The UK’s Bribery Act – its scope, its use so far and how businesses can avoid falling foul of it

February 2018  |  SPECIAL REPORT: CORPORATE FRAUD & CORRUPTION

Financier Worldwide Magazine

February 2018 Issue

This decade has seen a significant legal change in the prosecution of bribery in the UK, namely the Bribery Act 2010. The Act should be seen as the result of a decades-long attempt to reform the law regarding bribery and corruption. It replaced the pre-existing law, which was the common law offence of bribery and the statutory offences in the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption Act 1906. The old law, however, will still apply to cases where the alleged bribery and corruption was committed before the Bribery Act came into effect, on 1 July 2011.

The Bribery Act 2010 created two general offences: offering, promising or giving a bribe and requesting or agreeing to receive or accepting a bribe (Section 1 of the Act). There is also an offence of bribing a foreign public official (Section 6) and a corporate offence of failing to prevent bribery (Section 7).

Failing to comply with the Act can bring severe punishment. Corporates can face an unlimited fine. Directors or other individuals found guilty of an offence under this Act can face up to 10 years’ imprisonment and unlimited fines. Such a person does not even have to commit the bribery. Under Section 14, simply consenting to bribery or turning a blind eye to it can lead to conviction. Prosecutions can be brought under the Act in English, Welsh and Northern Irish courts, wherever in the world the bribery was committed, providing that the person or company committing it is either a British citizen, someone with a ‘close connection’ to the UK or an organisation incorporated under UK law.

Putting it simply, the Bribery Act is a far-reaching piece of legislation that places huge responsibility on businesses to prevent corruption.

International

Recent years have seen increasing cooperation between the Serious Fraud Office (SFO) – which is the UK agency most likely to prosecute bribery – and other investigating agencies, both here and abroad. As an example, GlaxoSmithKline was investigated over corrupt payments in China. It was an investigation carried out by Chinese authorities with the support of both the SFO and the US Department of Justice (DOJ).

Bribery investigations often cross borders, which is why international communication between agencies tackling it is on the rise. The bigger the company, the more likely it is to trade in more than one nation. This increases the risk of bribery and places a responsibility on those at the top of the company to do everything possible to reduce that risk.

This is not a theoretical argument. The major cases of 2016-17 have shown the international, multijurisdictional nature of bribery investigations. The huge mining company Eurasian Natural Resources Corporation (ENRC), Soma Oil and Gas, Rolls-Royce and Airbus are just a selection of the major companies that have been investigated in the past 18 months. Each has faced allegations that they used bribery as a tool to secure business in a number of countries. Authorities around the world are now a lot more attuned to the potential for bribery and more coordinated in their attempts to tackle it. Companies, therefore, cannot rely on good fortune when it comes to either preventing bribery or it going undetected.

Prosecutions

At the time of writing, prosecutions brought under the Bribery Act are scarce. But that will change as more corruption committed after 1 July 2011 is uncovered.

The 2015 case of Standard Bank was the first prosecution brought for the strict liability offence of failing to prevent bribery. As well as being the first Bribery Act prosecution, it was also the first UK case to involve a deferred prosecution agreement (DPA). Under a DPA, a company agrees to meet certain conditions, such as changes to working practices or personnel or the payment of a fine, in order to avoid a criminal conviction. As a result, Standard Bank was not convicted under the Bribery Act. There was a similar outcome when, in 2016, the anonymised company XYZ also entered into a DPA for failure to prevent bribery.

In late 2015, however, the first Section 7 conviction for failing to prevent bribery was obtained when the Sweett Group entered a guilty plea and was fined £2.25m. This was as a result of an SFO investigation into Sweett’s dealings in the United Arab Emirates, where it had made payments to senior figures in an insurance company to gain a hotel building contract.

The fact that Bribery Act convictions are, at present, rare should not lead anyone to believe that prosecutions are unlikely. Since being introduced in 2013, DPA’s are certainly an alternative to conviction. The high-profile DPA that Rolls-Royce reached early in 2017 with the SFO over its pre-2011 bribery is a notable example of how such an agreement can be accepted by both sides as an alternative to a lengthy and potentially damaging trial. But the SFO will not grant a DPA to each and every subject of a bribery investigation. And as more post-2011 bribery comes to light, and the SFO becomes increasingly adept at using the Bribery Act, the likelihood is that we will see increasing numbers of convictions under what is a powerful piece of legislation.

Procedures

Any company facing a Bribery Act investigation only has one defence – that it had “adequate procedures” in place to prevent those acting on its behalf committing bribery. Such written procedures have to be devised and introduced as a direct result of research into the risks of bribery in the geographical areas and business sectors in which a company trades or hopes to trade.

These procedures must also have the full commitment of senior management. They need to include due diligence on all parties a company is to do business with, involve proper training of staff regarding bribery prevention and be subject to regular monitoring and review.

Investigations

If a company knows or suspects it has been involved in bribery, it cannot afford to do nothing.

A thorough internal investigation has to be started, ideally using people with the relevant experience and expertise. A correctly-conducted internal investigation can help a company determine if bribery has been committed and, if so, the scale and duration of it. This can lead to greater leniency if the company then self-reports its wrongdoing. But the SFO will not take a lenient view of any self-reporting that it believes to be poorly executed, inadequate or carried out merely as some sort of face-saving exercise.

For this reason, great thought has to be given to planning the internal investigation. Who should carry it out, who should be questioned, what form the questioning should take, what data needs to be examined, what needs to be presented as possible evidence to the SFO and how all the findings should be presented to the SFO are all issues that require careful consideration.

When it comes to self-reporting, a company must take care – and appropriate legal advice. Self-reporting bribery carries the risk of giving the authorities everything they need for a Bribery Act prosecution. This is a risk that, ideally, should not be left in the hands of a company’s in-house solicitor or general counsel.

With the Bribery Act making companies criminally responsible for the corrupt activities of anyone acting on their behalf, those companies need to know what is being done in their name. Creating whistleblowing procedures whereby staff, agents, clients or trading partners can report their suspicions direct to the company gives it the chance to act on the information and prevent or identify wrongdoing.

This can give a company an invaluable early warning system regarding bribery, which can be of great importance when self-reporting to the SFO. Early and comprehensive self-reporting can be important when seeking to establish credibility with the SFO – credibility that can be the difference between prosecution and a DPA or no action being taken.

The wide geographical scope of the Bribery Act and the large responsibilities it places on companies mean that all businesses have to make the effort to ‘design out’ the risk of bribery in their working practices. Prevention is key.

 

Aziz Rahman is the founder of Rahman Ravelli. He can be contacted on +44 (0)20 3947 1539 or by email: aziz.rahman@rahmanravelli.co.uk.

© Financier Worldwide

BY

Aziz Rahman

Rahman Ravelli

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