Mention the UK Bribery Act to many compliance professionals in Asia and you may be forgiven for wondering what all the fuss has been about. Until recently, in the absence of any significant prosecutions, not to mention the multimillion-dollar settlements generated by the US authorities, “its bark is far worse than its bite” seems to have been the widely held view.
But two recent events this year seem to have introduced some teeth into the UK’s international anti-corruption efforts. They are likely to be of concern to all companies in Asia who do business in the UK.
The problems with policing global corruption and the UK’s solution
One look at any map charting the spread of corruption around the world and it quickly becomes apparent that corruption is widespread.
The dilemma facing many countries who wish to stamp out corruption is how to police it. Even if the resources existed to fund a global anti-corruption police force, absence of political will and effective legal systems in many countries would likely make the job impossible.
However, the UK government appears to have found a solution. Rather than rely on governments to police corruption, its approach is to shift the responsibility onto companies. In other words, making companies serve as global anti-corruption policemen.
The crime of failing to prevent bribery
The UK has sought to achieve this by introducing a corporate criminal offence into the Bribery Act, namely Section 7: “Failure of commercial organisations to prevent bribery.”
This applies to any commercial organisation (including non-UK companies) who carry on a business or part of a business in the United Kingdom. If you do business in the UK, then you should be aware of this. If not, here is a quick summary.
If you carry on a business in the UK and an associated person (meaning anyone providing a service to your company) pays a bribe for your benefit, anywhere in the world, whether you know about it or not, then you may be guilty of a criminal offence.
If that sounds draconian, you would be right because it is meant to be so. The clever bit is that it is a defence to any charge under Section 7 if, at the time the bribery took place, you can prove you had adequate anti-bribery procedures in place in your organisation.
In other words, unless companies put in place “adequate procedures” to prevent bribery, then they will be at risk of prosecution by the UK authorities. Those that have “adequate procedures” will be protected.
Event No. 1: R v Sweett Group Plc
In February this year, the Sweett Group (a multi-national construction and engineering company) became the first company to be sentenced under Section 7 of the Bribery Act because it failed to prevent bribery conducted by an associated person in relation to a hotel project in the United Arab Emirates.
At the time the bribery took place, Sweett Group did not have adequate procedures in place to prevent bribery and consequently was ordered to pay GBP 2.25 million (about USD 3.2 million).
This may be the first of many convictions under Section 7, particularly in the light of UK government policy to stamp out corruption following the 2016 London Anti-Corruption Summit.
Event No. 2: The announcement of a new crime of “failing to prevent economic crime”
On 11 May 2016, in a letter to The Guardian, Prime Minister David Cameron announced what could be one of the biggest developments in UK corporate criminal liability that we have seen this century.
The Prime Minister announced three measures to tackle corruption: (i) establishing a register of beneficial owners of property in the UK, (ii) a new Anti-Corruption Coordination Centre and (iii) the creation of a new offence of failure to prevent other economic crimes.
This last measure is potentially very significant. What appears to be proposed is, in effect, requiring companies to implement adequate procedures to prevent, not only bribery, but also fraud, money laundering, tax evasion and other economic crimes. In other words, the model of forcing companies to self-police bribery may be extended to other corporate wrongdoing.
To Whom Will This Apply?
If you carry on a business in the UK (which may be directly or via a subsidiary or group company), then the UK Bribery Act already applies.
If the UK authorities apply the Bribery Act model to other economic crimes, then in the near future, companies that carry on a business in the UK will likely need to look at their compliance procedures prudently. Are my internal procedures adequate to prevent not only bribery, but also money laundering, fraud and tax evasion? If not, then there could be a problem.