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Trends and climate
Have there been any recent changes in the enforcement of anti-corruption regulations?
The strict liability offence of failing to prevent bribery under Section 7 of the Bribery Act 2010 is perceived to be easier to prosecute as it does not require the prosecutor to establish intent on the part of a company’s directing mind. The Serious Fraud Office (SFO) has confirmed that there are around 60 ongoing investigations, and additional resolutions are expected with corporates or prosecution under Section 7 of the Bribery Act.
In 2015 Sweett Group became the first company to plead guilty to violating Section 7 of the Bribery Act. In March 2018 Southwark Crown Court found Skansen Interior Limited guilty of violating Section 7.
Since deferred prosecution agreements (DPAs) became available on February 24 2014, the court has approved three DPAs for offences under the Bribery Act (Standard Bank, XYZ Limited and Rolls Royce) and one for offences of false accounting (Tesco Stores Limited).
DPAs are voluntary agreements between prosecutors and:
- partnerships; or
- unincorporated associations.
Under a DPA, a prosecutor will not commence criminal proceedings pending successful compliance with a range of conditions such as:
- the payment of penalties;
- implementing or making changes to compliance programmes;
- providing training to employees;
- cooperating with investigations relating to the alleged offences; and
- the payment of prosecution costs.
After negotiations to enter into a DPA have begun, but before the terms of the DPA are agreed, a judge must consider whether entering into the DPA is likely to be in the interests of justice and whether the proposed terms of the DPA are fair, reasonable and proportionate. The judge must give reasons for his or her decision.
The SFO sees cooperation and commitment to reform as key factors in securing a DPA. Cooperation often starts with the company self-reporting; however, Rolls Royce was able to secure a DPA despite not self-reporting because of its “extraordinary cooperation”.
The new director of the SFO, whose mandate will start in April 2018, is likely to continue to use DPAs, as well as new powers provided by the Criminal Finances Act 2017 (eg, unexplained wealth orders (UWOs)). UWOs require a respondent to explain the origins of assets where it appears that the respondent’s known lawfully obtained income would be insufficient to enable it to obtain the asset. The National Crime Agency (NCA) has already secured two UWOs to investigate assets totalling £22 million that are believed to be ultimately owned by a politically exposed person. The use of UWOs may see a corresponding increase in the seizure of criminal assets.
Prosecution of individuals
DPAs are not available to individuals; therefore, even if a company has entered into a DPA, its employees can still be prosecuted.
Despite limited examples of the successful prosecution of individuals under the Bribery Act, the SFO has taken – and will likely continue to take – aggressive enforcement action against individuals under legislation in force before the act.
This area is expected to see increased attention in the coming years with the ongoing investigation into the conduct of individuals following the Rolls Royce DPA.
Increased coordination and cooperation with other regulators
The SFO has and will continue to increase its coordination and cooperation with regulators in other countries. SFO Director David Green is reported to be “pleased with the relationships the SFO has built with foreign agencies” and in December 2016 the US Department of Justice seconded a UK lawyer to spend one year at the SFO and one year at the Financial Conduct Authority.
There is a trend towards increased cooperation between UK agencies. In December 2017 it was announced that a new National Economic Crime Centre will be established within the NCA to coordinate operational responses to economic crime across UK agencies.
Are there plans for any changes to the law in this area?
The government has indicated that is it committed to tackling economic crime and has appointed a new minister for economic crime within the Home Office.
According to the government’s anti-corruption strategy, it intends to:
- introduce a draft bill in 2018 to establish a public register of the beneficial ownership of foreign companies that own UK property or participate in central government contracts – the register will likely be operational by 2021;
- consider the findings of the Law Commission’s review of the common law misconduct in public office offence and set out a response to any recommendations for reform; and
- support a Law Commission review of the Proceeds of Crime Act 2002 in order to identify improvements to powers to confiscate the proceeds of crime.
Various UK laws are derived from EU law, including anti-money laundering legislation and law enforcement cooperation mechanisms. When the United Kingdom leaves the European Union, the EU Withdrawal Bill will convert existing EU law as it applies in the United Kingdom into domestic law. The government’s anti-corruption strategy states that the government will then update its “laws, standards and co-operation arrangements to reflect new external relationships” in order to maintain its ability to address corruption, including through powers that it intends to attain under the Sanctions and Anti-money Laundering Bill. Green warned that Brexit has the potential to damage the SFO’s ability to carry out and request overseas request warrants, confiscations orders and mutual legal assistance in EU countries, and stressed that maintaining the integrity of UK-EU cooperation structures is in “everyone’s best interest”.
The government is considering an extension of the law to include an offence of failing to prevent economic crime, which would make it easier for regulators to prosecute companies for broader economic crimes (beyond bribery and the facilitation of tax evasion). Under Green’s direction, the SFO has strongly advocated for the failure to prevent economic crime offence. This offence would impose strict liability on a company and the prosecution need not prove any intent by the company’s directing mind to commit the offence. Consultation on the proposal closed on March 31 2017; however, no indication has been given as to when the results will be shared.
Which authorities are responsible for investigating bribery and corruption in your jurisdiction?
The Serious Fraud Office (SFO) is responsible for the detection, investigation and prosecution of serious or complex fraud, bribery and corruption in England, Wales and Northern Ireland. The SFO is the lead agency for investigating large and complex cases of bribery and corruption.
Fraud cases that do not fall into this category are investigated by the police (typically the City of London Police, which has a specialist fraud unit) or Her Majesty’s Revenue and Customs in cases of tax fraud.
The National Crime Agency (NCA) is a crime-fighting agency with national and international reach. It has the mandate and powers to work in partnership with other law enforcement organisations to tackle serious and organised crime. In terms of bribery and corruption, the NCA can act itself or coordinate with other agencies (including the SFO).
The Financial Conduct Authority (FCA) is responsible for the regulation of the financial services industry. In addition to its regulatory powers, it has criminal powers of enforcement against regulated and non-regulated companies and individuals that have breached its rules or the Financial Services and Markets Act 2010. Regulated firms must have adequate policies and procedures in place to counter the risk of being used to further financial crime. Individuals authorised by the FCA must act with integrity in carrying out their accountable functions.
The Prudential Regulation Authority, which is responsible for the prudential regulation and supervision of various financial institutions, has similar rules and means of enforcement to the FCA.
What are the key legislative and regulatory provisions relating to bribery and corruption in your jurisdiction?
The Bribery Act 2010 is the primary piece of bribery and corruption legislation. It applies to conduct which took place only after July 1 2011. Conduct which took place before July 1 2011 is subject to:
- common law offences of bribery and accepting a bribe;
- the Public Bodies Corrupt Practices Act 1889;
- the Prevention of Corruption Acts 1906 and 1916; and
- the Anti-terrorism Crime and Security Act 2001.
The Ministry of Justice (MoJ) has issued guidance on offences under Sections 1, 6 and 7 of the Bribery Act, particularly in relation to the strict liability offence of a commercial organisation failing to prevent bribery (Section 7). Organisations have a complete defence to this offence if they have adequate procedures in place to prevent bribery. As required under Section 9 of the Bribery Act, the MoJ guidance covers the procedures that commercial organisations can put in place to prevent bribery by associated persons.
The director of the SFO and the director of public prosecutions have also published joint guidance on the Bribery Act offences.
What international anti-corruption conventions apply in your jurisdiction?
The following anti-corruption conventions apply in the United Kingdom:
- the EU Convention on the Protection of the European Communities’ Financial Interests 1995;
- the Organisation for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997;
- the EU Convention on the Fight against Corruption involving Officials of the European Communities or Officials of Member States of the European Union 1997;
- the Council of Europe Criminal Law Convention on Corruption 1999 and its additional protocols;
- the United Nations Convention against Transnational Organised Crime 2000; and
- the United Nations Convention against Corruption 2003.
Brexit has introduced a degree of uncertainty as to the United Kingdom’s continuing obligations under certain EU agreements. It is hoped that the status of such agreements will be clarified in the coming months.
Specific offences and restrictions
What are the key corruption and bribery offences in your jurisdiction?
The key bribery offences contained in the Bribery Act 2010 are:
- bribing another person (Section 1);
- receiving a bribe (Section 2);
- bribing a foreign public official (FPO) (Section 6); and
- failure of a commercial organisation to prevent bribery (Section 7).
Bribing another person and receiving a bribe
An offence has been committed if the bribe payer:
- intends the offer, promise or giving of an advantage to bring about or reward another person’s improper performance of a relevant function or activity; or
- knows or believes that the acceptance of the advantage offered, promised or given, in itself, constitutes the improper performance of a relevant function or activity.
The offer, promise or giving of an advantage can be direct or indirect.
Section 2 of the Bribery Act creates an equivalent offence in relation to being bribed.
‘Improper performance’ is the performance of an activity in breach of an expectation of good faith or impartiality, or in breach of a position of trust. The test for whether an activity has been performed improperly is what a reasonable person in the United Kingdom would expect in relation to the activity. If the activity takes place overseas, local customs are disregarded unless permitted by the country’s written law.
The offences under Sections 1 and 2 of the Bribery Act apply to both public and private-sector bribery relating to any function:
- of a public nature;
- connected with a business;
- performed during a person’s employment; or
- performed on behalf of a company or another body of persons.
Bribing a foreign public official
It is an offence to directly or indirectly offer, promise or give a financial or other advantage to an FPO or another person at the FPO’s request or with his or her assent or acquiescence in circumstances where the person intends to influence the official in his or her capacity.
The briber must intend:
- that the advantage given or offered would influence the FPO in the performance of his or her FPO duties; and
- to secure business or obtain a business advantage.
There is no requirement for corrupt intent or improper performance on behalf of the FPO. No offence is committed if the advantage to the FPO is permitted or required by the written law applicable to the FPO.
The definition of ‘FPO’ is extremely broad and includes:
- all elected and appointed officials holding a legislative, administrative or judicial position of any kind in a country or territory outside the United Kingdom; and
- any person performing public functions in any branch of the national, local or municipal government, or exercising a public function for any public agency or enterprise of such a country or territory, and working for international organisations.
Failure of a commercial organisation to prevent bribery
A commercial organisation is guilty of an offence if a person associated with it bribes another person with the intention of obtaining or retaining business or a business advantage for the organisation. An ‘associated person’ is someone who performs services for, or on behalf of, the commercial organisation and includes an employee, agent or subsidiary (Sections 8(1) and 8(3) of the Bribery Act). This is a strict liability offence and an organisation will be guilty unless it can show that it had in place adequate procedures to prevent bribery. ‘Adequate procedures’ are not defined in the Bribery Act, but they are addressed in the Ministry of Justice (MoJ) Guidance.
Section 7 of the Bribery Act is potentially far-reaching. It covers bribery both in the United Kingdom and abroad, and applies to both UK and overseas businesses.
Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details?
There is no specific exception regarding the giving of gifts, travel expenses, meals or entertainment.
Under the MoJ Guidance, the Bribery Act does not prohibit hospitality and promotional expenditure that is:
- reasonable; and
- undertaken in good faith.
However, there may be instances where such expenditure could fall under Sections 1, 6 or 7 of the act. Whether it does so is a question of fact in each case.
Joint guidance issued by the director of the Serious Fraud Office and the director of public prosecutions indicates that hospitality or promotional expenditure which is “reasonable, proportionate and made in good faith is an established part of doing business” and the Bribery Act does not seek to penalise such behaviour. The more lavish the hospitality or expenditure (or if it is unconnected to a legitimate business activity), the greater the inference that it is intended to encourage or reward improper performance or influence an official (see the MoJ Guidance for useful illustrations).
What are the rules relating to facilitation payments?
The Bribery Act makes no exception for facilitation payments.
In order for prosecution to be brought for a facilitation payment, there must be a realistic prospect of a conviction and the prosecution must be in the public interest. The Joint Prosecution Guidance states that cases of large or repeated facilitation payments have a higher likelihood of prosecution. A small one-off payment may not satisfy the public interest test. Similarly, if the payer was in a vulnerable position arising from the circumstances in which the payment was demanded, this may tend against prosecution being brought.
Scope of liability
Can both individuals and companies be held liable under anti-corruption rules in your jurisdiction?
Sections 1, 2 and 6 of the Bribery Act
Individuals may be liable for:
- giving bribes (Section 1);
- receiving bribes (Section 2); and
- bribing a foreign public official (Section 6).
Companies may also be liable under Sections 1, 2 and 6 of the Bribery Act if it can be proved that an individual who represents the “directing mind and will” of the company has committed the offence. Section 14 of the act extends liability to senior officers or persons (as well as the company), who will be liable to prosecution if an offence contrary to Sections 1, 2 or 6 is proved to have been committed by the company with the consent or connivance of:
- the senior officer of the company; or
- a person purporting to act in such a capacity.
For a senior officer or similar person to be found individually liable, he or she must have a close connection to the United Kingdom (ie, be a British citizen, ordinarily resident in the United Kingdom or a British overseas citizens (Section 12(4) of the Bribery Act)). Both the company and the senior manager (if he or she is the directing mind) will be guilty of the main bribery offence.
Section 7 of the Bribery Act
Section 7 creates the strict liability offence of failing to prevent bribery, which can be committed only by a ‘relevant commercial organisation’ defined as:
- a body incorporated or a partnership formed under UK law, irrespective of where business is carried out; or
- any other body corporate or partnership (wherever incorporated or formed) which carries on a business or part of a business in the United Kingdom.
The offence is committed where a person who is associated with the commercial organisation offers, promises or gives a bribe to another person contrary to Sections 1 and 6 of the Bribery Act, with the intention of obtaining or retaining business or an advantage in the conduct of business for the commercial organisation. Individuals involved in the Section 7 offence may not necessarily be individually liable, but may attribute liability to the company.
Offences under Sections 1 and 6 of the Bribery Act include being liable by way of:
- counselling; or
The prosecution need not show that the person who committed the bribery has already been successfully prosecuted. However, it must show that the person would be guilty of the offence if he or she were to be prosecuted or capable of being prosecuted. The individual need not have a close connection to the United Kingdom; if the organisation falls within the definition of ‘relevant commercial organisation’, the UK courts will have jurisdiction.
It is immaterial where the conduct element of the offence occurs (Section 12(5) of the Bribery Act).
It is a defence for the commercial organisation to show that it had adequate procedures in place to prevent persons associated with it from committing bribery offences.
Can agents or facilitating parties be held liable for bribery offences and if so, under what circumstances?
Yes, agents or facilitating parties can be held liable for bribery offences under Sections 1, 2, 6 or 7 of the Bribery Act if the elements of those offences are met and the agent or facilitating party is subject to the jurisdiction of the Bribery Act.
Section 7 of the Bribery Act also covers all individuals and corporate entities connected to an organisation that could commit bribery on the organisation’s behalf (ie, employees, subsidiaries, sub-contractors, suppliers, agents and joint ventures). Individuals involved in the Section 7 offence may not be individually liable, but will attribute liability to the company.
Can foreign companies be prosecuted for corruption in your jurisdiction?
Yes, the corporate offence of failing to prevent bribery (Section 7 of the Bribery Act) applies to ‘relevant commercial organisations’, including entities formed or incorporated outside the United Kingdom but which carry on business or part of a business in the United Kingdom. The courts will determine whether an organisation carries on business in the United Kingdom and will consider the facts of each case. The government has stated that the question of whether an organisation carries on business in the United Kingdom can likely be answered by applying a common-sense approach (see the Ministry of Justice Guidance).
Foreign companies can also be prosecuted under Sections 1, 2 and 6 of the Bribery Act if any action or omission which forms part of the offence takes place in the United Kingdom (Section 12(1)).
If a Section 1, 2 or 6 offence is proved to have been committed with the consent or connivance of a senior officer of the company who has a close connection to the United Kingdom or a person purporting to act in such a capacity, then both the senior officer and the company will be guilty of the offence (Section 14(2)).
Whistleblowing and self-reporting
Are whistleblowers protected in your jurisdiction?
Yes, Section 47B of the Employment Rights Act 1996 protects workers from suffering detriment or being dismissed as a result of making a “protected disclosure”. Any disclosure of information which reveals, in the reasonable belief of the worker making the disclosure, that a crime or breach of some other legal obligation – which an infraction of the Bribery Act 2010 could easily constitute – has been committed, is being committed or is likely to be committed constitutes a protected disclosure if the worker reasonably believes that the disclosure is in the public interest (Section 43B of the Employment Rights Act). The individual must demonstrate that in making the disclosure, he or she had a reasonable belief as to the crime or other breach in question. Those who have suffered detriment as a result of making a ‘protected disclosure’ can bring a claim in the Employment Tribunal for unlimited compensation, including an award for injury to feelings.
For institutions regulated by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA), whistleblowing obligations are more onerous. They must have a whistleblowing champion, who is responsible for overseeing internal whistleblowing policies and procedures, and for reporting to the board annually on their efficacy. The FCA and PRA have established the concept of ‘reportable concerns’ (defined in the FCA Handbook), which will trigger firms’ whistleblowing arrangements for matters that may not be protected disclosures under the Employment Rights Act. The two types of reportable concern are:
- a concern held by any person in relation to a breach of the firm’s policies and procedures; and
- behaviour that harms or is likely to harm the reputation or financial wellbeing of the firm.
There is no specific incentive regime for whistleblowers (unlike in the United States) and it is unlikely that the United Kingdom will adopt one in the near future.
Is it common for leniency to be shown to organisations that self-report and/or cooperate with authorities? If so, what process must be followed?
The benefits of proactively bringing matters to the attention of enforcement authorities are potentially significant. There is no guarantee that notifying issues to enforcement authorities will lead to a lenient approach; however, the early disclosure of potential wrongdoing maximises the chances of a favourable outcome (eg, by obtaining a deferred prosecution agreement (DPA) and securing discounts on any fines payable).
One factor when determining whether a DPA is appropriate is whether a company self-reported previously unknown offending (see the DPA Code of Practice).
When Sir Brian Leveson approved the first DPA between Standard Bank and the Serious Fraud Office (SFO), one of the key factors when considering whether to enter into a DPA was the short timeframe between the discovery of relevant conduct and it being reported to the SFO.
Although Rolls Royce did not self-report, it remained eligible for a DPA due to its ”extraordinary cooperation” with the authorities once it was contacted by the SFO. Rolls Royce reported on issues that the SFO was aware of, but also provided information on wrongdoing of which the SFO was unaware. The SFO confirmed that this level of disclosure meant that the lack of a self-report was not fatal to the DPA. Rolls Royce also:
- provided access to over 30 million documents and to witness statements and witnesses;
- provided witness interviews on a limited waiver basis;
- agreed to the interviews being audio recorded when asked by the SFO; and
- allowed the SFO to interview witnesses before they were interviewed by the company.
Leveson acknowledged that a self-report is usually “highly relevant” in considering whether a DPA is an appropriate resolution. He was also satisfied that the internal changes made by Rolls Royce demonstrated a genuine intention to change the culture and ensure that historical problematic practices no longer took place. The company paid the UK authorities a £497 million penalty, including £240 million in fines and £257 million in disgorgement of profits earned through the alleged corruption. It avoided paying an extra £238 million in fines due to its cooperation.
Since the Rolls Royce judgment, the SFO has stressed that self-reporting remains a significant step to qualifying for a DPA. SFO Director David Green has explained that if a company reports misconduct, the “odds are” that it will be offered a DPA; however, if it does not, it will be prosecuted. He has also expressed the hope that his successor will convey a similar message.
Dispute resolution and risk management
Is it possible for anti-corruption cases to be settled before trial by means of plea bargaining or settlement agreements?
Deferred prosecution agreements
The Crime and Courts Act 2013 introduced deferred prosecution agreements (DPAs) into English law on February 24 2014. DPAs are voluntary agreements between prosecutors and:
- partnerships; or
- unincorporated associations.
Under a DPA, a prosecutor will not commence criminal proceedings pending successful compliance with a range of conditions. DPAs are not available to individuals.
After negotiations to enter into a DPA have begun, but before the terms of the DPA are agreed, a judge must consider whether entering into the DPA is likely to be in the ‘interests of justice’ and whether the proposed terms of the DPA are ‘fair, reasonable and proportionate.’ The judge must give reasons for his or her decision.
A DPA can be entered into in relation to all offences under the Bribery Act 2010, as well as other financial crime offences, including fraud and money laundering.
Defendants may also enter into a plea bargain, whereby they agree to plead guilty to certain charges. Companies and individuals may want to plead guilty to some, but not all, charges or to different, possibly less serious charges. Prosecutors can accept the defendant’s plea if they think that the court is “able to pass a sentence that matches the seriousness of the offending” (Code for Crown Prosecutors).
According to the attorney general’s guidance on plea discussions in cases of serious or complex fraud, a prosecutor may initiate plea discussions and, where agreement is reached, the parties should discuss the appropriate sentence with a view to presenting a joint written submission to the court. The joint submission on the appropriate sentence is not binding on the court.
Sentencing is at the court’s discretion and agreements made with the prosecutor will not bind the court (R v Innospec).
Are any types of payment procedure exempt from liability under the corruption regulations in your jurisdiction?
There is no payment procedure specified as exempt from liability under the Bribery Act.
What other defences are available and who can qualify?
A commercial organisation has a defence to the Section 7 offence if it can prove that it had adequate procedures in place to prevent bribery.
The Ministry of Justice (MoJ) Guidance recognises that the common law defence of duress is commonly available in circumstances where individuals are “left with no alternative but to make payments in order to protect against loss of life, limb or liberty”.
There is also a defence if a person’s conduct was for the proper exercise of any function of an intelligence service or the armed forces (Section 13 of the Bribery Act).
What compliance procedures and policies can a company put in place to assist in the creation of safe harbours?
Whether a company can prove that it had adequate procedures will be a matter of fact in each case. Guidance published by the MoJ states that procedures put in place by an organisation to prevent bribery should be informed by six principles:
- An organisation’s procedures to prevent bribery should be proportionate to the risks that it faces and the nature of its business.
- Top-level management should be committed to preventing bribery by persons associated with the organisation and should “foster a culture in which bribery is never acceptable”.
- Organisations should assess the nature and extent of their exposure to bribery on a periodic and documented basis.
- Organisations should apply due diligence procedures in respect of associated persons in order to mitigate identified bribery risks.
- Organisations should ensure that their bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication (including training).
- Organisations should monitor and review procedures designed to prevent bribery and make improvements where necessary.
Record keeping and reporting
Record keeping and accounting
What legislation governs the requirements for record keeping and accounting in your jurisdiction?
The obligation on companies to keep adequate accounting records is governed by Part 15 of the Companies Act 2006.
Specific sectoral rules relating to record keeping and accounting may also apply. The Financial Conduct Authority (FCA) Handbook states that regulated firms must arrange for orderly records to be kept of their business and internal organisation. The Listing Rules also contain certain record-keeping obligations for listed companies.
Specific record-keeping obligations relating to money laundering and terrorist financing are provided in the Money Laundering Regulations 2017.
What are the requirements for record keeping?
Pursuant to Section 386(1) of the Companies Act 2006, every company must keep adequate accounting records, which (among other things):
- show and explain the company’s transactions; and
- disclose with reasonable accuracy, at any time, the financial position of the company (Sections 386(2)(a) and (b) of the Companies Act).
Private companies must keep accounting records for three years and public companies must keep accounting records for six years (Section 388(4) of the Companies Act).
An offence is committed by every officer of the company who fails to comply with Section 386 of the Companies Act (Section 387). It is a defence for such persons to show that they acted honestly and that the default was excusable in the circumstances in which the company’s business was carried on. The maximum punishment for the offence is two years’ imprisonment (Section 387(3)(a) of the Companies Act).
A company’s annual accounts must be audited unless an exemption applies (eg, if the company qualifies as a small company (Section 475 of the Companies Act)). The auditor must compile a report which includes a statement as to whether, in his or her opinion, the accounts give a true and fair view of the company’s state of affairs (Section 495).
Under Section 17 of the Theft Act 1968, an offence of false accounting is committed where a person with a view to gain for himself or herself, or intent to cause loss to another, dishonestly:
- destroys, defaces, conceals or falsifies accounting records; or
- produces or uses accounting records which to his or her knowledge are or may be misleading, false or deceptive in a “material particular” (ie, materially deceptive).
Three former employees of Tesco Stores Limited who held senior management roles were each charged with one count of false accounting contrary to Section 17 of the Theft Act and one count of fraud by abuse of position contrary to Sections 1 and 4 of the Fraud Act 2006.
The Money Laundering Regulations also provide record-keeping requirements. A relevant person must maintain copies of documents, including those obtained to satisfy customer due diligence (CDD) requirements, and supporting records in respect of transactions subject to CDD measures for five years (Regulation 40).
What are the requirements for companies regarding disclosure of potential violations of anti-corruption regulations?
There is no general duty to disclose or report potential violations of anti-corruption regulations under UK law or the Bribery Act 2010.
Self-reporting potential violations is one of the factors considered when determining whether a deferred prosecution agreement is appropriate.
Assessing potential risk areas, remedying any actual or potential failings in anti-bribery and corruption systems and controls, and monitoring such risks could help a company to argue that it had adequate procedures in place to prevent bribery.
Regulated firms must disclose actual, potential or suspected violations of anti-bribery and corruption systems and controls. Firms subject to FCA regulation must immediately notify the FCA if they become aware of any matter that could have an adverse effect on the firm’s reputation. This notification requirement also extends to circumstances where a firm has reasonable information to suggest that such a matter may have occurred or could occur in the foreseeable future (Supervision 15.3.1 of the FCA Handbook). The FCA also requires that “a firm must deal with its regulators in an open and cooperative way, and must appropriately disclose to the FCA anything relating to the firm of which that regulator would reasonably expect notice” (Principle 11 of the FCA Handbook). Compliance with this principle includes giving the FCA notice of “any significant failure in the firm’s systems or controls, including those reported to the firm by the firm’s auditor” (Supervision 15.3.8(2) of the FCA Handbook).
Under the Proceeds of Crime Act 2002 and the Terrorism Act 2000, firms in the regulated sector must report where they know or suspect, or have reasonable grounds for knowing or suspecting, that another party is engaged in money laundering or terrorist financing. Where there is a suspicion of bribery, the benefit of such bribery (eg, contract revenue) will likely fall within the Proceeds of Crime Act. Disclosures under the Proceeds of Crime Act and the Terrorism Act must be made to the National Crime Agency in a specific manner to avoid tipping off any potential suspect.
Under the FCA Listing Rules, a listed company should consider the obligations in the EU Market Abuse Regulation (596/2014) to inform the public as soon as possible of inside information which directly concerns the issuer. However, the disclosure may be delayed on certain conditions.
What penalties are available to the courts for violations of corruption laws by individuals?
Individuals guilty of an offence under Sections 1, 2 or 6 of the Bribery Act 2010 are liable to a maximum of 10 years’ imprisonment, an unlimited fine or both (Section 11 of the Bribery Act).
The Sentencing Council Guidelines state that in order for the court to determine the appropriate sentence, it should assess both culpability and harm. The level of culpability is determined by weighing up all factors to determine “the offender’s role and the extent to which the offending was planned and the sophistication with which it was carried out”. Harm is assessed in relation to “any impact caused by the offending (whether to identifiable victims or in a wider context) and the actual or intended gain to the offender”. Other available penalties include confiscation and compensation orders.
Under the pre-Bribery Act statutory offences, the maximum penalty is seven years’ imprisonment, an unlimited fine or both.
For the common law bribery offence, the term of imprisonment is at the discretion of the court (although in practice the court is likely to be guided by the maximum sentences under the Bribery Act) and may be accompanied by an unlimited fine.
Companies or organisations
What penalties are available to the courts for violations of corruption laws by companies or organisations?
Companies guilty of an offence under Sections 1, 2, 6 or 7 of the Bribery Act are liable to an unlimited fine (Sections 11(2) and (3) of the Bribery Act). The Sentencing Guidelines divide the sentencing process into a series of steps. The appropriate level of fine is determined by:
- assessing the gross profit from the contract obtained, retained or sought as a result of the bribery offence (ie, the ‘harm’); and
- multiplying this figure by reference to a culpability category.
The multiplier is higher depending on the level of culpability.
Up to 50% discount on a penalty is available by way of a deferred prosecution agreement, with up to one-third discount available by way of an early guilty plea during prosecution.
The court may also make a confiscation order if it is asked to do so by the prosecutor or if it believes that it is appropriate to do so.
A company convicted of a criminal offence under Sections 1, 2 or 6 of the Bribery Act will face mandatory debarment from public contracts across the European Union. If a company is convicted for a Section 7 offence, debarment is discretionary and not mandatory.
Under the pre-Bribery Act offences, a company may also be subject to an unlimited fine.