Yesterday the Serious Fraud Office ("SFO") replaced all its guidance in relation to hospitality, facilitation payments and self-reporting. Whilst some of the guidance is a re-statement of its previous position, the guidance in relation to self-reporting is now much more severe: where an organisation is involved in bribery and corruption criminal acts are being committed and, in those circumstances, the SFO will act as investigator and prosecutor.

The previous guidance provided some measure of comfort indicating certain circumstances in which it was unlikely that the SFO would pursue a prosecution. The SFO has stated that all new guidance "supersedes any statement of policy or practice" previously issued "by or on behalf of the SFO".

The guidance reiterates that facilitation payments are "illegal under the Bribery Act, regardless of their size or frequency" and that, in respect of business expenditure, bona fide hospitality is an established part of doing business but that it can be the case "that bribes are sometimes disguised as legitimate business expenditure." Both facilitation payments and excessive or inappropriate business expenditure are bribery and will be treated as such by the SFO.

The most significant change in the SFO guidance is the end of what may have been viewed as a softer approach to self-reporting and the SFO's prior practice of making settlement agreements unilaterally with organisations who have clearly been involved in corrupt practices.

The tenure of the previous head of the SFO was marked with criticism from the judiciary, international organisations and legal commentators in respect of pre-arranged settlements that meant corrupt organisations did not face the full scrutiny of the criminal justice system. In the 2010 case of Innospec the settlement and prior arrangements Innospec made with the SFO came in for damning criticism.

Key points raised in the Innospec matter related to a plea agreement which had been agreed between the SFO and its US counterpart. The presiding judge, Lord Justice Thomas stated that it is for the Court to assess whether any plea agreement is fair and in the interests of justice, and then proceed to sentencing where it deems it necessary. He was very clear that "[t]he SFO cannot enter into an agreement... with an offender as to the penalty in respect of the offence charged".

As we reported in an earlier e-update this year, the SFO was also publically censured by the Organisation for Economic Cooperation and Development (“OECD”). The OECD said that the SFO's increased use of civil recovery orders, the low level of information in regard to settlements and the use of confidentiality agreements with offenders by the SFO has meant that enforcement in the UK cannot currently be seen to be "effective, proportionate and dissuasive".

It is clear that the SFO is now addressing criticism from both the judiciary and the OECD. In the SFO's introduction to the updated guidance the SFO said its aims were threefold: to "restate the SFO's primary role as an investigator and prosecutor of serious or complex fraud, including corruption"; to "ensure there is consistency with other prosecuting bodies"; and "meet certain OECD recommendations."

Gone is the previous comfort that self-reported incidents of bribery and corruption would be met with leniency. The previous SFO guidance said that “we want to settle self-referral cases" and "civilly where-ever possible”, now however the SFO has advised that while it encourages self-reporting it "offers no guarantee that a prosecution will not follow any such report”.

The landscape is much starker for companies who are contemplating self-reporting. Any steps in this regard should be taken with appropriate legal advice.