On October 9, the UK’s Serious Fraud Office (SFO) issued a press release reviewing its approach to the enforcement of UK Bribery Act 2010 (the Bribery Act). The SFO announced that it was revoking official guidance it had issued, and past public statements made on the agency’s behalf by its officials, regarding facilitation payments, business expenditures (hospitality), and the treatment of companies that self-report foreign bribery issues to the SFO. In their place, the SFO announced new policies intended to focus on its Bribery Act enforcement efforts on criminal prosecution of major cases of grand corruption and away from the agency’s recent attempts to construct a US-style foreign bribery enforcement regime relying on corporate self-reporting and negotiated settlements.
These developments may prove important on a number of fronts. The move away from a US-style enforcement regime reverses one of the signature initiatives of former SFO Director Richard Alderman during his tenure. Paradoxically, this shift may signal SFO’s intent to be both more and less aggressive in enforcing the Bribery Act: on the one hand, the new guidance appears to reduce the availability for “credit” or leniency in disposition of matters brought before the SFO through self-reporting; on the other, the revocation of the former guidance appears consistent with the Director Green’s intent to focus the SFO’s limited resources on prosecution of “grand corruption” and away from smaller or less complex matters which other UK law enforcement agencies may more appropriately handle.
The timing of the announcements is also interesting, particularly from a US perspective. The policy revisions were released the day before meetings of the OECD Working Group on Bribery (WGB) in Paris at a time when the US stakeholder community had been led to expect that US authorities would issue long-awaited FCPA enforcement guidelines. Not only does the revised UK guidance highlight the absence to date of any US guidance, but the directional shift of the UK enforcement policy raises multiple questions about what the US guidance may bring. Many had speculated that the now-revoked UK guidance had been a factor in prompting the US to issue its own guidance. Whether the repudiation of the prior approach in the UK may foreshadow a similar backtracking in guidelines in the US remains to be seen.
From a UK perspective, whether these developments result in more or less vigorous Bribery Act enforcement also remains uncertain. There has been widespread comment on the future of the SFO and what its limited resources and recent reversals augur. Nevertheless, the possibility of less leniency for Bribery Act violators—even if they self-report—continues to underscore the need for companies subject to the UK Bribery Act to adopt compliance programs and procedures sufficient to satisfy the Bribery Act’s “adequate procedures” defence if they are forced to defend themselves before a more focused SFO in the future.
The SFO’s Prior Policy Statements
The SFO’s original guidance on overseas corruption investigations was issued on July 21, 2009, before the passage and entry into force of the Bribery Act. The nine-page document signalled an intent to increase foreign bribery enforcement by providing companies with incentives to self-report evidence of overseas corruption violations, primarily through the increased prospect of reaching a civil, as opposed to criminal resolution of the matter. The SFO also indicated an intention to expand coordination with other countries’ enforcement agencies and to encourage UK-based companies to adopt international best-practice compliance standards.
Former SFO Director Alderman also made widely-publicized comments, before and after the Bribery Act went into force on July 1, 2011, regarding the SFO’s approach to facilitating payments. He stated that the SFO’s approach would be “nuanced” and that companies making such payments would not be prosecuted provided they met the following six factors:
- Whether the company has a clear issued policy regarding such payments
- Whether written guidance is available to relevant employees as to the procedure they should follow when asked to make such payments
- Whether such procedures are being followed by employees
- If there is evidence that all such payments are being recorded by the company
- If there is evidence that proper action (collective or otherwise) is being taken to inform the appropriate authorities in the countries concerned that such payments are being demanded
- Whether the company is taking what practical steps it can to curtail the making of such payments”
The former SFO Director advanced these policies to create incentives for UK-based companies to adopt best-practice compliance standards and to bring matters to the SFO’s attention for appropriate disposition. These incentives resembled the enforcement model employed the US DOJ and SEC in their enforcement of the FCPA. The SFO’s position on facilitating payments appeared to take a “realistic” or pragmatic approach to the problem of their elimination, while at the same time avoiding the potential conflict-of-laws issues that companies subject to the FCPA (or analogous Canadian or Australian legislation) faced with the entry into force of the Bribery Act, which prohibits facilitating payments outright.
The New Approach
The SFO removed its July 21, 2009 guidance from its website on October 3, 2012 and issued its most recent press release on October 9, 2012. The press release contained a short statement of the SFO’s purpose in revising its policies regarding facilitating payments, business expenditures and corporate self-reporting: 1) to “restate the SFO’s role as an investigator and prosecutor of serious or complex fraud, including corruption,” 2) to “ensure consistency with other prosecuting bodies,” and 3) to “meet certain OECD recommendations.”
The press release then linked to three short policy statements. With respect to facilitating payments the new guidance confirmed that such payments are illegal under UK law and indicated that the SFO would no longer follow the six-factor test announced by Mr. Alderman in 2011. The new guidance reinforced Mr. Green’s statements that bona fide hospitality is a legitimate part of doing business and lawful while business entertainment that is provided with the intent to bribe is not—somewhat less than illuminating guidance. Finally, the new policy statement indicated that no special consideration or “credit” will be provided for corporate self-reporting, other than as specified in the pre-existing guidance and standards governing the SFO’s (and other UK law enforcement agencies’) decisions to prosecute criminal conduct: the Full Code Test in the Crown Prosecution Service’s Code for Crown Prosecutors, the Joint Prosecution Guidance on Corporate Prosecutions, and where relevant, the Joint Prosecution Guidance of the SFO and the Director of Public Prosecutions on the Bribery Act of 2010. The UK Ministry of Justice’s Bribery Act Guidance, released three months before the Act came into force, is unaffected by the SFO’s recent policy revisions.
These new policy positions appear to change the SFO’s approach to Bribery Act enforcement in fundamental ways. First, they signal a reallocation of resources away from prior attempts by the agency to create a US-style enforcement regime dependent on self-reporting and negotiated resolutions to foreign bribery cases. This reallocation is likely driven by: 1) a significant reduction in funding available to the agency; 2) the English judiciary’s rejection of the SFO’s attempt to resolve foreign bribery cases through negotiated resolutions, as set out in Lord Justice Thomas’ sentencing remarks in the SFO’s prosecution of Innospec Ltd., and 3) the rumoured abandonment of the Ministry of Justice’s efforts to introduce, in statute, Deferred Prosecution Agreements to avoid the rejection of negotiated settlements encountered in the Innospec case.
Second, they may signal a more focused—and potentially more aggressive—approach to Bribery Act enforcement (although the agency’s limited resources may inhibit this approach). The revocation of the prior guidance is consistent with Mr. Green’s public statements that he will not seek to prosecute smaller, less complex cases such as those involving corporate hospitality (he has gone so far as to state that such cases should not be investigated by the SFO, declaring that “[the SFO] is not the Serious Champagne Office”). Evidently, the agency intends to focus its limited resources on larger, more complex, cases, including those under the Bribery Act, and will prosecute aggressively—likely with less scope for penalty mitigation for self-reporting and/or cooperating companies—when it does bring them.
Implications Going Forward
The implications of these policy revisions for companies subject to the Bribery Act are unclear. The prospect of fewer cases being investigated by the SFO suggests that the risks of prosecution of offending companies may be lower under the current SFO Director than under his predecessor. Conversely, more aggressive prosecution of major cases by the SFO, with less scope for penalty mitigation through corporate cooperation and remediation, suggests that companies subject to the Bribery Act have added incentives to bolster their compliance programs and procedures, as the Bribery Act’s “adequate procedures” defence will be even more important to a company under investigation for foreign bribery than it may have been under the old regime.