 

What all business crime lawyers are experiencing is the need to keep abreast with the fast-changing profiles of global business and financial services. This requirement is further expanded by the spread of business and finance to new centres in developing countries. The offshore world, despite attracting criticism from international standard setters like FATAF, the World Bank and the OECD, is nonetheless rapidly becoming acceptable as a regulated place to do business. Additionally, the Middle East, most notably, Lebanon and the UAE, are establishing sound financial centres offering competitive services. 

This geographical expansion has gone hand in hand with the overall development of international norms and increasing sophistication in the provision of financial services. Regulators and lawyers alike have to grapple with the ever more complex financial instruments and derivative markets, as well as the emergence of powerful new business models, like hedge funds and private equity companies. 

The knowledge of domestic criminal law is little more than a starting point. The business crime lawyer must have expertise in regulatory and administrative law, as well as the matrix of best practice models and the interaction of national law, and the interaction of national law enforcement and regulatory agencies. 

The practitioners represented in this guide – and their peers – must familiarise themselves with the common typologies of white-collar crime and the often subtle differences in how those typologies are regarded in different domestic legislations and international instruments. He or she must have some knowledge of foreign jurisprudence and foreign procedures and the interplay between them. 

The last decade has also witnessed the reinforcement of human rights, which now figure large in issues of mutual legal assistance and the surrender of suspects. 

Then there is the question of the interplay between civil, administrative and criminal law. Criminal enquiries that cross frontiers provoke questions of comity, equivalence and uniformity. 

The political effort to combat international organised crime and terrorism has led to a determination to cast aside or ignore long cherished principles like commercial and banking secrecy and attorney-client privilege. Greater impetus has been given to cross-border initiatives by the need to collect taxes in a world where business is often conducted in cyber space, and where tax gathering based on purely national instruments is often ineffective. 

The internet has increased the reach of the fraudster and made the maintenance of national norms of rectitude harder to police. One has only to examine the US effort to discourage internet gaming, lawful and regulated in many countries, to see the challenge confronting those advising business. 

What is perfectly acceptable entrepreneurial conduct in one developed country may be unacceptable and, indeed, criminal in another. Whereas dual criminality requirements were once a safeguard to oppressive extra-territorial reach, the ‘war on crime and terrorism’ has led to this safeguard either being swept aside or, at least, significantly restricted. 

International cooperation has been vouchsafed without sufficient regard to the consequences of what appears to be a reasonable political response to shared threats. Suspects may now be surrendered regardless of nationality without any, or any proper, regard to the adequacy of evidence, the guarantee of a fair trial or the availability of adequate legal representation. 

Information is routinely gathered about corporations and individuals and transmitted to requesting states again often without adequate due process or safeguards as to its eventual use. States routinely wish to enquire into the activities of businesses and their proprietors and assemble huge databases of information which may or may not be relevant or appropriate. Little regard is paid to the difficulties experienced by business and individuals alike in challenging these procedures. Too often, data and people are sent across frontiers without effective protection. 

If there is inadequate protection for suspects, there is also inadequate guidance for the business and financial communities in their efforts to conduct due diligence and remain compliant. Minimum best standard norms are set internationally without adequate prior consultation. It is then for the business client to try and decide what is or is not acceptable compliance – hopefully with the assistance of their legal advisers. 

This burden has been accentuated by deputising increasing numbers of economic players as gatekeepers. These gatekeepers have been given policing responsibilities which are described in non-specific terms, making the conduct of international trade and finance increasingly slow, complex, expensive and hazardous. 

The business or banking client must constantly weigh up risk and hope that their response to it will not only provide a safeguard to third party dishonesty, but also satisfy all relevant government agencies and international bodies. Matters are made worse by the various and variable interpretations of legal obligations as one moves from sovereign state to sovereign state. What is a crime in one, may be a regulatory breach in another, or behaviour visited only by civil sanctions, in a third. 

Businesses or individuals who are the victims of crime or business malpractice who have neither the diplomatic reach nor the financial resources of government may find it impossible to obtain redress in a foreign state. 

International business regulation has developed piecemeal, often in response to threats like terrorism financing which has little connection with common business practice. This kind of regulation is not only oppressive because of the financial demands it makes of a legitimate economy, but frequently frustrates the pursuit of legitimate economic goals. The appointment of lawyers as gatekeepers has been accepted in some states and is resisted in others, making for an uncompetitive and uneven playing field. 

The business crime lawyer lives in interesting and challenging times.

It is not possible to buy entry into Who's Who Legal

terms and conditionscontact us