Corporations behind bars: can a company be a criminal, and how does compliance become the only way out?

For a long time, the law followed the principle societas delinquere non potest: a company cannot commit a crime. It was thought that you could not put handcuffs on a company or send it to prison. Modern times, however, have brought a paradigm shift. Today, in Serbia and around the world, corporations are liable for criminal offences committed by their employees and management.

As a lawyer, I often explain to clients that it is no longer enough that “they personally” do not break the law. If the system within the company allows or encourages abuse, the entire corporation becomes an accomplice.

Who is the real “criminal in a suit”?

The concept of white-collar crime, introduced by Edwin Sutherland, focuses on persons of high social status who commit offences in the course of their occupation. There is no violence here, but the damage to the budget, the market and society is measured in millions of euros.

Corporate crime includes:

• financial fraud and tax evasion,
• competition infringements (cartels),
• corruption and bribery (money laundering),
• environmental crime (pollution to save on filters).

Liability of legal entities: when does the company “pay the bill”?

Under Serbian law, a legal entity is liable for a criminal offence committed by a responsible person with the intention of obtaining a benefit for the legal entity. The key problem is the de facto immunity that corporations long enjoyed because of the complexity of their structure. It is difficult to isolate a single culprit in a system of 5,000 employees. That is why the law now targets the structure.

If a company has not established control mechanisms, it is held liable because it “failed to exercise due supervision”.

Compliance: your insurance policy against prosecution

Compliance is no longer a “luxury” of foreign corporations. It is a set of procedures that ensure that the company, its management and its employees act in accordance with the law and ethics.

From the defence perspective, an effective compliance programme is of decisive importance:

Before the offence (prevention): training and whistleblowing channels prevent the offence from happening at all.

After the offence (response): if an offence nevertheless occurs, the existence of a compliance programme may lead to exemption from liability or be treated as a mitigating circumstance. The court looks at whether the company did everything in its power to prevent the crime.

It is a set of procedures that ensure that the company, its management and its employees act in accordance with the law and ethics.

Slaviša Cincarević

The reality in Serbia: an analysis of the top 40 companies

Research (such as that of Professor Natalija Lukić) shows interesting data about our market. Although 91% of the most successful companies in Serbia have foreign capital, the application of compliance rules varies:

Only 57.5% of companies have a clearly defined department or person responsible for compliance.

Many companies still confuse compliance with internal audit, which is a legal mistake. Audit looks at what was; compliance looks at what will be.

Whistleblowing rules and codes of ethics are becoming standard, but their actual application in practice (for example, anonymous reports of corruption) is still in its infancy.

A lawyer's advice: how to protect your company

To keep your company out of the crime pages, it is essential to establish a “culture of compliance”:

Appoint a compliance officer: a person who is independent of the commercial side and can say “no” to the director if a deal is risky.

Set up reporting channels: employees must have a safe way to report irregularities (whistleblowers are your best allies, not enemies).

Regular training: employees must know where the line lies between aggressive marketing and abuse of position.

Partner due diligence: criminal liability is often “imported” through dubious suppliers or intermediaries.

Conclusion

The time when corporate crime flew under the radar is over. Today, compliance is a key part of corporate governance. As legal representatives, our task is to help companies build systems in which profit is legal and risk is under control. Otherwise, fines, loss of licences and the collapse of reputation can be fatal.

This text expresses the author's professional opinion and does not constitute legal advice for a specific case.