In Canada, criminal offences are federally legislated primarily through the “Criminal Code of Canada” (the Code). This legal framework enables the imposition of criminal liability on corporations in which a senior officer is implicated in a criminal offence.
Under the Code, corporations may face criminal liability if a senior officer is aware of fraudulent activities and fails to take reasonable measures to prevent them. This positive obligation extends to other criminal offences as well.
Summary of the identification principle in Canada
The Code attaches criminal liability to a corporation when a senior officer becomes a party to a crime. A senior officer, defined as a key figure in shaping the corporation’s policies or overseeing vital activities of a corporation1, can become a party to a crime under any of the three following circumstances:
If a senior officer suspects a corporate representative is committing a crime and deliberately refrains from confirming the suspicion, the law deems this deliberate ignorance as equivalent to knowledge of the crime3.
Title of any legislation which creates a corporate liability for failing to prevent fraud
The Code can criminalize a corporation’s failure to prevent fraud in certain circumstances. To illustrate, if a senior officer knows that a corporate representative—encompassing employees, partners, agents or contractors—is engaged in fraudulent activities that benefit the corporation and fails to take any reasonable measures to prevent them from committing the crime, the corporation can be criminally charged with fraud. This stems from the Code’s imposition of a positive obligation on the senior officers of a corporation to prevent a crime from being committed by a corporate representative once they become aware or deliberately ignore that a crime is being committed. The Code does not go as far as imposing criminal liability on the corporation for failing to have appropriate fraud detection controls or policies in place, but the corporation must act once a senior officer becomes aware or deliberately ignores the existence of a fraudulent scheme.
The obligation to prevent the commission of the offence is not limited to fraud and extends to any other criminal offence. For example, if a senior officer becomes aware or deliberately ignores that the corporation’s partners or agents are laundering money through the company, then that company may face prosecution if it fails to take steps to prevent the money laundering activities.
To summarize, the Code establishes a framework for holding corporations criminally liable in association with the actions of their senior officers. The Code does criminalize a corporation’s failure to prevent fraud when a senior officer becomes aware of or deliberately ignores a fraudulent scheme. The Code does not hold corporations criminally liable for lacking controls or policies but places a positive obligation on senior officers to address criminal conduct once identified or suspected within the corporation. This obligation extends beyond fraud to encompass a spectrum of white-collar crimes, such as money laundering.
 Section 2 of the Criminal Code of Canada, definition of “senior officer”
 Section 22.2 of the Criminal Code of Canada
 Critical Developments in Corporate Criminal Liability: Senior Officers, Wilful Blindness, and Agents in Foreign Jurisdictions, Todd Archibald, Ken Jull, and Kent Roach, Criminal Law Quarterly, Volume 60 at p119