Anti-corruption: UK government pushes for major shift in corporate culture – International Bar Association

UK Legislation Aligns with Sustainable Development Goals to Combat Corporate Fraud

Introduction

In September, the United Kingdom enacted new legislation targeting corporate fraud, directly supporting the principles of several Sustainable Development Goals (SDGs). The ‘failure to prevent fraud’ offence holds large organisations accountable for fraudulent acts committed by employees or associates for the company’s benefit. This legislative action is a significant step towards fostering corporate accountability and aligns with the global agenda for sustainable development, particularly SDG 16 (Peace, Justice and Strong Institutions) by aiming to reduce illicit financial flows and corruption.

Legislative Framework and Corporate Accountability

Scope and Applicability

The law is designed to drive a cultural shift towards anti-fraud practices within large corporations, contributing to stable economic environments as outlined in SDG 8 (Decent Work and Economic Growth). An organisation falls under the scope of the law if it meets two of the following three criteria:

• More than 250 employees
• A turnover exceeding £36 million
• Assets valued over £18 million

The legislation covers a range of fraudulent conduct, including dishonest sales practices, concealment of information from consumers or investors, and dishonest activities in financial markets.

Enforcement and Penalties

Enforcement will be managed by the UK’s Serious Fraud Office (SFO) and the Crown Prosecution Service (CPS). Organisations found in breach of the law face severe penalties, including:

• Unlimited fines
• Criminal convictions
• Significant reputational damage

Advancing Key Sustainable Development Goals

SDG 16: Peace, Justice, and Strong Institutions

This legislation is a direct implementation of SDG 16’s targets to combat corruption and build effective, accountable institutions. By holding corporations liable, the law aims to:

• Substantially reduce illicit financial flows and corruption.
• Promote the rule of law within the corporate sector.
• Develop effective, accountable, and transparent institutions at all levels.

The SFO’s commitment to prosecuting non-compliant businesses underscores the strengthening of institutional frameworks to enforce justice.

SDG 12: Responsible Consumption and Production

The new rules explicitly make ‘greenwashing’ a criminal offence. This provision directly supports SDG 12 by ensuring companies provide accurate information about their environmental credentials. By criminalising false or misleading statements on sustainability, the law compels organisations to adopt more transparent and responsible production patterns, preventing consumer deception and promoting genuine environmental stewardship.

SDG 8: Decent Work and Economic Growth

By preventing large-scale financial scandals that often lead to significant job losses and economic instability, the legislation promotes sustainable and inclusive economic growth. A corporate culture that is inherently anti-fraud fosters market integrity, investor confidence, and a stable environment conducive to creating decent work for all.

SDG 17: Partnerships for the Goals

The law’s broad definition of an ‘associated person’—which includes subsidiaries, contractors, and suppliers—necessitates robust partnerships across entire supply chains. This creates a ‘trickle-down effect’, encouraging small and medium-sized enterprises (SMEs) to implement their own anti-fraud measures to continue working with larger corporations. This collaborative approach to compliance embodies the spirit of SDG 17, fostering partnerships to achieve sustainable development objectives.

Implementation and Expected Outcomes

Reshaping Corporate Risk Assessment

The offence is expected to fundamentally alter how businesses approach risk management. It shifts the focus from merely being a potential victim of fraud to being a potential beneficiary and perpetrator. The law’s extraterritorial reach means non-UK businesses with UK operations or connections must also assess their exposure and implement reasonable prevention procedures.

Measuring Success Beyond Prosecution

While prosecutions are an important enforcement tool, the ultimate success of the legislation will be measured by its ability to foster a systemic change in corporate culture. Key indicators of success will include:

1. A demonstrable improvement in corporate compliance standards across the board.
2. A cultural shift that sensitises organisations to the risks of fraud, similar to the impact of the UK Bribery Act.
3. The widespread adoption of robust, organisation-wide anti-fraud controls.

Analysis of SDGs, Targets, and Indicators

SDG 16: Peace, Justice and Strong Institutions

• The article focuses on new UK legislation designed to hold businesses accountable for fraud, which directly relates to promoting justice and building strong, accountable institutions. The law targets corruption and illicit financial activities within the corporate sector.
• It discusses strengthening enforcement bodies like the Serious Fraud Office (SFO) and the Crown Prosecution Service (CPS) to prosecute corporate crime, which is a core aspect of developing effective institutions.
• The legislation aims to “promote a corporate culture that’s anti-fraud in nature,” directly addressing the goal of reducing corruption and bribery.

SDG 8: Decent Work and Economic Growth

• The article links large-scale financial scandals to “numerous job losses” and potential “financial crisis.” By preventing such fraud, the legislation contributes to economic stability, which is essential for sustained economic growth and protecting jobs.
• The law targets “dishonest practices in financial markets,” which helps to strengthen the integrity and stability of domestic financial institutions, a key component of a healthy economy.

SDG 12: Responsible Consumption and Production

• The article explicitly states that the new rules “make greenwashing a criminal offence.” This directly addresses the need for responsible corporate behaviour regarding environmental claims.
• By criminalizing misleading statements about environmental credentials, the law encourages companies to adopt genuinely sustainable practices and report on them transparently, which aligns with the principles of responsible production.

Specific targets under those SDGs

SDG 16: Peace, Justice and Strong Institutions

• Target 16.4: By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime. The article’s focus on a new law to combat corporate fraud, which is a major form of illicit financial flow, directly supports this target. The legislation aims to reduce fraud, which “accounts for over 40 per cent of crime recorded against individuals in England and Wales.”
• Target 16.5: Substantially reduce corruption and bribery in all their forms. The article explicitly mentions that the new law follows similar “failure to prevent” legislation concerning bribery and tax evasion. The goal is to foster an “anti-fraud” corporate culture, directly tackling corporate corruption.
• Target 16.6: Develop effective, accountable and transparent institutions at all levels. The legislation is a tool to make corporations more accountable. Furthermore, the article discusses the role and resourcing of the SFO and CPS, highlighting the importance of effective public institutions to enforce the law.

SDG 8: Decent Work and Economic Growth

• Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all. The law’s aim to curb “dishonest practices in financial markets” and prevent large-scale financial scandals contributes to the stability and trustworthiness of the financial system, which is a prerequisite for this target.

SDG 12: Responsible Consumption and Production

• Target 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle. By making “greenwashing a criminal offence,” the law pressures companies to be truthful about their environmental credentials, thereby encouraging the adoption of genuinely sustainable practices rather than just making false claims.

Indicators mentioned or implied in the article

SDG 16: Peace, Justice and Strong Institutions

• Improvement in corporate compliance standards: The article suggests that a key measure of the law’s success is not the number of prosecutions but “whether, across the board, compliance standards have improved.” This implies tracking the adoption of “reasonable procedures” and “robust anti-fraud measures” by companies.
• Reduction in the prevalence of fraud: The article provides a baseline statistic that fraud “accounts for over 40 per cent of crime recorded against individuals in England and Wales.” A reduction in this percentage would be a direct indicator of progress.
• Shift in corporate culture: The article mentions the Bribery Act was effective in “changing culture or at least sensitising people to the risks around bribery.” A similar cultural shift towards being anti-fraud would be a qualitative indicator of success for the new law.

SDG 8: Decent Work and Economic Growth

• Reduction in job losses linked to financial scandals: The article notes that past scandals have “resulted in numerous job losses.” A decrease in employment disruption caused by corporate fraud would indicate greater economic stability.

SDG 12: Responsible Consumption and Production

• Number of prosecutions for greenwashing: The article identifies greenwashing as a criminal offence under the new law. The number of investigations or prosecutions related to false environmental claims would serve as a direct indicator of enforcement.
• Accuracy of corporate environmental reporting: An implied indicator is an improvement in the truthfulness of corporate statements about environmental credentials, as companies seek to avoid making “misleading or false statements.”

Table of SDGs, Targets, and Indicators

Source: ibanet.org