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Prosecutors should have US-style powers to punish big business and root out financial crime in the City, the head of the Serious Fraud Office said today.

David Green said legal reforms inspired by the American system of "vicarious liability" would make it easier to hold banks and other large corporations criminally responsible for wrongdoing carried out by their staff.

"My real worry, and why I think the law should be changed, is public confidence," he said in an interview with the Standard.

"The public look at the perceived American performance against corporates and they understandably think, 'Why can't this country do that?' "The answer is that American prosecutors have far more power than we do.

Over there, if someone is acting criminally in the course of their employment and part of their motive is to benefit the company then anything they do makes the company liable. That's very easy.

"Here, we have the 'controlling mind' test where if you want to convict a company you have to prove that the 'controlling mind' — usually the board of directors — was complicit in the criminality.

That is difficult because inevitably the email trail tends to dry up at middle management and evidentially it is hard to prove.

That's why I suggest ways that it could be changed. It’s a matter of public confidence." Mr Green, director of the SFO since 2012, said another option would be to amend the Bribery Act to create a new offence of failing to prevent crime.

His call for reform will fuel the debate over whether ministers have responded adequately to evidence of significant malpractice in the City which emerged following the financial crash of 2008.

Although banks, including Barclays, Deutsche Bank and RBS, have been fined by regulators for market manipulation, none has faced corporate prosecution.

The lack of action has been denounced by politicians, ex-director of public prosecutions Lord Macdonald and others.

Questions about corporate liability were raised again after the recent decision by the Crown Prosecution Service that Rupert Murdoch's newspaper empire should not be charged over the phone-hacking scandal because there was insufficient evidence to prove a crime under current legislation.

Mr Green said a failed attempt by the SFO to prosecute the Japanese camera giant Olympus, which was dropped after a ruling that companies cannot be held criminally responsible in English law for misleading their auditors, might have ended differently if the reforms he advocated were implemented.

He said: "Supposing there was a practice in the banking or finance industry that was well known and widespread and criminal, then the corporations themselves, if they knew of that practice and allowed it to continue, I don't see why they shouldn't be liable for it as well as the individuals who conduct the criminality. The new offence would make the bank tself, or the corporation, liable criminally."

Reform on US lines would also address the problem that it is easier to prosecute small firms than corporations, he said.

"What is very bad and unfair and illogical is that because of our rules about the controlling mind it's much easier to get a conviction of a very small company than it is of a huge company.

"That's because at a small two-man outfit you know who the controlling minds are — those two men — whereas if you come after some enormous bank or vast international corporation then you have the identification problem.

That is the illogicality. They are not being brought to justice."

Mr Green said tougher prosecution powers would also help protect London's reputation and money-generating capacity.

He added: “It's hugely important that the public have confidence in the state agencies’ ability to prosecute the top tier of serious and complex fraud and bribery.

“Not only is it important as a matter of public confidence, it also makes London and the UK a safer place to do business, inspires more confidence and makes us a wealthier country.”

On other issues, the SFO director said that he remained concerned about the ownership of property and other assets by overseas companies from countries such as the British Virgin Islands and Turks and Caicos, in which the owners’ identities were concealed.

He said this facilitated money laundering via the City and London's property market, adding:‎ "It's hard to evaluate the size of the problem, but there's no doubt that large amounts of money are effectively laundered through the City and London property. Proving that is a different matter.

"We would be greatly assisted in that by transparency in corporate structures. The British Overseas Territories for instance: it would be good if they would conform to what we will be doing in transparency of corporate steuctures and beneficial ownership."

He also vowed to continue pursuing convicted criminals with outstanding confiscation orders and disclosed that the SFO’s recent success in securing its first Deferred Prosecution Agreement – against Standard Bank – had already triggered other companies to come forward to volunteer information about potential criminality.

