The Serious Fraud Office (“SFO”) is the main prosecutor responsible for enforcing the U.K. Bribery Act 2010 (the “Bribery Act”) in the U.K. On 9 October 2012, the SFO revised its policies in relation to facilitation payments, business expenditure and self-reporting under the Bribery Act (the “Revised Policies”). The new guidance took immediate effect and superseded all preceding SFO statements of policy or practice on these three issues.
The Revised Policies
The Revised Policies represent a marked departure from the SFO’s former approach to prosecution and enforcement, possibly as a direct response to the Organisation for Economic Cooperation and Development’s (“OECD”) recent criticisms of U.K. authorities for too often opting to settle cases on civil grounds.
The Revised Policies are intended to (i) “restate the SFO’s primary role as an investigator and prosecutor of serious or complex fraud, including corruption”; (ii) “ensure there is consistency with other prosecuting bodies”; and (iii) “meet certain OECD requirements”1.
The Revised Policies were announced just ahead of the much-anticipated Foreign Corrupt Practices Act (“FCPA”) guidance, which the U.S. Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) issued on 14 November 2012. The SFO appears to be setting a stricter enforcement strategy that is more closely aligned with the positions set out in the U.S. regulators’ FCPA guidance.
- Self Reporting
The SFO’s most noteworthy change in policy has been in relation to the self-reporting of corruption by corporations. In its previous 2009 guidance2 the SFO had stated that prosecution was an unlikely consequence in circumstances in which a company had self-reported a violation under the Bribery Act. As an alternative, such cases were settled “civilly wherever possible”.
Under the Revised Policies, corporations can no longer rely on self-reported violations being resolved on civil grounds. Instead, each case will depend on its own facts. Whilst self-reporting by a company might now be considered as a “public interest factor” tending against prosecution, this will only be the case where the self-report comprises “part of a genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice”. This new approach requires prosecuting bodies to apply the Full Code Test3 in order to establish whether or not to prosecute a business for Bribery Act offences. The test obligates prosecutorial authorities to be satisfied that:
- there is sufficient evidence to provide a realistic prospect of conviction against each suspect on each charge; and
- prosecution is in the public interest.
Furthermore, even if a self-reporter is not prosecuted for its involvement in corruption, the Revised Policies permit prosecuting authorities in the U.K. to disclose information about reported misconduct to foreign regulators, including foreign police forces.
The SFO’s new guidance on self-reporting harmonises the U.K.’s position with existing U.S. policy in relation to voluntary disclosure of FCPA violations. Self-reporting by companies in the U.S. is considered by the DOJ and SEC as an important factor as to how companies may be treated; however, it does not provide any guarantee of leniency.
- Facilitation Payments
Facilitation payments are bribes paid to facilitate routine government action.4 In its former guidance on prosecution, the SFO had advised that single facilitation payments concerning small amounts of money would unlikely result in a prosecution and would usually only involve a nominal penalty, provided that companies responsible for such payments had implemented the following measures:
- they had issued a clear policy regarding such payments;
- they had written guidance available to employees on the procedures for handling requests for such payments;
- employees followed those procedures;
- evidence existed that the company recorded all such payments;
- evidence existed that the proper action was taken to inform the appropriate authorities in the countries concerned that such payments were being demanded; and
- the business was taking what practical steps it could to curtail the making of such payments.5
In its Revised Policies, the SFO clarifies that the procedures outlined above do not represent exemptions to prosecution and that facilitation payments have been illegal in the U.K., irrespective of their size and frequency, both before the Bribery Act and since it has been in force. Under the Revised Policies, the assessment for whether or not to prosecute for facilitation payment violations will also be governed by the Full Code Test.
The absolute prohibition of facilitation payments under U.K. law contrasts with that of U.S. law, which treats facilitation payments as outside the scope of the FCPA’s bribery prohibitions, to the extent that such payments are to “expedite or to secure the performance of a routine government action”. The FCPA defines routine government action as “an action which is ordinarily and commonly performed by a foreign official” related to non-discretionary, ministerial-type activity. It expressly does not include any decision to award new business or to continue business with a particular party.
- Business Expenditure
Business expenditure means bona fide hospitality and promotional or other business expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations.6 The SFO had previously stated in its former guidance that offering corporate hospitality was acceptable and was not prohibited by the Bribery Act, provided that such expenditure was reasonable, proportionate and made in good faith. The Revised Policies, however, provide no such assurance. Whilst the SFO recognizes that bona fide business expenditure for hospitality is an “established and important part of doing business”, it warns that companies may be prosecuted for bribes disguised as legitimate business expenditure and that any such violations will also be subject to the Full Code Test.
Nevertheless, the new director of the SFO, David Green, has recently stated that “the sort of bribery we would be investigating would not be tickets to Wimbledon or bottles of champagne. We are not the ‘serious champagne office‘”.7 This suggests that prosecuting authorities do not seek to concern themselves with ordinary corporate entertaining, but shall investigate and potentially prosecute incidences of business expenditure so profuse as to point towards bribery.
First and foremost, companies subject to the Bribery Act should have regard to the implications of the SFO’s Revised Policies. The SFO looks set to pursue a tougher approach towards prosecuting major cases of corruption and the Revised Policies appear to suggest that corporations will be less likely to successfully mitigate penalties by self-reporting their violations under the Bribery Act. Therefore, entities falling within the scope of the Bribery Act might be advised to strengthen their corporate governance measures and compliance procedures in relation to bribery prevention, and make certain that any corporate hospitality or business expenditure is proportionate and thoroughly documented. It will likely become even more important for commercial organisations to depend on the ‘adequate procedures’ defence in the event that they are investigated by the SFO which, if argued successfully, provides a complete statutory defence to a charge under the Bribery Act and not just a mitigation of a penalty. The Ministry of Justice has published guidance on what constitutes ‘adequate procedures’ (as detailed in Curtis’s previous corporate client alert, entitled ‘Bribery Act 2010: Ministry of Justice Publishes Final Guidance on Adequate Procedures’, April 2011,8 as well as earlier client alerts on ‘adequate procedures’9).