Bribery

What you need to know

Presented by Rupert Nevin, DWF LLP

Introduction

The Bribery Act 2010 is perhaps the most far reaching and pervasive anti-corruption regime in the world. It was introduced to make bribery offences easier to prosecute and to reflect the cross border nature of many of the contracts that attract the highest risks of bribery.

The Act introduces a range of new offences both for those who give or receive bribes and for organisations which fail to implement adequate procedures to prevent bribery, both by employees and third parties who act on their behalf.

No-one from a government agency will routinely check compliance with bribery laws. However the Serious Fraud Office (and Crown Office in Scotland) have said that they will be relying on whistleblowing reports. This could include disgruntled employees, suppliers or competitors.

Key points to remember:-

• Anything can be considered a bribe – not just cash and financial benefits

• Third parties’ actions can make an organisation criminally liable for their bribes

• Having “adequate procedures” to ensure compliance with the law is a defence, i.e. procedures and training

• If you are a UK company then your actions throughout the world, and those of third parties acting on your behalf, can still render you criminally liable to prosecution in the UK under the Act

What is a bribe?

• A bribe is something of value (known as an advantage) which is intended to “improperly” influence, namely to alter a person’s performance of his/her functions in a manner that a reasonable person would find unacceptable – an “improper performance”

• An advantage is not limited to cash or other forms of payment/fee/commission or financial benefit. Gifts, favours, donations, confidential information, sponsorship and invitations to events/hospitality/entertainment can also constitute a bribe

• There is no minimum amount as to what constitutes a bribe. The first prosecution under the Bribery Act in the UK involved a Court clerk taking bribes of only a few hundred pounds.

• The key test is what the intention behind the advantage was.

What are the bribery offences?

• For an organisation or individual to bribe or offer a bribe, (“active” bribery)

• For an organisation or individual to be bribed or to solicit a bribe (“passive” bribery)

• For an organisation or individual to bribe or offer a bribe to a Foreign Public Official (FPO)

• A director or senior officer who consents or connives (turns a blind eye) to bribery also commits the offence

• Additionally where there is active bribery, or bribery of a FPO, by an employee or an associated person acting on its behalf (such as an agent or affiliated company), an organisation will also be guilty unless it can show it had “adequate procedures” to prevent bribery.

Summary of offences and who can commit them

Conviction of an offence is punishable by an unlimited fine and/or imprisonment of up to 10 years.

The Bribery Act 2010 – the story so far

There have been 3 successful prosecutions under the Act to date, all involving individuals:-

• In October 2011 Munir Patel, a Court Clerk, was convicted of receiving a bribe of £500 to not enter an offender’s details on a Court database. He received a term of 6 years imprisonment for this and for the offence of misconduct in public office.

• In December 2012 Mawia Mushtaq was found guilty of offering a bribe to a Licensing Officer of £300 for a pass mark on his private taxi licence test, he was sentenced to 2 months in prison, suspended for 12 months.

• In April 2013 Yang Li, a Bath University Student, offered a bribe of £5,000 to his lecturer to increase his 37% mark to a pass (40%), he was sentenced to 12 months in prison for his bribery offence.

Sustainable Agroenergy

There has been significant debate about the lack of further action by the prosecutions in connection with Corporate activities.

The SFO have now initiated the first “Corporate” prosecution under the Act against four individuals, the CEO, Financial Controller, Chief Commercial Officer and an Independent Financial Adviser of Sustainable Agroenergy, all of whom are charged with fraud offences, whilst the latter 3 are also charged with “passive” bribery offences. The prosecution relates to the promotion of biofuel investment

products to UK investors, in particular a purported transaction to purchase land in Cambodia and soliciting investment after it was clear the operation would not be profitable.

• In addition in response to recent criticism the SFO has indicated that there are a further 8 “corporate” cases under investigation.

Key Considerations from Sustainable Agroenergy

Significantly the company has not been charged in connection with this offence. However the company has been under investigation since November 2011 and the prosecution highlights that:-• An investigation has profound consequences for a business even if

no prosecution is ultimately brought – for instance frozen assets, investigation costs, lost management time and reputational damage

• Those affiliated with companies can be “caught” by the legislation, as occurred with the IFA in question. Directors within a group must be careful of their status when making decisions, particularly when they do not have oversight of the whole transaction

• Unsurprisingly there is a significant cross-border aspect to this prosecution. Prosecutors may well be demonstrating a new appetite for prosecuting organisations where offending takes place overseas, a particular risk for multinational groups.

Tips for Company Secretaries and Officers

The Act places a new and onerous burden on those responsible for internal compliance within a business. It is essential to follow best practices, including:-• Due diligence including enhanced due diligence on those acting on

your behalf and those you deal with in “high risk” territories or industries. This can include background checks, financial reports, contractual conditions and annual compliance certificates. Particular care should be taken in selecting agents or business partners given that they will be “associated persons” under the Act.

• Internal anti-bribery procedures. Key staff need to be trained to recognise bribery, procedures should ensure issues are brought to management attention..

• Robust financial controls, including auditing and vetting of high risk relationships.

Key concerns for Co-Operatives

Organisations with alternative ownership and management structures, such as co-operative societies, are potentially more exposed to bribery and must focus more on ensuring compliance. • By dint of a broader (but potentially less commercially aware)

ownership there may be less oversight of Board level activities. • Simultaneously there are potentially more decision makers at

various levels whose actions need to be monitored.

As a result co-operatives need to conduct a thorough assessment of where they are most vulnerable and ensure that appropriate oversight is in place for those whose roles potentially place them in the position to engage in corrupt practices.

The board and company officers should seek to ensure that compliance with best practice is achieved and the process should be documented to show the measures adopted, and why.

Key indicators of SFO’s future approach from speech of David Green, SFO director 2 Sept 2013

• “We are investigators and prosecutors…We are not a regulator, deal maker or a confessor”

• “the previous guidance implied that a corporate self-report guaranteed a civil rather than a criminal outcome. No prosecutor should be giving that sort of guarantee in advance…the fact of a genuine self-report is capable of being a decisive factor”

• “the SFO will never decline to investigate on grounds of cost”• “foreign bribery undermines civil society and ultimately harms the

poorest most. We can never accept the argument that a bribe is the necessary price for doing business abroad”

The future of Bribery enforcementThe Sustainable Agroenergy prosecution confounded predictions that civil sanctions (in which a sum equivalent to the proceeds of the bribery is paid) would become a standard method of enforcement. It was suggested that the SFO, faced with budget cuts, would shy away from prosecutions.

David Green has stated “To those who are impatient for the first prosecution under the Bribery Act…watch this space”. Based on his comments it is clear that there is no guarantee that self reporting will prevent prosecution and that he will be targeting companies which fail to prevent bribery through adequate procedures, both at home and overseas.

It is interesting to note that this bullish attitude comes in the wake of the introduction of Deferred Prosecution Agreements, which allow criminal penalties to be agreed without a trial, subject to certain conditions. Failure to adhere to the conditions will result in a resumption of prosecution.

It appears that the SFO may be stepping up their enforcement activities, increasing the pressure to ensure compliance with the Act.

Any Questions?

Source: Transparency International Corruption Perceptions Index 2012