Business Crime Defence 2016: Trends

“Transparency” has been the word on everyone’s lips this past year as governments worldwide continue in their efforts to combat corruption and fraud within the business world. The past 12 months have witnessed a rising trend in the number of corporates under investigation, sparking an increase in the number of lawyers entering and developing practices in the field. With the increase in enforcement activity from authorities such as the US Department of Justice (DOJ) and the UK’s Serious Fraud Office (SFO) leaving corporates feeling exposed, it comes as no surprise that practitioners have been busier than ever. 

The transparency debate has become a permanent fixture in the sphere of money laundering, as many sources identify the changing nature of investigations. Previously the focus was on events – but the spotlight is increasingly falling on the individuals involved and where responsibility lies. As a greater focus on corporate criminal liability emerges, it is clear to see how this has reflected the changing political landscape. Lawyers have commented on how activity within the practice area often follows a pattern of “peaks and troughs”, as it has in more recent times, with large investigations such as Libor, as well as recent tax scandals, bringing business crime back to the fore.

In April 2016 the Panama Papers scandal broke: more than 11.5 million leaked financial documents lifted the lid on how the rich and powerful have avoided sanctions, laundered money and evaded tax. After David Cameron (at the time British prime minister) had his own personal finances and links to the scandal scrutinised, he announced plans to discuss a new corporate offence of “failure to prevent economic crime”, thus extending the liability of companies in relation to the criminal financial actions of their employees. Many practitioners have viewed this as a knee-jerk reaction to the harsh political reality at the time; however, since Cameron’s resignation, its remains unclear to what extent such plans will be pursued.

Large-scale and high-profile investigations such as Libor, Euribor and Forex, as well as investigations into Tesco and Rolls-Royce, have dominated the UK business crime market over the past year. Conflict issues have created the need for multiple lawyers and firms to be involved in each investigation, meaning that larger full-service firms and boutique outfits alike have had an extremely busy year – with many directly defending those involved. November 2015 saw the SFO agree its first deferred prosecution agreement (DPA) with Standard Bank, and secure its first Libor success earlier that year with the conviction of trader Tom Hayes. Despite these successes, their novelty has left lawyers tentative about their significance for future SFO investigations. They comment that it will only be over the next year that the future of the practice area will be determined, giving more clarity to the situation.

The future of the SFO is also under the spotlight, with many practitioners unsure as to the extent of its resources and ability to commission full-scale international investigations. They note that it is the government that “holds the purse strings”, and with the public sector under increasing pressure to cut budgets, the SFO’s reliance on blockbuster funding has left many uncertain about its role in the coming years. However, with the Euribor trial set for September 2017, the next 12 months will be extremely interesting for corporates, individuals and practitioners alike.

Business crime defence work has been a well-established area throughout the US for many years now, with the jurisdiction seen as a clear frontrunner in the legal market. Despite being a long-standing fixture within the US legal world, the level of activity has seen no let-up over the past year, with practitioners noting an increase in the sophistication of the authorities. They highlight this with particular reference to the compliance monitor at the DOJ, whose ever-more critical focus on company compliance programmes is resulting in a high level of work for the legal community.   

Although companies are now becoming increasingly vigilant of internal corrupt activity, lawyers have flagged their need to also be aware of external issues, most notably cyber threats. They now often find themselves advising clients on preventative steps to be taken as a means of protecting against problems such as data theft, as more and more commercial institutions are targeted.

Hong Kong is another jurisdiction that seems to have experienced much activity over the past year. Many practitioners have commented on the current “fierce regulatory environment”, highlighting an uptick in work that they’ve received in relation to clients’ rights and obligations during regulatory investigations. This combination of pre-emptive advisory and contentious investigative work has meant that now more than ever, clients require reactive, alert and well-informed counsel to advise on regulatory changes and requirements.

The traditional view of the business crime legal market emphasises the role of big city firms as large corporate defenders, and that of boutique firms as representatives of individual clients. Although a generalised view would indicate that this has remained the case for the most part, this is not a black-and-white depiction of the current state of the field. Practitioners have identified that as many boutiques have looked to broaden their practices to corporate defence, the line has become more blurred; however questions of conflict regarding legal representation, as well as resources when dealing with large global investigations, has resulted in an overall stasis.

Despite this apparent stability, recent years have seen a lot of movement of key players in the UK market from boutique outfits to larger city firms in order to help develop their white-collar capabilities. In addition, many US firms have also set up shop in London, seeing Europe as a key growth area for corporate crime work, and London as a base and launch pad for access to other jurisdictions. In general, the marketplace is now a lot more crowded than it has been in previous years, as the practice area gains importance, and firms see it as a lucrative area in which to invest resources and develop practitioners. However, this trend remains in its early stages, with many larger firms possessing pockets of expertise and great resources, but not yet the depth or strength of some of the boutique outfits. This looks set to change over the next few years, with lawyers interested to see which players will emerge as frontrunners in the field.

Although competition among the legal community has seen a great increase in recent times, it would seem that this growth has occurred at a similar rate to that of the practice area. Market development is being driven by the globalisation of business crime investigations, which at face value would indicate a favourable environment for larger firms with resources on a global scale. However, practitioners stress that despite this, an important role remains for boutique firms, whose highly specialised teams remain extremely attractive to clients.

It would seem that heading into the next year, the main focus from lawyers will be the evolving role of the client, as the pressure increases on them to develop their own compliance systems and ensure that they have sufficient processes in place. As they become more sophisticated and regulators become more aggressive, the next year is set to see business crime lawyers busier than ever. 

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