1 Legal and enforcement framework
1.1 Which legislative and regulatory provisions govern anti-corruption in your jurisdiction, from a regulatory (preventive) and enforcement (criminal) perspective?
Conduct which took place before 1 July 2011 can be subject to:
- common law offences of bribery and accepting a bribe;
- the Public Bodies Corrupt Practices Act 1889;
- the Prevention of Corruption Acts 1906 and 1916; and
- the Anti-Terrorism Crime and Security Act 2001.
The Bribery Act 2010 is now the main legislation in the United Kingdom that governs bribery and corruption. It came into effect on 1 July 2011 and covers all companies with a UK connection. They can be prosecuted under the act in the United Kingdom for bribery committed anywhere in the world by staff, intermediaries, third parties or trading partners acting on their behalf. Individuals can also be prosecuted.
Under Sections 1 and 2 of the act, it is an offence to promise, offer or give a bribe or to request, agree to receive or accept a bribe to ensure the improper performance of a relevant function or activity.
Under Section 6 of the act, it is an offence to promise, offer or give a bribe to a foreign public official to influence him or her and obtain or retain business or a business advantage.
Under Section 7, which applies to companies only, a corporate is guilty of an offence if any of the three aforementioned offences are committed by someone acting on the corporate’s behalf. The only defence to this charge of failure to prevent bribery is that the corporate had ‘adequate procedures’ in place to prevent bribery.
Penalties under the act are a maximum of 10 years’ imprisonment and/or an unlimited fine for individuals. Corporates face an unlimited fine and can be barred from tendering for public contracts. For the purposes of this Q&A, we will be referring to the new Bribery Act unless otherwise stated.
1.2 Which bilateral and multilateral instruments on anti-corruption have effect in your jurisdiction?
The following conventions have been signed and, unless otherwise stated, ratified by the United Kingdom:
- the United Nations Convention against Corruption (signed on 9 December 2003 and ratified on 9 February 2006);
- the United Nations Convention against Transnational Organised Crime (signed on 14 December 2000 and ratified on 9 February 2006);
- the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (signed on 17 December 1997 and ratified on 14 December 1998);
- the Council of Europe Criminal Law Convention on Corruption (ETS 173) (signed on 27 January 1999 and ratified on 9 December 2003). Implementation of this convention is monitored by the Group of States against Corruption;
- the Additional Protocol to the Criminal Law Convention on Corruption (ETS 191) (signed on 15 May 2003 and ratified on 9 December 2003);
- the Council of Europe Civil Law Convention on Corruption (ETS 174) (signed on 8 June 2000 but not yet ratified);
- the Convention on the Fight Against Corruption Involving Officials of the European Communities or Officials of Member States of the European Union (signed on 26 May 1997 and notified on 11 October 1999); and
- the Convention on the Protection of the European Communities Financial Interests and Protocols (signed on 26 July 1995 and entered into force on 17 October 2002).
The United Kingdom also signed the Agreement for the Establishment of the International Anti-Corruption Academy as an international organisation on 2 September 2010, but this agreement has not yet been ratified.
1.3 Are there accessible directives or other guidance from enforcement authorities in your jurisdiction?
The following have been published:
- the Bribery Act 2010 Guidance by the Ministry of Justice;
- Joint Guidance for Prosecutors and Joint Guidance on Corporate Prosecutions by the director of public prosecutions (DPP) and the director of the Serious Fraud Office (SFO);
- the United Kingdom Anti-Corruption Strategy 2017–2022;
- the BBA’s Anti-Bribery and Corruption Guidance May 2014; and
- the OECD and International Bar Association report proposing global conduct guidelines for lawyers working on commercial structures, published 31 May 2019.
In April 2019, SFO Director Lisa Osofsky stated that she was set to issue guidance for corporates about what they can expect from her agency if they self-report wrongdoing.
This guidance was published in August 2019. It states that cooperation will be a relevant consideration when the SFO decides whether to charge, and that ‘cooperation’ means providing assistance that goes above and beyond what the law requires. Identifying suspected wrongdoing and the people responsible, reporting this to the SFO within a reasonable time and preserving available evidence are cited as examples of cooperation – although the guidance says that even full, robust cooperation does not guarantee any particular outcome.
Controversially, the guidance states that where a company claims that documentation is privileged – and therefore unavailable to the SFO – this claim must be established by independent legal counsel.
1.4 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?
The Bribery Act can be enforced by agencies including the SFO, the National Crime Agency (NCA), the Financial Conduct Authority (FCA), City of London Police and regional police forces. The SFO director can authorise a bribery prosecution. Any other agency needs the consent of the DPP.
The SFO is the primary agency in England and Wales for investigating and prosecuting corruption cases in these countries and abroad. It has a range of unique powers under Section 2 of the Criminal Justice Act. Under Section 2, the SFO can compel any individual or organisation to provide it with information or documents that it believes are relevant to its investigation. The SFO has also told lawyers that they are not guaranteed a right to accompany a client that is compelled to go in for interview under Section 2. While it is commonly the case that a lawyer can attend a Section 2 interview, a lawyer intending to attend a Section 2 interview with a client must argue why he or she should be allowed to do so, and may even have to agree to certain restrictions during the interview. Pre-interview materials are often provided which can be reviewed with an instructed lawyer prior to the interview and the interview cannot be used against the person in future criminal proceedings, unless it is for enforcement of Section 2. Following the High Court’s decision in KBR v SFO (2018), the powers of Section 2 notices extend beyond UK borders (see question 2.8).
Although the SFO encourages self-reporting of involvement in bribery and corruption, it has emphasised that this will not necessarily prevent a prosecution being brought – and it will not accept the company’s report of wrongdoing at face value.
The SFO also now has deferred prosecution agreements (DPAs) at its disposal. Introduced under Schedule 17 of the Crime and Courts Act 2013, a DPA is an agreement reached (under the supervision of a judge) between a prosecutor and an organisation which could be prosecuted. It allows a prosecution to be suspended for a set period, provided that the organisation agrees to meet certain specified conditions and admits the criminal behaviour. If the organisation meets the conditions, the prosecution will not go ahead – but it will be prosecuted if it fails to meet those conditions.
The United Kingdom’s anti-money laundering regime requires reporting to the NCA and applies very strictly to the regulated sector. Any suspicion of a bribery offence may need to be reported to the NCA. The NCA’s International Corruption Unit was set up specifically to take reports of bribery and corruption. Its key role is to investigate money laundering in the United Kingdom resulting from corruption of high-ranking officials overseas, bribery involving UK-based companies or nationals which has an international element and cross-border bribery where there is a link to the United Kingdom. It also traces and recovers the proceeds of international corruption.
The NCA is a member of the International Anti-Corruption Coordination Centre, which brings together specialist law enforcement officers from agencies around the world to tackle corruption. It is also involved with the International Foreign Bribery Taskforce, which sees bribery investigators from the United Kingdom, Australia, Canada and the United States share expertise.
The other agencies responsible for enforcing the law in relation to bribery are:
- the Crown Prosecution Service (CPS), which prosecutes corruption cases in England, Wales and overseas;
- the FCA, which regulates the UK financial services industry, using powers conferred on it by the Financial Services and Markets Act 2000. It has imposed large fines on firms for breach of its principles where bribery and corruption have taken place or where a firm’s systems and controls have been inadequate to deal with the threat of corruption; and
- the National Economic Crime Centre. This began operating on 31 October 2018. It coordinates the United Kingdom’s national response to economic crime by working with the various prosecuting bodies.
1.5 What are the statistics regarding past and ongoing anti-corruption procedures in your jurisdiction?
The United Kingdom is the 11th least corrupt nation out of 175 countries, according to the 2018 Corruption Perceptions Index reported by Transparency International. The index scores on a scale of zero (highly corrupt) to 100 (very clean). The United Kingdom scored 80 points out of 100 on the 2018 Corruption Perceptions Index.
Many bribery-related cases are still being prosecuted under earlier laws. Indeed, between 2014 and the second quarter of 2018, the CPS launched 107 proceedings under the Prevention of Corruption Act 1906, compared with around 42 for all offences under the Bribery Act 2010.
According to the House of Lords Select Committee on the Bribery Act 2010, 2011 to 2017 saw 22 prosecutions under Section 1 of the Bribery Act (offering or giving a bribe), which led to 14 convictions. These resulted in 10 custodial sentences, three suspended sentences and one community sentence. For the same period for the Section 2 offence of requesting or accepting a bribe, there were 14 convictions, leading to seven custodial sentences, five suspended sentences and one community sentence.
Most of the earliest cases brought under the Bribery Act were relatively minor, involving bribes of less than £10,000. It appears that more large-scale corporate cases are now being brought, albeit not many.
The SFO’s first successful Bribery Act 2010 conviction of individuals came in 2014, in relation to the prosecution of two men involved in a £23 million fraud concerning Sustainable AgroEnergy’s (SAE) biofuel investment products. SAE’s former director and chief commercial officer received bribes in exchange for false invoices.
In 2015 construction company Sweett Group PLC was the first to be convicted under the Section 7 Bribery Act offence of failing to prevent bribery. It was fined £2.25 million after it admitted failing to prevent an act of bribery intended to secure and retain a contract with an insurance company in the United Arab Emirates.
The first contested Section 7 case was concluded in 2018 after Skansen Interiors reported bribery by two employees to the police and was itself charged with the offence. Skansen argued that it had adequate procedures in place to prevent bribery, but a jury found this not to be the case. The company had ceased trading in 2014 and was given an absolute discharge.
The SFO’s first conviction after trial of a corporate for offences involving bribery of foreign public officials came in 2014, leading to printing company Smith and Ouzman being ordered to pay £2.2 million for its corrupt payments to officials in Kenya and Mauritania.
While the number of prosecutions has been relatively low under the 2010 Act, it should also be noted that the DPAs concluded with Standard Bank, Sarclad and Rolls-Royce were all bribery related.
1.6 What are the shortcomings identified in your jurisdiction’s anti-corruption legislation (including recommendations of the Organisation for Economic Co-operation and Development, where applicable)?
The issue of corporate as opposed to individual liability in relation to the prosecution of bribery has led to criticism of how allegations are investigated and prosecuted. A company can enter into a DPA with the SFO which allows it to escape prosecution, but offers no such protection for the individuals within the company. The individuals are literally left to defend themselves. This problem may be due to the difficulty in identifying the controlling mind of the company and how this relates to the acts or omissions of those individuals (for further information on DPAs, see question 6).
However, the DPA alternative to prosecution of corporates can lead to the contradictory situation of a company admitting wrongdoing and avoiding prosecution and the authorities then failing to convict the individuals who allegedly committed the wrongdoing. The situation may also arise – as with the Rolls-Royce bribery case – where a DPA is agreed and the company accepts that wrongdoing was committed, but the investigation into individuals is then dropped. This may be because of the fact that it is possible for a DPA to be concluded without a full code test (which prosecutors apply when deciding whether to charge) – that is, where the company accepts the wrongdoing without the prosecuting agency having identified material to satisfy the evidential burden of the test.
In March 2019 the House of Lords Select Committee on the Bribery Act 2010 found that the act is considered an international gold standard for anti-bribery and corruption legislation. However, the committee also stated the following:
- The government must improve the advice given to small and medium-sized companies on how to comply with the act when exporting goods and services.
- There is a lack of cooperation between the CPS, SFO, NCA and other agencies, which must be addressed.
- The CPS and SFO should make speeding up bribery prosecutions a priority.
In its 2012 report, the OECD Bribery Working Group criticised the United Kingdom for what it said was a lack of transparency surrounding decisions to resolve a number of bribery investigations via a civil settlement rather than by prosecution.
2 Definitions and scope of application,
2.1 How is ‘public corruption’ or ‘bribery of a public official’ defined in the anti-corruption legislation?
The terms ‘public corruption’ and ‘bribery of a public official’ are not defined in the Bribery Act. However, the offences detailed in Sections 1, 2, 6 and 7 of the act cover such situations, as explained in question 1.1.
Section 6 of the Bribery Act makes it an offence to promise, offer or give a bribe to a foreign public official (see question 2.2). The other sections of the Act make no distinction between private and public bribery.
2.2 How is a ‘public official’ defined in the anti-corruption legislation? How is a ‘foreign public official’ defined?
The term ‘public official’ is not defined in the Bribery Act. ‘Foreign public official’ is defined under Section 6(5) as someone who holds a legislative, administrative or judicial position of any kind, whether appointed or elected, in a country or territory outside the United Kingdom (or any subdivision of such a country or territory) and exercises a public function. A ‘public function’ is defined as being for, or on behalf of, a country or territory outside the United Kingdom (or any subdivision of such a country or territory), or for any public agency or public enterprise of that country or territory (or subdivision) or acting as an official or agent of a public international organisation, such as the United Nations or the World Bank.
The offence of bribery of a foreign public official does not require an intention of the person bribing to induce improper conduct or a belief that the bribe will result in such conduct. All that is required is that the person offering the bribe intends to influence an official when he or she is acting in an official capacity, so that the person can obtain or retain business or an advantage in the conduct of business.
2.3 How is ‘private corruption’ or ‘bribery in the private sector’ defined in the anti-corruption legislation?
The terms ‘private corruption’ and ‘bribery in the private sector’ are not defined in the Bribery Act. The act does not distinguish between public officials and private individuals. The focus of misconduct is the function that the person is performing, regardless of the sector in which that function is being performed.
Section 3 of the act defines the scope of a function or activity, and what is considered ‘relevant’ for the purposes of Sections 1 and 2.
There are four possible relevant functions or activities:
- any function of a public nature;
- any activity connected with a business;
- any activity performed in the course of a person’s employment; and
- any activity performed by on or behalf or a body of persons (whether corporate or unincorporated.
To qualify, however, the person performing the function or activity either must be expected to have performed in good faith or impartially, or must have been in a position of trust by virtue of performing it.
2.4 How is ‘bribe’ defined in the anti-corruption legislation?
‘Bribery’ under the Bribery Act is defined as offering, promising or giving a financial or other advantage intending to induce or reward improper conduct, or knowing or believing its acceptance to amount to improper conduct. ‘Improper’ means breaching an expectation of good faith, impartiality or trust.
The bribe need not be given; merely offering it – even if it is not accepted – can constitute bribery.
A person being bribed commits an offence if he or she requests, agrees to receive or accepts a financial or other advantage where that amounts to improper conduct, or where such an advantage is accepted with the intention that improper conduct will follow or as a reward for improper conduct that has been carried out.
2.5 What other criminal offences are identified and defined in the anti-corruption legislation?
As outlined in question 1.1, the criminal offences are as follows.
Sections 1 and 2 of the Bribery Act 2010 cover the two general offences of offering, promising or giving an advantage, and requesting, agreeing to receive or accepting an advantage in circumstances involving the improper performance of a relevant function or activity.
‘Relevant function or activity’ means a public or business activity which a reasonable person in the United Kingdom would expect to be performed in good faith, impartially or in a particular way because the person performing it is in a position of trust. ‘Improper performance’ means breach of that expectation.
These offences cover both public and private sector bribery.
Under Section 6 of the act, it is an offence to promise, offer or give an advantage (financial or otherwise) to a foreign public official with the intention of influencing that official and obtaining/retaining business or a business advantage. To be guilty under this offence, there need not be evidence of intention on the part of the person bribing to induce improper conduct, or knowledge or belief that acceptance of the bribe will amount to improper conduct – only that the person bribing intends to influence the official acting in his or her official role.
Section 7 of the Bribery Act created the offence of failure by a commercial organisation to prevent a bribe being paid to obtain or retain business or a business advantage. The defence to this offence is that the organisation had adequate procedures in place to prevent bribery.
2.6 Can both individuals and companies be prosecuted under the anti-corruption legislation?
Individuals can be prosecuted under Sections 1, 2 and 6 of the Bribery Act. A company can also be prosecuted under these sections if the prosecution can show the necessary mental element for the offence to be attributed to the ‘directing mind’ of the company.
Under Section 7 of the Bribery Act 2010, only the company can be prosecuted for the offence of failure to prevent bribery.
2.7 Can foreign companies be prosecuted under the anti-corruption legislation?
The Bribery Act covers activity carried out by all companies and individuals in the United Kingdom. It also covers activity conducted outside of the United Kingdom, provided that the company or individual concerned has a close connection to the United Kingdom.
A ‘close connection’ includes:
- a company incorporated in the United Kingdom;
- a company that does business in the United Kingdom; and
- a foreign company that has a UK-based subsidiary.
A foreign company that carries out any part of its business in the United Kingdom could be prosecuted for failure to prevent bribery even where the bribery takes place outside the United Kingdom and the benefit or advantage to the company is gained outside the United Kingdom.
2.8 Does the anti-corruption legislation have extraterritorial reach?
Yes. The Bribery Act has extraterritorial reach both for UK companies operating abroad and for overseas companies with a presence in the United Kingdom. In relation to the offences of bribing, being bribed or bribing a foreign public official, provided that the person committing the offence has a close connection with the United Kingdom, that person can be prosecuted for bribery that occurs outside of the United Kingdom.
Provided that a company is incorporated in the United Kingdom or carries on business within the United Kingdom (regardless of where it was incorporated), it can be liable under the Section 7 offence of failing to prevent bribery, regardless of where the bribery takes place.
Incidentally, the case of KBR v SFO (2018) demonstrated the extraterritorial reach of the SFO’s powers under Section 2 of the Criminal Justice Act (see question 1.4). The SFO investigated corruption relating to a UK subsidiary of US-based KBR. The parent company has no place of business in the United Kingdom and conducts no business in the United Kingdom. The SFO issued a Section 2 notice to compel KBR to produce documents. Prior to this case, Section 2 notices were not thought to have an extraterritorial effect; but the High Court ruled that these notices can require the production of documents held overseas, provided that the recipient of the notice has a ‘sufficient connection’ to the United Kingdom.
KBR was deemed to have a sufficient connection, as the payments made by its subsidiary required the express approval of the parent company and were processed by the parent company.
3 Corruption and bribery
3.1 How are gifts, hospitality and expenses treated in your jurisdiction?
In guidance issued before the Bribery Act came into effect, the Ministry of Justice stated that there was no intention to outlaw all entertainment and hospitality.
The government stated when the act was set to become law that genuine hospitality and reasonable, proportionate business expenditure would not lead to prosecution. Any corporate spending on entertainment and hospitality is unlikely to attract official attention unless there are concerns that it is actually a covert form of bribery. Most companies draw up a manual or guidelines to assist employees regarding the distinction between minor gifts and commercial bribery.
A corporate should have appropriate policies and procedures for gifts, entertainment and hospitality in order to avoid allegations of bribery. But as the 2010 act provides no direct exemptions or assistance on what is acceptable and what is not, it is difficult to ascertain precisely what the limits are.
3.2 How are facilitation payments treated in your jurisdiction?
Facilitation payments have always been illegal in the United Kingdom, regardless of their size or frequency. That was the case before the UK Bribery Act came into force.
In deciding whether to prosecute in respect of facilitation payments, an enforcement agency will consider whether it is in the public interest to prosecute.
A prosecution is more likely if:
- large or repeated payments have been made;
- payments have been planned or accepted as part of a standard way of doing business;
- payments indicate that there has been corruption of an official; or
- there has been a failure to follow any existing policy regarding facilitation payments.
3.3 How is bribery through intermediaries and other third parties treated in your jurisdiction? Can those third parties be held liable?
A corporate can be held liable for bribery committed by an associated person. An associated person is defined in Section 8 of the Bribery Act 2010 as an employee, someone acting in the capacity of an employee, an agent or any other person who performs services for or on behalf of the organisation.
The Bribery Act covers all individuals and organisations with links to a corporate that could commit bribery on its behalf. Bribery committed by staff, agents, representatives in territories, subsidiaries, subcontractors, suppliers and anyone involved in joint ventures with the corporate can all lead to the corporate facing prosecution under the act.
3.4 Can a company be held liable for bribery committed by management or other employees?
Yes. An individual can be prosecuted under Section 1, 2 or 6 of the Bribery Act if he or she can be shown to be responsible for the offence. But if it can be shown that the directing mind and will of the company was responsible for the bribery, then the company can be prosecuted under Section 1, 2 or 6 – either along with or instead of individuals.
However, only a company can be prosecuted under Section 7. Under Section 7 of the act, a company can be prosecuted if a person associated with it bribes another person intending to obtain or retain business for that company or to obtain or retain an advantage in the conduct of business for the company.
A ‘person associated with a company’ is defined in Section 8 as a person who performs services for or on behalf of the company – which would certainly cover management and other employees. This also covers any agents working for the company or any of its subsidiaries.
Section 7 does not require a prosecution to have taken place arising from the offences committed by the associated person. However, there must be sufficient evidence to prove the commission of such an offence to the criminal standard.
The aim of Section 7 of the Bribery Act is to compel a change in corporate culture, which is why it is wide reaching and allows for a company to be prosecuted when senior employees engage in bribery.
While there is the defence to Section 7 of having adequate procedures in place, there are no legislative provisions or guideline cases to assist with determining what constitutes adequate policies and procedures. This will depend on the facts of each particular case.
The first contested case for failure to prevent bribery was the case of R v Skansen Interiors Ltd (2018). Skansen was a UK-based company that acquired two contracts in 2013, worth a total of £6 million. The managing director paid two bribes – the first £10,000 and the second £29,000 – to the project manager at the company that was inviting tenders for the work. Despite the bribery being committed by a senior employee unbeknown to the company and the fact that the bribes were uncovered by new management – who self-reported the bribery to the National Crime Agency – Skansen was still prosecuted. The Skansen managing director and the other company’s project manager were prosecuted under the general offence of Section 1 of the Bribery Act, while Skansen was prosecuted under Section 7 for failing to prevent bribery.
To successfully defend itself, Skansen needed to show that it had adequate polices in place, but the jury found this was not the case – hence the conviction. As there is no judicial guidance as to what will constitute adequate procedures, companies should take the right advice on what could be considered adequate procedures.
3.5 Can a company be held liable for bribery committed by domestic or foreign subsidiaries?
Yes. The extraterritorial reach of the Bribery Act means that while it covers bribery committed in the United Kingdom, it also covers any bribery committed anywhere in the world by a person or organisation with a close connection to the United Kingdom.
For companies, a ‘close connection’ to the United Kingdom means any organisation incorporated or formed in the United Kingdom or any organisation that carries out business or part of a business in the United Kingdom. If, therefore, such a company’s subsidiary commits bribery in the United Kingdom or in any other country, it can be prosecuted under the act.
Official guidance has stated that the issue of whether a company carries out a business or part of a business in the United Kingdom will be determined by a common-sense approach. This issue is to be determined on a case-by-case basis, according to the facts. The prosecution of a subsidiary does not require or necessarily lead to the prosecution of the parent company.
If a foreign subsidiary of a UK company commits an act of bribery on behalf of its UK parent company, it can lead to the parent company becoming liable under Section 7 of the Bribery Act –failure to prevent bribery. This would also be the case if the subsidiary were UK based.
There has yet to be a case that establishes whether a foreign parent company would be prosecuted if its UK subsidiary were found to have committed bribery.
3.6 Post-merger or acquisition, can a successor company be held liable for bribery committed by legacy companies?
Legislation and official guidance do not distinguish between commercial entities that have recently been taken over and their successors. Case law has shown that companies can be held liable for bribery committed by companies that they acquire. Companies should ensure that they undertake sufficient due diligence during the acquisition of any other organisation and have adequate procedures in place to prevent and detect bribery.
If there has been wrongdoing in Company A, one advantage of self-reporting and obtaining a DPA is that Company A can be reformed and recreated into the new, clean Company B. But Company B still has to pay the fine and demonstrate that this process is not a sham.
In May 2019 the SFO announced that Carol Ann Hodson, the former director and owner of a company named ALCA Fasteners Ltd, had pleaded guilty to paying £300,000 in bribes to secure contracts worth £12 million. The bribery was revealed by ALCA’s buyers, who identified it, reported it to the SFO and cooperated fully with the investigation. The SFO decided to prosecute Hodson rather than the company. This may be due to factors such as the offending not being recent, the current company being different from that which committed the bribery, the individual concerned having left the company and the self-reporting. Whatever the precise reason, the case sends a message that, when it comes to mergers and acquisitions, a company can self-report bribery it identifies in a company it has merged with or acquired and not necessarily be prosecuted.
4.1 Is implementing an anti-corruption compliance programme a regulatory requirement in your jurisdiction?
It is not compulsory. However, the only defence for a company accused of failing to prevent bribery under Section 7 of the Bribery Act is that it had ‘adequate procedures’ in place to prevent bribery. See question 4.2.
4.2 What compliance best practices should a company implement to mitigate the risk of anti-corruption violations?
In its advice on the Bribery Act, the Ministry of Justice issued guidance as to what could be considered having adequate procedures in place to prevent bribery.
The six principles the guidance outlined are as follows:
- Proportionate procedures: A commercial organisation’s procedures to prevent bribery should be proportionate to the bribery risks it faces and reflect the nature, scale and complexity of its activities. They should also be clear, practical, accessible, effectively implemented and enforced.
- Top-level commitment: A company’s top-level management must be committed to preventing bribery by persons associated with it and should foster a culture in which bribery is never acceptable.
- Risk assessment: Companies should conduct regular, documented assessments of the nature and extent of their exposure to possible external and internal risks of bribery posed by persons associated with it.
- Due diligence: A proportionate and risk-based approach should be taken to persons carrying out services for or on behalf of the company. Those persons should make similar checks on those they deal with.
- Communication and training: The company should ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation. This should be done through internal and external communication and training.
- Monitoring and review: Procedures designed to prevent bribery should be monitored regularly and altered where necessary.
The important thing is the substance of the procedures and the actual actions undertaken – not the mere fact that the procedures exist. It will be necessary to show there has been training in these procedures and that the relevant parties have access to them. There have been cases where having written procedures has not protected a company against corruption allegations. If a company is operating in an area where the risk of corruption is known to be high, its compliance must reflect this.
Compliance is about training to identify bribery and then reporting it and avoiding it. The reporting element is important as only through reporting can the evolution of methods of bribery be identified.
4.3 Which books and records requirements have relevance in the anti-corruption context?
Records of staff training and conduct will be of value when it comes to preventing corruption in the workplace.
A company’s ability both to maintain and to refer to comprehensive financial records will also be of immense importance in preventing and identifying corruption. Companies face a number of obligations in relation to the keeping of financial records, some of which are detailed below – although this list is not exhaustive:
- The obligation on companies to keep adequate accounting records is governed by Part 15 of the Companies Act 2006.
- Specific sectoral rules relating to record keeping and accounting may also apply. The Financial Conduct Authority (FCA) Handbook states that regulated firms must arrange for orderly records to be kept of their business and internal organisation.
- Under Section 386 of the Companies Act 2006, every company must keep adequate accounting records that show and explain its transactions and financial position.
- Private companies must keep accounting records for three years and public companies must keep accounting records for six years (Section 388(4) of the Companies Act).
- The Companies Act states that a company’s annual accounts must be audited unless an exemption applies, such as if it is a small company (Section 475). The auditor must compile a report that includes a statement as to whether, in his or her opinion, the accounts give a true and fair view of the company’s state of affairs (Section 495).
- An offence is committed by every officer of the company who fails to comply with Section 386 of the Companies Act. It is a defence for such persons to show that they acted honestly and that the default was excusable in the circumstances in which the company’s business was carried out. The maximum punishment for the offence is two years’ imprisonment (Section 387(3)(a) of the Companies Act).
4.4 Are companies obliged to report financial irregularities or actual or potential anti-corruption violations?
Any company that suspects financial irregularities or corruption should be looking to conduct an internal investigation. It should either carry this out itself or seek help from those with relevant experience of conducting such investigations. Only by carrying out an internal investigation can a company determine whether there has been wrongdoing and, if so, the likely cause and scale thereof.
There is no legal duty to report financial irregularities or corruption. However, an internal investigation can be of value in helping the company to decide whether there is a matter that needs reporting to the authorities and, if so, how and when to report it. The findings of such an investigation coupled with legal advice from those with expertise in this field can help a company to hold its nerve in its dealings with the authorities and seek the most appropriate outcome, as opposed to meekly accepting its punishment.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force in June 2017 and implemented the EU Fourth Directive on Money Laundering. UK companies covered by the regulations are obliged to report financial irregularities. While this does not directly relate to bribery, money laundering may be carried out as the result of bribery. The EU Fifth Directive on Money Laundering is set to be implemented in 2020.
Companies and directors have duties imposed on them to disclose corrupt activities to auditors, shareholders or regulators by particular legislation or regulations. Companies in the regulated sector and their officers may be required to disclose a violation or allegation of misconduct in accordance with their regulatory obligations.
4.5 Does failure to implement an adequate anti-corruption programme constitute a regulatory and/or criminal violation in your jurisdiction?
Under UK law, there is no offence of not having an adequate anti-corruption programme in place.
However, having such a programme in place can be of great importance if a company is investigated for a Bribery Act Section 7 offence of failure to prevent bribery, as the only defence to this charge is that the corporate had ‘adequate procedures’ in place to prevent bribery. The Section 7 offence is designed to criminalise failures that result in bribery and corruption.
5.1 Can companies that voluntarily report anti-corruption violations or cooperate with investigations benefit from leniency in your jurisdiction?
The Serious Fraud Office (SFO) is likely to look favourably on companies that self-report – but only if this is part of a genuine attempt to put right the wrongs when the company’s management have become aware of them. It is no guarantee that a prosecution will not be brought.
In the case of the Sweett Group, the company only reported its bribery just before a newspaper article about it was published. It then failed to report other illegal payments until the SFO had begun its investigation. The company was convicted and ordered to pay £2.25 million.
Deferred prosecution agreements (DPAs), introduced to the UK legal system under the Crime and Courts Act 2013, are an incentive for companies to self-report. A DPA is an agreement that is reached between the SFO or CPS and an organisation that could be prosecuted for a corporate crime offence. The agreement, made under the supervision of a judge, allows a prosecution to be suspended for a set period as long as the organisation meets certain specified conditions. If the company does not meet these conditions, the DPA can be ended and a prosecution can be brought.
The value of cooperation was highlighted when the SFO agreed a DPA with Rolls-Royce in 2017 in relation to systemic bribery in a number of countries. Rolls-Royce had not self-reported the wrongdoing, but in approving the DPA Sir Brian Leveson QC highlighted the “extraordinary cooperation” the company had offered investigators – and the cooperation secured Rolls-Royce a 50% discount on the penalty that was imposed.
But it should also be noted that if the bribery or corruption is considered so large or endemic that it is in the interests of justice to bring a prosecution, no amount of cooperation or self-reporting will prevent one from being brought.
5.2 Can the existence of an anti-corruption compliance programme constitute a defence to charges of anti-corruption violations?
Having an existing anti-corruption compliance programme is a defence if the company is charged under Section 7 of the Bribery Act 2010: failure to prevent bribery. The company will need to prove that it had adequate procedures designed to prevent persons associated with the corporate from acting corruptly. But Skansen(referred to in questions 1.5 and 3.4) indicates how high the bar is set when it comes to what constitutes adequate procedures.
5.3 What other defences are available to companies charged with anti-corruption violations?
For a company to be found guilty of the general offences under Sections 1, 2 and 6 of the Bribery Act 2010, the prosecution must show that the necessary mental element can be attributed to the “directing mind” of the company: it must prove that the offence has been committed with the consent or connivance of such a senior officer. The challenge the company faces is to disprove such allegations.
5.4 Can companies negotiate a pre-trial settlement through plea bargaining, settlement agreements or similar?
In criminal proceedings, plea bargaining and settlement agreements are not options open to any defendant, whether a company or an individual.
However, under the Code for Crown Prosecutors, defendants can agree to plead guilty to certain charges and prosecutors can accept this if they think that the court is “able to pass a sentence that matches the seriousness of the offending”. Companies do have the option to enter into a DPA if the SFO feels it is appropriate to offer one.
While there is no plea bargaining as such, taking a strategic approach and knowing when to challenge or cooperate with investigators can have a significant effect on the outcome of an investigation.
The Attorney General’s Guidelines on Plea Discussions in Cases of Serious or Complex Fraud allow a company and individuals to enter into pre-charge plea negotiations with a prosecutor on how matters should proceed.
5.5 What penalties can be imposed for violations of the anti-corruption legislation? Can non-exhaustive penalties be imposed for such violations (eg, exclusion from public procurement, exclusion from entitlement to public benefits or aid, disqualification from the practice of certain commercial activities, judicial winding up)?
An individual convicted in a magistrates’ court of an offence under Section 1, 2 or 6 of the Bribery Act can be imprisoned for up to 12 months, fined up to £5,000 or both. If convicted in a higher court for any of these offences, the maximum penalty is 10 years’ imprisonment, a fine or both.
A company guilty of an offence under Section 7 can be fined. The Sentencing Council Definitive Guidelines on Fraud, Bribery and Money Laundering indicate that the court should ensure that the fine is large enough to have a real economic impact on the company, “which will bring home to both management and shareholders the need to operate within the law”.
The Proceeds of Crime Act 2002 can be used by prosecuting bodies to recover criminal assets, while the Company Directors Disqualification Act 1986 allows the disqualification of directors for general misconduct.
Debarment from competing for public contracts can be imposed under the Public Contracts Regulations 2006. However, in a DPA reached between the SFO and Serco Geografix Ltd in 2019 (see question 6.3), the company and its parent company were not barred from such contracts, even though the DPA related to fraud and false accounting regarding public contracts.
DPA fines are calculated by reference to the value of the wrongdoing, the need to remove the benefit of the bribery/corruption and the worth of the company. While the possible impact on shareholders and employees can be considered, it is envisaged that in some cases it will be necessary to impose a fine to extinguish a company.
5.6 What is the statute of limitations to prosecute anti-corruption violations in your jurisdiction?
There is no statute of limitations. A company or an individual can be charged under the Bribery Act, the legislation that was in place before the act or both, depending on when the alleged offence or offences were committed. There is no time limit on when charges can be brought.
6 Trends and predictions
6.1 How would you describe the current anti-corruption enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
It remains to be seen whether deferred prosecution agreements (DPAs) are increasingly used as a means of concluding bribery investigations. The Serious Fraud Office (SFO) has made it known that it is looking for increased cooperation from corporates and wants to see investigations concluded quicker, which could lead to more DPAs.
It would be a surprise if we saw any major legislative changes. The House of Lords Select Committee on the Bribery Act 2010 reported in 2019 that the Bribery Act is recognised internationally as the most comprehensive and far-reaching piece of anti-bribery and corruption legislation.
The government may be persuaded by the committee’s call for it to offer more advice to small and medium-sized companies on compliance with the act. The committee’s claim that there is a lack of cooperation between the Crown Prosecution Service, the SFO, the National Crime Agency and other agencies may lead to this being addressed, which could result in quicker decisions regarding prosecutions.
As it stands, however, the United Kingdom has legislation in place that is unlikely to be subject to any significant reform in the near future. The only changes we may see are likely to be in the way the enforcement authorities use the legislation at their disposal.
Current anti-corruption enforcement does appear to be taking an increasingly US-style approach, with the use of DPAs and new SFO Director Lisa Osofsky (who is American) expressing her desire to implement the use of informants and covert human intelligence sources. In doing this, Osofsky is echoing the United States, where the use of wires and informants is routine.
The SFO is also making increasing use of artificial intelligence tools to examine electronic documents and forensic computer expertise.
Strict liability offences seem to be gaining popularity. Part 3 of the Criminal Finances Act 2017 created a strict liability offence whereby a company, partnership or other ‘legal person’ commits an offence if it fails to take reasonable steps to prevent an employee or associated person from facilitating tax evasion. Consideration is being given to expanding the strict liability to an offence of failure to prevent financial crime, which could include a wide range of offences. As yet, however, this is not set to become reality.
7 Tips and traps
7.1 What are your top tips for the smooth implementation of a robust anti-corruption compliance programme and what potential sticking points would you highlight?
Every company will face its own set of challenges when it comes to prevention of corruption.
However, the following measures will go a long way towards removing the potential for problems:
- Adopt explicit written policies regarding anti-corruption in an easily understandable format for all employees, and conduct training and education for the board, high-level persons, employees and, as appropriate, agents.
- Appoint a member of senior management to oversee anti-corruption compliance and ensure that the organisation has an effective compliance programme. Entrusting compliance to a low-level employee without access to either the board or resources to implement the programme will not achieve the right goals.
- Provide a confidential and/or anonymous method for employees to report suspected wrongdoing within a company. This could be a generic email address to the anti-corruption compliance manager or a hotline.
- Have a clear protocol for dealing with third parties.
- Conduct strict reviews of payments to companies.
- Carry out due diligence on business partners and contracts.
- Initiate rapid investigation of alleged breaches of policies.
- Review employment contracts to ensure that the organisation’s position is protected in the event of a breach by an employee.
- Carry out internal audits of all business locations at regular intervals. It is vital to the integrity of the company that it visits the locations of the individuals and the companies it is working with.
- Continually seek to improve the existing anti-corruption compliance programme – and seek relevant legal advice whenever necessary.
Sticking points can include:
- insufficient resources being devoted to compliance;
- poor or non-existent communication to employees;
- inadequate anti-corruption training; and
- a lack of management of third parties;
The case of Skansen (see questions 1.5 and 3.4) suggests that enforcement agencies – in this case, it was the Crown Prosecution Service – may be willing to make an example of a small or medium-sized company by prosecuting it under bribery legislation. This contrasts with Rolls-Royce, which offended for decades and yet was not prosecuted, as the SFO entered into a deferred prosecution agreement with it.
The Ministry of Justice has emphasised the importance of having bribery prevention procedures in place that are proportionate to the risk, show a commitment to analysing and tackling the risk, are regularly reviewed and are publicised to everyone involved with a company. Such advice may seem obvious, but it cannot be overemphasised.
Any compliance programme can be of value only if any suspicions are acted on. This means planning and conducting an internal investigation in order to determine what, if anything, has happened. If wrongdoing is discovered, it must be reported to the authorities in the right way, in order to secure the best possible outcome. It may be that internal investigations and self-reporting are matters best managed by those with the relevant experience of both the law and the way the enforcement agencies function. This is because there can be great benefit in knowing exactly when and how to hold your nerve in subsequent discussions with such agencies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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Article by Azizur Rahman (Rahman Ravelli Solicitors)