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Trends and climate

Trends

Have there been any recent changes in the enforcement of anti-corruption regulations?

In May 2016 David Cameron hosted an anti-corruption summit in London with representatives from over 40 countries as well as major international organisations. The summit signalled the government’s intention to get tougher on tackling corruption in the United Kingdom and overseas. Since then, the government has introduced new measures in the Criminal Finances Bill 2016, with proposals for future changes to obtaining the proceeds of crime. It is clear that the government’s focus – now that the United Kingdom has implemented a modern, fit for purpose set of bribery laws – is to set its sights on depriving the corrupt from obtaining the benefit of their crimes.

Perhaps the most significant recent trend is the application of deferred prosecution agreements (DPAs) to resolve corporate corruption cases as an alternative to prosecution. While DPAs were introduced by the Crime and Courts Act 2013, they were not used until November 2015, when the Serious Fraud Office (SFO) entered into its first DPA with ICBC Standard Bank Plc for failure to prevent bribery under Section 7 of the Bribery Act. The SFO has clarified that it wants early, meaningful engagement and cooperation from companies if they are to qualify for a DPA.

On July 8 2016 the second DPA was approved for failure to prevent bribery in the case of XYZ. Again, the focus was on early cooperation from the company. A one-third discount is usually applied to sentences where admissions are made at the earliest opportunity. However, in this case, Sir Brian Leveson applied a 50% reduction to the penalty on the basis that the company had self-reported “far in advance of the first reasonable opportunity”. Immediately after identifying the concerns, the company instructed lawyers who promptly approached the SFO. The large reduction was also intended to act as a signal to other companies and encourage early self-reporting.

Legislative activity

Are there plans for any changes to the law in this area?

In October 2016 the Criminal Finances Bill 2016 set out plans for a number of new changes designed to tackle corruption.

The bill proposes to introduce unexplained wealth orders, which would require a person who is suspected of involvement in, or association with, serious criminality to explain the origin of any assets that appear to be disproportionate to his or her known income. Focusing on corruption, the bill makes it easy for politically exposed persons, their immediate family or known close associates to be targeted under a statutory presumption that they were involved in serious criminality.   

The United Kingdom is expected to emulate the US Department of Justice’s pilot programme aimed at encouraging more companies to self-disclose corruption offences under the US Foreign and Corrupt Practices Act 1977. Discounts of up to 50% for early reporting and cooperation have been offered under the pilot and it is likely that in the future UK cases will attract a discount greater than the 30% allowed under the sentencing guidelines. That said, case law in England and Wales has already seen concessions of this much, as in XYZ.

Legal framework

Authorities

Which authorities are responsible for investigating bribery and corruption in your jurisdiction?

The Serious Fraud Office (SFO) is the specialist prosecuting authority tasked with investigating and prosecuting serious or complex fraud, bribery and corruption and cases involving foreign corruption.

Cases which are not prosecuted by the SFO are prosecuted by the Crown Prosecution Service (CPS). The CPS and the SFO have produced a joint statement of policy on their approach to prosecutions under the Bribery Act 2010 and joint guidelines for prosecuting corporates.

The National Crime Agency (NCA) was set up in 2013 to lead the operational response to serious and organised crime, including economic crime. The NCA has oversight for the law enforcement response to bribery and corruption and works with law enforcement and other prosecuting authorities such as the SFO, the CPS and the Financial Conduct Authority (FCA). In 2015 the NCA established the International Corruption Unit to investigate grand corruption and money laundering where developing countries are involved.   

The FCA regulates the financial services industry in the United Kingdom. It has levied fines in the past for breach of its principles where bribery and corruption has taken place or where a company’s systems and controls have been inadequate to deal with the threat of corruption.

Domestic law

What are the key legislative and regulatory provisions relating to bribery and corruption in your jurisdiction?

The key corruption and bribery offences are set out in the Bribery Act 2010, which is now widely acknowledged as being among the most stringent anti-corruption legislation in the world. The 2010 act was introduced to improve UK law on bribery and bring the United Kingdom into line with the requirements of the 1997 Organisation for Economic Cooperation and Development (OECD) Anti-bribery Convention.

The 2010 act is not retrospective and the pre-2011 common law and legislation still applies to offences which took place before July 1 2011.

Before the 2010 act, there was a combination of common law and statutory offences dealing with corruption and bribery. At common law, the offence of bribery is limited to the public sector and the individual receiving the bribe must hold a public office. There is also a common law offence of misconduct in public office where a public officer wilfully neglects to perform his or her duty or wilfully misconducts himself or herself in such a way that amounts to an abuse of the public’s trust in the office holder, without reasonable excuse or justification.

The statutory offences are set out in the Public Bodies Corrupt Practices Act 1889 (bribery of a member, officer or servant of a public body) and the Prevention of Corruption Act 1906 (corrupt transactions with agents in public or private sector) and deal with giving and receiving bribes.

The Prevention of Corruption Act 1916 introduced a presumption that any gift given to a public official by any person or agent will be presumed corrupt unless proven otherwise on the balance of probabilities. This offence applies only where there are gifts made by or on behalf of a person who holds or seeks to obtain a contract with the crown or public body that has fallen into disuse.

The Anti-terrorism, Crime and Security Act 2001, which came into force on February 14 2002, extended jurisdiction of the UK courts to crimes committed abroad by UK nationals and UK companies, including acts of bribery committed abroad. On January 15 2016 the Court of Appeal confirmed that bribery of a foreign public official was an offence under the Prevention of Corruption Act 1906 and therefore illegal before the 2001 act came into force.

International conventions

What international anti-corruption conventions apply in your jurisdiction?

The following conventions have been signed and ratified by the United Kingdom unless otherwise stated:

  • the United Nations Convention against Corruption;
  • the United Nations Convention against Transnational Organised Crime;
  • the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions;
  • the Council of Europe Criminal Law Convention on Corruption (ETS 173);
  • the Additional Protocol to the Criminal Law Convention on Corruption (ETS 191);
  • the Council of Europe Civil Law Convention on Corruption (ETS 174) (signed 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; and
  • the Convention on the Protection of the European Communities Financial Interests and Protocols.

The United Kingdom also signed the Agreement for the Establishment of the International Anti-corruption Academy as an international organisation, but the agreement has not yet been ratified.

Specific offences and restrictions

Offences

What are the key corruption and bribery offences in your jurisdiction?

The key offences set out in the Bribery Act 2010 are:

  • Section 1 – offering a bribe (active bribery);
  • Section 2 – receiving a bribe (passive bribery);
  • Section 6 – bribery of a foreign public official; and
  • Section 7 – failure of a commercial organisation to prevent bribery.

The failure to prevent bribery has proved to be the most controversial, as it is a strict liability offence which places a burden of proof on companies to demonstrate that they have put adequate procedures in place to prevent bribery. The company will be guilty regardless of whether they had knowledge of the corrupt activity. In simple terms, this offence means that where an employee is involved in bribery, the company will be held criminally responsible unless it can show that it took reasonable steps to ensure adequate procedures were in place to prevent bribery from occurring.

For offences committed before July 1 2011, the key offences are:

  • the common law offences of public sector bribery of a person in public office and misconduct in public office;
  • active or passive bribery of a member, officer or servant of a public body (Section 1 of the Public Bodies Corrupt Practices Act 1889); and
  • corrupt transactions (bribery) with agents in public or private sector (Section 1(1) of the Prevention of Corruption Act 1906).

Hospitality restrictions

Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details?

In the United States, the Foreign Corrupt Practices Act 1977 clearly provides a defence for “reasonable and bona fide” expenses. In the United Kingdom, the Bribery Act 2010 failed to set out the position on corporate hospitality, gifts and expenses. As a result, companies have been left uncertain as to the extent to which these matters could cause them to fall foul of the act.

The provision of hospitality or other expenditures to another could fall under the offences set out in Sections 1, 6 or 7 of the 2010 act. For instance, under Section 1 (offering a bribe), a gift may be seen as a bribe if it is deemed to be an “advantage” offered or received in return for “improper performance”. Case law has not clarified the definition of an ‘advantage’ or ‘improper performance’.

Under Section 6 (bribery of a foreign official), the prosecution would need to show that the gift or hospitality was intended to influence the foreign public official in order to obtain/retain business or an advantage in the conduct of business. The joint Serious Fraud Office (SFO) and Crown Prosecution Service (CPS) guidance recognises that hospitality which is “reasonable, proportionate and made in good faith is an established and important part of doing business”. In October 2012 the SFO indicated that its focus was on bribes disguised as legitimate business expenditure rather than “bona fide hospitality”. The SFO noted that in certain cases involving business expenditure it may use its powers of civil recovery under the Proceeds of Crime Act 2002 as an alternative or in addition to prosecution where it would be in the public interest to do so. 

Companies should ensure that their hospitality and gifts policy reflects this approach and has oversight to prevent gifts or hospitality which could be regarded as unreasonably lavish. In March 2011 then Justice Secretary Ken Clarke explained: “Rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix”. There is no detailed guidance as to what gifts or hospitality will be considered a bribe – this is a question of fact and degree, and the full circumstances of the case must be considered.

Facilitation payments

What are the rules relating to facilitation payments?

Consistent with its strict approach (and unlike its US counterpart), facilitation payments are illegal under the 2010 act. This reflects the position before the 2010 act. The joint guidance from the director of public prosecution and the SFO on facilitation payments describes facilitation payments as “unofficial payments made to public officials in order to secure or expedite the performance of a routine or necessary action”. In a 2013 interview Director of the SFO David Green said that the SFO was not interested in a single payment of £20 and bottle of whisky made to a pilot to take a ship to a specific destination. However, a course of conduct over a number of years will not be viewed as a small, insignificant bribe, but rather a regular payment over time to ensure business.

Liability

Scope of liability

Can both individuals and companies be held liable under anti-corruption rules in your jurisdiction?

Both individuals and companies can be held liable for bribery at common law and under the relevant bribery legislation, including under Sections 1, 2 and 6 of the Bribery Act 2010; however, the strict liability offence under Section 7 for failing to prevent bribery applies only to companies.

Under Section 14, a senior officer can be held liable for offences committed under Sections 1, 2 or 6 of the 2010 act if the bribery offence has been committed by the company with the senior officer’s consent or connivance and the officer has a “close connection to the UK” within the meaning of Section 12(4) of the 2010 act.

The pre-July 1 2011 offences at common law and in statute apply to companies and individuals.

Can agents or facilitating parties be held liable for bribery offences and if so, under what circumstances?

Both agents and facilitating parties can be held liable for offences committed under Sections 1 and 6 of the 2010 act if the necessary elements of the offence are met.

Companies should note that they can be held liable for bribery committed by an associated person, which could include an agent, under Section 7 of the 2010 act.

For offences committed before July 1 2011, the position is less straightforward in practice. The Prevention of Corruption Act 1906 was specifically introduced to ensure that cases of private or public sector bribery involving agents would be an offence. ‘Agent’ is defined as “any person employed by or acting for another”. In the Organisation for Economic Cooperation and Development’s Phase 1 report, which relates to the implementation of the Anti-bribery Convention, UK authorities confirmed that the common law offence extends to intermediaries (eg, agents). However, in its final report, the Law Commission referred to a response from the Serious Fraud Office which reported the difficulties it has investigating and prosecuting bribery involving intermediaries under the pre-Bribery Act 2010 legislation. 

Foreign companies

Can foreign companies be prosecuted for corruption in your jurisdiction?

Foreign companies may be prosecuted for bribery offences in the United Kingdom if any act or omission forming part of the offence takes place inside the United Kingdom.

For offences taking place outside of the country, Section 7 of the Bribery Act 2010 has extra-territorial reach. Bribery committed abroad by an employee or associated person of a foreign company which “carries on business or any part of a business” in the United Kingdom could result in a criminal conviction for that company in the United Kingdom. The 2010 act does not define ‘any part of a business’; thus, businesses should exercise due caution should they have any professional connection to or demonstrable presence in the United Kingdom.

Whistleblowing and self-reporting

Whistleblowing

Are whistleblowers protected in your jurisdiction?

The Public Interest Disclosure Act 1998 protects whistleblowers from detrimental treatment by their employer. A disclosure which, in the employee’s reasonable belief, shows that a crime has been committed, is being committed or is likely to be committed will be treated as a “qualifying disclosure” for the purposes of the act.

The act operates to ensure that workers have the right not to be subjected to detriment as a result of having made a qualifying disclosure. Where employees suffer detriment, they can bring a case before an employment tribunal which has the power to award unlimited compensation.

The act does not oblige employers to have a policy either on the reporting of impropriety concerns or a procedure for making disclosures. However, it would be sensible for companies to do so. For financial services firms, Financial Conduct Authority (FCA) guidance encourages them to set appropriate internal procedures for handling employee concerns and sets out guidelines for firms to consider when implementing an internal whistleblowing policy. Whistleblowers can also contact the FCA or the Serious Fraud Office (SFO) directly.

Self-reporting

Is it common for leniency to be shown to organisations that self-report and/or cooperate with authorities? If so, what process must be followed?

As discussed above, there is significant advantage for a company that identifies potential bribery or corruption within its organisation to instruct lawyers and, if appropriate, self-report as soon as possible.

The SFO must demonstrate to the court that a deferred prosecution agreement (DPA) will be in the interests of justice; thus, early cooperation is key if a company wants to enter into a DPA and avoid the reputational damage that comes with a prosecution and conviction. The court must be satisfied that there is sufficient evidence for a realistic prospect of conviction and that the public interest would be best served by a DPA instead of prosecution. Some of the factors that will be taken into account include:

  • the value of any gain or loss;
  • the risk of harm to the public or unidentified victims;
  • the impact on financial markets and international trade; and
  • the impact of the offence in other countries.

ICBC Standard Bank and XYZ are the only cases to date resulting in a DPA. The SFO has been clear that cooperation will include access to witnesses in internal investigations and their original accounts. What is evident from these two judgments is that early cooperation with the SFO is essential for an agreement to be reached and will result in a significant reduction in the fine to be paid. 

Dispute resolution and risk management

Pre-court settlements

Is it possible for anti-corruption cases to be settled before trial by means of plea bargaining or settlement agreements?

In appropriate cases, civil recovery may be considered by the authorities as an alternative to criminal prosecution. Prosecutors may consider civil recovery when it is unfeasible to secure a conviction or in cases where a prosecution is feasible but use of the non-conviction based powers might better serve the overall public interest. It is also possible for prosecutors to stay proceedings and adopt terms agreed by the parties in the form of a consent order, although this is less common.

However, these powers should be considered in light of the judgment in Innospec, which held that civil procedures in the cases of serious crime (eg, corruption of senior foreign officials) would be inappropriate.

Deferred prosecution agreements (DPAs) were introduced by the Crime and Courts Act 2013 as an option for companies that are willing to self-report. They were designed to provide a mechanism to allow companies to avoid prosecution for certain financial offences by entering into an agreement with the Serious Fraud Office. DPAs are not available to individuals.

Defences

Are any types of payment procedure exempt from liability under the corruption regulations in your jurisdiction?

No – the Bribery Act 2010 does not distinguish between different types of payment procedure.

What other defences are available and who can qualify?

The Ministry of Justice guidance notes that the defence of duress is likely to be available for the offences set out in Sections 1, 3 and 6, where an individual had no alternative except to make a payment in order to protect against loss of life, limb or liberty.

In practice, prosecuting corporate bodies for bribery is difficult, as the company will be held liable only if it can be proved that the individual involved in the bribery is sufficiently senior to be deemed “the controlling mind and will” of the company. It is for this reason that the Section 7 offence was brought into force. However, where a company has been charged with the Section 7 offence of failing to prevent bribery, as its defence, the company can show that it had adequate procedures in place, designed to prevent persons associated with it from undertaking such conduct.

Where a company seeks to rely on this defence, the onus remains on the company to demonstrate that its procedures were adequate. It is ultimately for the courts to decide by reference to the particular facts and circumstances of each case whether a company’s procedures are adequate.

Section 5 makes clear that, where the offence is one of bribery in exchange for improper performance by another person outside of the United Kingdom, local custom or practice in the foreign jurisdiction will be no defence unless it is permitted or required by the written law of the relevant country. Section 13 provides certain defences for persons charged with bribery offences to show that the conduct was necessary in their role within the intelligence service or armed forces while engaged in active service.

There are also a number of individuals and categories of person who are afforded immunity from prosecution under common law, the Diplomatic Privileges Act 1964 and State Immunity Act 1978 (eg, heads of state and diplomatic agents). 

Risk management

What compliance procedures and policies can a company put in place to assist in the creation of safe harbours?

Given the scope of the Bribery Act 2010, no specific set of procedures or policies create a safe harbour for companies. However, there are some key considerations in terms of risk management. The Ministry of Justice has set out six principles for organisations seeking to prevent bribery:

  • Proportionate procedures – procedures should be proportionate to the bribery risks and the nature, scale and complexity of the company’s activities. They should also be clear, practical, accessible and effectively implemented and enforced.
  • Top-level commitment – top-level management should be committed to preventing bribery by persons associated with it and should foster a culture within the organisation in which bribery is never acceptable.
  • Risk assessment – companies should carry out periodic and documented risk assessments on their exposure to external and internal risks of bribery by associated persons.
  • Due diligence – due diligence procedures should be applied in respect of persons who perform or will perform services on the company’s behalf.
  • Communication – procedures and policies should be made clear to all employees through internal and external communication, including training.
  • Monitoring and review – procedures should be monitored and reviewed so that improvements can be made where needed.

Record keeping and reporting

Record keeping and accounting

What legislation governs the requirements for record keeping and accounting in your jurisdiction?

The Companies Act 2006 sets out the financial reporting and accounting rules applicable to private and limited companies in the United Kingdom.

In addition to accounting and record-keeping requirements, a company may be subject to further record-keeping requirements depending on the nature of its business. For example, as a result of the EU Markets in Financial Instruments Directive, all investment firms in the European Union must now keep records of all services and transactions in order to monitor compliance with the directive. The Money Laundering Regulations 2007 set out the obligations on certain businesses (including most financial and credit businesses) to establish appropriate policies and procedures in respect of money laundering and terrorist financing.

What are the requirements for record keeping?

Under Section 386 of the Companies Act 2006, every company in the United Kingdom must keep adequate accounting records that:

  • show and explain its transactions;
  • disclose, with reasonable accuracy and at any time, its financial position; and
  • enable its directors to ensure that accounts comply with the requirements set out in the Companies Act 2006 and, where applicable, Article 4 of the International Accounting Standards Regulation.

Failure to keep adequate accounting records as required by Section 386 is an offence under Section 387.

Under Section 17 of the Theft Act 1968, a person may commit fraud by false accounting if they dishonestly destroy, conceal or falsify accounting records or produce misleading, false or deceptive accounting records.

Under the Money Laundering Regulations 2007, companies must implement appropriate risk-sensitive policies and procedures. This includes due diligence, record-keeping and systems for internal money laundering reports. The government has published guidance for businesses on the Money Laundering Regulations 2007.

The Bribery Act 2010 does not require record-keeping in respect of gifts and hospitality; however, gift registers, while not compulsory, are sensible for companies that want to demonstrate that they have a policy in force and are monitoring this as a potential risk area.

Reporting

What are the requirements for companies regarding disclosure of potential violations of anti-corruption regulations?

There is neither a general legal duty to disclose or report known or suspected corrupt activity to law enforcement bodies in England and Wales nor an obligation under the Bribery Act 2010. However, companies in the regulated sector have a duty to report any potential violations. Additionally, there are duties of due diligence and disclosure in respect of money laundering and general duties of disclosure imposed on companies and directors which might require them to disclose corrupt activities to regulators, shareholders or auditors.

Under Part 7 of the Proceeds of Crime Act 2002 and the Terrorism Act 2000, persons in the regulated sector must submit a suspicious activity report if they become aware or suspect that a person is engaged in or attempting money laundering or terrorist financing. If a suspicious activity report indicates that there is culpability on behalf of the company, it may be necessary or wise for the company to consider making a self-report to the authorities. 

Companies may also be subject to disclosure obligations under the rules of an exchange on which their shares have been listed for trading. 

Penalties

Individuals

What penalties are available to the courts for violations of corruption laws by individuals?

For both individuals and organisations, the penalties for corruption offences under the Bribery Act 2010 and under earlier law will depend on the seriousness of the offence. There are no mandatory minimum sentences for bribery offences.

The 2010 act provides for maximum penalties for individuals of imprisonment not exceeding 10 years and/or an unlimited fine.

At common law, bribery is an indictable offence and there is no statutory maximum term of imprisonment. Under the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption Act 1906, the maximum penalties for individuals are seven years’ imprisonment and/or an unlimited fine. 

Companies or organisations

What penalties are available to the courts for violations of corruption laws by companies or organisations?

Under the 2010 act, the maximum penalty for companies is an unlimited fine. At common law, bribery is an indictable offence and there is no statutory maximum term of imprisonment. Under the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption Act 1906, the maximum penalty for a company is an unlimited fine.

Law stated date

Correct as of

Please state the date as of which the law stated here is accurate.

The law stated here is accurate as of November 7 2016.