Corporate Criminal Liability and the Failure to Prevent in Singapore
Victoria Ting recently published an article with Chambers Expert Focus discussing the question: When does a company commit a crime? The article is reproduced below.
Corporate Criminal Liability and the Failure to Prevent in Singapore
The starting point is that a company is a legal entity unto itself, and the acts of its agents or employees are not automatically attributed to it. Then again, a company can only act through natural persons, and in certain situations it can be held accountable for the crimes of an officer. Singapore’s test for corporate criminal liability is the “embodiment doctrine” – whether a person is the “living embodiment” of the company, and whether the commission of the offence was performed as part of a delegated function of management.
Assuming the “embodiment” threshold is met, the next question for prosecutors is whether the company should be held criminally liable, in the sense that it should face criminal charges. This is a matter of prosecutorial discretion.
As recently as late 2015, then-Attorney-General of Singapore, VK Rajah SC, wrote an opinion-editorial emphasising the importance of “holding accountable the individuals who perpetrated the misconduct”. He contrasted Singapore’s enforcement strategy with that of the US: while in the US, “the recent trend appears to be for enforcement action to be focused at the corporate level”, in Singapore “a decision to take action against a corporate entity requires careful consideration in order to ensure that disproportionate collateral damage is not inflicted on innocent parties, such as employees and their families, as well as shareholders”.
CHANGES TO THE LAW
Of course, the state of play in Singapore, much like elsewhere in the Commonwealth, has evolved since 2015. In reliance on the “embodiment” doctrine, a number of high-profile corporate prosecutions occurred in recent times: the Singapore branch of the China Railway Tunnel Group Co. was charged under the Prevention of Corruption Act 1960, and two companies pleaded guilty to corruption charges in connection with the “Ang Mo Kio Town Council” prosecution.
There have also been legislative changes. The Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019specifically enacted “Offences by corporations”, where the state of mind of an officer, employee or agent of that company engaged in conduct within the scope of his or her actual or apparent authority can be attributed to the company. The legislature also substantially enhanced punishments – eg, in 2018, penalty provisions under the Corruption, Drug-Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992(Singapore’s keystone money-laundering statute) were amended to raise the maximum fine for companies to SGD1 million, or twice the value of the company’s benefits from the predicate offence, whichever is higher.
Finally, in the 2021 decision of Prime Shipping Corp v Public Prosecutor  4 SLR 795, the Singapore High Court upheld the forfeiture of a USD4.5 million oil tanker, on the basis that the applicant company’s then-chairman, who was complicit in the offences, was the “living embodiment” of the company. The chairman’s complicity was attributed to the company, and barred it from claiming the status of an innocent third party – it was therefore justified for the company to suffer forfeiture.
THE POSITION IN OTHER COUNTRIES
Singapore is not alone in hardening its stance against companies. At present in the UK, the litmus test for corporate liability is the “directing mind and will” doctrine, from which Singapore’s “embodiment” principle was very much derived. Under the UK doctrine, a person must have sufficient status or authority to constitute the company’s “directing mind and will” before his or her acts may be attributed to the company. This limits the possible pool of attribution to only very senior actors. However, this year, parliamentarians tabled a new “failure to prevent fraud” offence, which will likely catch a company so long as an associated person, such as an agent or employee, commits, aids or abets fraud, and the fraud was for the benefit of the company or someone to whom the company provides services. Under this proposal, the pool of attribution would be greatly expanded.
The proposed UK “failure to prevent fraud” offence has much in common with existing offences in the UK directed at corporates, such as the failure to prevent bribery and facilitation of tax evasion. Across the pond, the US has a similar offence of failure to prevent bribery. Closer to home, 2020 amendments to the Malaysian Anti-Corruption Commission Act introduced a new corporate offence for bribery, where a person gives or offers a bribe in order to obtain or retain business or advantages for the company. Australia is likewise considering making the failure to prevent bribery a corporate offence, and its Law Reform Commission contemplated the “failure to prevent” model for tax evasion and other transnational offences.
What these offences have in common is that companies can defend themselves against criminal liability by demonstrating that they had reasonable measures in place to prevent the predicate offence in question from occurring. This incentivises companies to step up compliance. One can expect that the same defence will be made available in jurisdictions considering the criminalisation of “failure to prevent”-type conduct.
Singapore has yet to see the introduction of such “failure to prevent”-type offences. The closest analogue is Section 236B of the Securities and Future Acts 2001, where a company will be criminally liable for the offence of an officer committed with its “consent and connivance”, and for its “benefit” – but imposes no positive requirement for prevention measures. It remains to be seen whether the “failure to prevent” model will become a mainstay of regulators’ toolkits in Singapore moving forward.
On the one hand, it is easy to perceive the appeal of the “failure to prevent” model for lawmakers. While then-AG Rajah was correct that it is important to hold individual offenders accountable, the “stick” of additionally prosecuting companies shifts the supervisory burden to them. On the other hand, the transaction costs of developing and implementing compliance programmes and internal protocols materially increase the friction of operations and business.
THE PRACTICAL IMPLICATIONS OF THIS GLOBAL TREND FOR SINGAPORE COMPANIES
Having internal controls in place to prevent white-collar offences can reap benefits, notwithstanding that “failure to prevent” is not presently a standalone offence.
- First, a prosecutor may be less inclined to prefer a charge against a company with internal controls aimed at preventing the predicate offence, as the company would be seen as less culpable, and prosecution less in the public interest.
- Second, a corporate defendant would be in a more advantageous position if it had to negotiate a possible deferred prosecution agreement (DPA). While Singapore has yet to enter into any DPAs pursuant to the fairly recent amendments to the Criminal Procedure Code 2010 empowering prosecutors to do so, there is specific mention of internal controls and compliance programmes among the possible DPA requirements.
- Third, a company would be better placed if seeking to resist ancillary consequences such as forfeiture of property used in, or evidencing, an offence (such as the oil tanker in Prime Shipping), by demonstrating that it was not only an innocent third party but also took active steps to prevent the commission of the offence, rendering forfeiture unjustifiable.
- Fourth, in today’s commercial context, where many Singapore-headquartered companies are likely to have overseas operations, having the requisite controls in place serves to mitigate the risk of exposure to corporate criminal liability in the various jurisdictions where the company operates. This will be especially if the company operates in jurisdictions with broader bases of corporate attribution.
- Fifth, having appropriate controls and policies can mitigate a company’s exposure to potential civil claims for damages brought on the basis of a breach of a duty premised on the legal or regulatory regimes in the jurisdictions in which the company operates.
Finally, it is notable that the same 2022 UK Law Commission Report which proposed the “failure to prevent fraud” offence, also proposed expanding the “directing mind and will” principle to lowerthe bar for corporate attribution. If these proposals are taken up, companies should closely monitor any similar developments in Singapore’s common law, given the shared history on the subject between the two jurisdictions.