The head of the UK's Serious Fraud Office has proposed a change to the Bribery Act 2010 (the "Act"), seeking broader powers to get tough with corporations that fail to prevent their staff from committing financial crimes. If enacted, the measures could make it easier for the SFO to prosecute corporations under the Act. Considering the extraterritorial reach of the Act, the tabled change will have implications for corporations which, while not registered in the UK, conduct business in or through the jurisdiction.
The proposed change centres on Section 7 of the Act, which provides that it is an offence for a company to fail to prevent acts of bribery by its staff. The offence is one of strict liability, but corporations may avail themselves of the statutory defence of having in place "adequate procedures". As a result, for the SFO to successfully bring a prosecution under Section 7, it must be established that the "controlling mind" of the corporation – namely the board of directors of that corporation – knew of the bribery being perpetrated by its employees. In practice, it will often be the case that evidence is not available to demonstrate that members of a corporation's board were cognisant of bribery being committed by workers at lower-levels within the corporation.
The difficulty for the SFO in securing convictions on the basis of corporate liability is well known, and is in stark contrast to the comparative success rate (albeit, largely negotiated) enjoyed by the Department of Justice and the Securities Exchange Commission in the United States in enforcing the Foreign Corrupt Practices Act. The proposed change to Section 7 would expand the offence from one of failing to prevent bribery, to the wider offence of failing to prevent financial crime from being committed by its employees, thereby extending the reach of the Act to offences other than bribery.
It is understood that the SFO envisages that the increased scope of Section 7 would only be used in exceptional cases, such as where a corporation profited from the criminal conduct of its employees, but it is not clear what other circumstances would be considered 'exceptional'.
The potentially broader scope of Section 7 would likely have a deterrent effect. Corporations convicted under a wider Section 7 may be blacklisted from bidding for European public contracts, which could prove fatal to the financial viability of many corporations. Further, with the expansion of Section 7 to include financial crimes, there may well be significant consequences for banks that are caught up in the LIBOR-rigging investigations.
At present the proposals have not been presented to Parliament, which will finally decide if the suggested amendments should be given effect in law.
The proposals remain in the nascent stages, but the sentiment expressed by the amendments indicates a desire on the part of the SFO to ensure that corporations are held accountable for the wrongs committed by those institutions, and to adopt a more aggressive stance when investigating corporations implicated in bribery and corruption.
As many of the corporations that are subject to the Act would also be subject to the FCPA, it remains imperative for companies to have a proper understanding of bribery and corruption issues, and how they can take steps to prevent themselves being subject to an investigation under either the Act or the FCPA.