On October 9, 2012, the UK’s Serious Fraud Office (SFO) released a new policy for corporations on self-reporting in relation to enforcement of the UK Bribery Act 2010. Providing for criminal offences for both domestic and foreign bribery, the Bribery Act 2010 implements the Organization for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
The new policy comes in response to criticism from the OECD, which had described certain aspects of the old policy as “unsound” and “overly generous” in its Phase 3 Working Report on Implementing the OECD Anti-Bribery Convention in the United Kingdom.
The New Policy on Self-Reporting
The SFO’s new policy changes the handling of self-reported cases and aims to toughen enforcement, departing from the previous policy of settling self-reported offences civilly whenever possible. The SFO will now prosecute if there is a realistic prospect of conviction and if it is in the public interest to do so. Self-reporting does not guarantee that prosecution will not follow.
Through its Guidance on Corporate Prosecutions, the SFO also points to the following factors as relevant in determining whether to prosecute in instances of self-reporting:
- A genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice;
- The existence of a genuinely proactive and effective corporate compliance program; and
- A lack of a history of similar conduct involving prior criminal, civil and regulatory enforcement actions against the company.
Guidance on Facilitation Payments
Facilitation payments are small payments made to induce officials to perform routine functions they are otherwise obligated to perform. In contrast to similar legislation in the U.S. and Canada, facilitation payments are illegal under U.K. legislation.
The new guidance issued by the SFO indicates that prosecutions of facilitation payments will be governed by the Full Code Test. This test involves a determination of whether there is a reasonable prospect of conviction based on the evidence and, if so, whether it is in the public interest to proceed with a prosecution. The Joint Prosecution Guidance on the Bribery Act 2010 lists the factors that will guide the SFO when it considers whether it is in the public interest to prosecute instances of facilitation payments, including the following:
- Large or repeated payments are more likely to be prosecuted than single, small payments.
- Payments that indicate an active attempt to corrupt the official are more likely to be prosecuted than instances where the official made the demand for payment while the payer was in a vulnerable position.
- Prosecution is less likely where a commercial organization follows a clear and appropriate policy setting out procedures when facilitation payments are requested.
Guidance on Hospitality or Promotional Expenditures
The SFO recognizes that hospitality or promotional expenditures can be an important part of doing business. However, in certain circumstances the giving of gifts or hospitality expenses may be disguised attempts to offer a bribe. The SFO is more likely to infer that the hospitality expenditure was intended to influence an official or encourage improper performance when the expenditure is lavish beyond what may be reasonable in the particular circumstances. The more lavish the hospitality or expenditure, the greater the inference.
What Canadian Businesses Need to Know
Canadian businesses with subsidiaries or otherwise operating in the UK need to carefully consider their exposure to the Bribery Act. Upon becoming aware of any potential bribery offence relating to its foreign activities, Canadian businesses need to consult with experienced professionals in order to develop a comprehensive strategy and manage their legal risks.
Beyond direct exposure to UK enforcement, the SFO’s new policy on self-reporting is important as an indication of international enforcement trends. Governments such as Canada are sensitive to OECD criticism, and issues of self-reporting are particularly important given the dominant role settlement negotiations play in the current enforcement regime.