On 12 May, the UK hosted representatives from more than 40 countries to discuss and agree initiatives to combat corruption. We look at the outcomes and what they mean for multinational companies.Each country has outlined its specific commitments arising from the summit, but the outcomes of the summit can, generally, be categorised as:
- increased transparency and sharing of information on beneficial ownership (ie who really owns and controls companies); and
- stronger mechanisms to investigate and prosecute corruption, including via an international anti-corruption coordination centre and cross-border law enforcement partnerships. In the UK, specifically, the Government has revived plans to consult on a new corporate offence for failing to prevent economic crimes—which would, the Government says, make it easier to prosecute corporates for crimes related to bribery, such as fraud and money laundering.
So what does this mean for multinational companies?
In various jurisdictions, companies must be prepared to disclose their true owners
Last month the UK Government announced it was creating a public register of who ultimately owns and controls all UK companies. That register will be launched next month.
During the summit, the Netherlands, France, Nigeria and Afghanistan agreed to create similar registers. Six other countries - Australia, New Zealand, Jordan, Indonesia, Ireland and Georgia - made softer commitments to take steps towards setting up such public registers. This is, in part, in response to the ‘Panama Papers’ leak which shone a light on the use of shell companies to hide illicit money flows. Other countries have taken similar steps to address the issue. For example, the US has proposed new laws to oblige companies to report on their beneficial owners.
The UK is also pushing for greater transparency in the property sector to clamp down on the use of UK properties to launder illicit funds from abroad. All foreign companies that own properties in the UK will also have to provide details of their beneficial owners for the public register. And no foreign company will be able to buy UK property or bid for central government contracts without joining this register. Companies must be prepared for that information to be shared across borders—40 countries have agreed to automatically and regularly share their entire list of company ownership with each other (something the UK and many of the countries in attendance had already agreed to do).
Companies will face even more international cooperation on enforcement of anti-bribery and corruption laws International cooperation has been a regular feature of many large corruption cases in recent years and measures announced at the summit seek to strengthen that cooperation further:
- An international anti-corruption coordination centre will be created in London to identify and help prosecute corruption and seize assets. This will be done via a partnership between the US, the UK, Canada, Australia, New Zealand, Switzerland, and Interpol.
- 18 countries will enter into law enforcement partnerships to help strengthen anti-corruption agencies around the world by sharing best practices and technical assistance. The countries who have committed to these ‘Institutional Integrity Partnerships’ are: the UK, Romania, Mexico, Georgia, Switzerland, Afghanistan, Australia, Norway, Nigeria, Kenya, Tanzania, Bulgaria, the Netherlands, Ghana, Korea, Ukraine, Germany, and the USA—as well as the UN and Commonwealth.
- 16 countries (including the UK) will join a new anti-corruption innovation hub to look at the use of technology in the fight against corruption.
- A global forum for asset recovery will take place in 2017 which will bring together governments and law enforcement agencies to work together to recover stolen assets.
With stronger enforcement agencies, particularly in emerging and developing economies, companies may find more investigations commencing locally that could lead to enforcement action in several jurisdictions. It will be even more important than ever for companies to take steps to ensure all business units, regardless of where they are located, comply with anti-bribery laws.
Companies in the UK may face greater exposure to criminal liability
The UK Government will move ahead with plans to introduce a corporate offence for failing to prevent economic crime. This is despite the announcement, in September last year, that the reform had been dropped. It is currently proposed that such an offence would operate in a similar way to the existing offence of failing to prevent bribery by an associated person. And it would be in addition to the plans to criminalise corporates’ failure to prevent the facilitation of tax evasion, for which draft legislation has already been produced.
If these reforms go ahead as planned, the SFO will not have to prove that the ‘directing mind’ (ie very senior officers) of a business was complicit in misconduct. This would, the Government believes, make it easier to bring a criminal case against companies whose employees engage in fraud or money-laundering. As with the Bribery A ct, it is likely that companies will be able to defend themselves by proving they had adequate systems in place to prevent such misconduct.
Much about the proposed offence is currently unclear. This includes whether only UK companies would be caught or if it would extend to foreign companies operating within the UK too. In any event, it would likely impose a significant further compliance cost on those companies caught by the proposed law.