Britain is adopting U.S.-style plea bargaining deals to persuade unscrupulous companies to admit wrongdoing in a move to bring more firms to justice and help tackle an annual fraud bill estimated at 73 billion pounds ($117 billion).
Justice Minister Damian Green said on Tuesday so-called Deferred Prosecution Agreements (DPAs) would prove a valuable tool for prosecutors struggling to nail corporate fraudsters who rely on the cost and complexity of cross border investigations to evade justice.
"Deferred Prosecution Agreements ... will ensure that more unacceptable corporate behaviour is dealt with ... through substantial penalties, proper reparation to victims, and measures to prevent future wrongdoing," he said.
Britain's cash-strapped Serious Fraud Office (SFO) has been keen to use DPAs, under which companies that accept wrongdoing will have to comply with stringent conditions to avoid lengthy criminal prosecutions.
Both U.S. and British DPAs will be sanctioned by a judge. But in Britain, judges will be brought into the process much earlier to ensure any deal struck is in the public interest.
The government hopes the new tool will allow prosecutors to focus on companies that fail to admit wrongdoing and serious cases requiring full criminal prosecution.
Lawyers said DPAs needed to be policed properly, adding it remained to be seen whether they would encourage companies to step forward.
"This will require the cooperation of the judiciary who will be keen to uphold the public interest in prosecuting corporate fraud, ensuring justice is not surrendered in favour of political or financial expediency," said Michael Caplan, a partner at law firm Kingsley Napley.
"What's more, the future may look bleak for boardroom executives who may find themselves personally exposed to criminal prosecution once the corporation's fate has been sealed under a DPA."
The SFO, which operates on a tight annual budget of around 30 million pounds, has been lambasted for dropping high-profile investigations it says were unlikely to yield any prosecution.
Current investigations include a probe into the Libor interest rate rigging scandal, the advisory fees paid by Barclays to avoid a government bailout in 2008 and a $1.7 billion accounting fraud at Japan's Olympus.
DPAs have now been added to the Crime and Courts Bill, which is currently winding its way through parliament. They are not expected to be implemented before early 2014.
($1 = 0.6237 British pounds)
(Reporting by Kirstin Ridley; Editing by David Cowell)