On the 9 October 2012, the SFO reviewed its policies on facilitation payments, business expenditure (hospitality) and corporate self-reporting. The purpose is to:
- Restate the SFO’s primary role as an investigator and prosecutor of serious or complex fraud, including corruption;
- Ensure there is consistency with other UK prosecuting bodies; and
- Meet certain OECD recommendations.
If any act or omission which forms part of a bribery offence takes place in the UK, then the SFO will have jurisdiction to prosecute the relevant individual(s) and / or company. These offences include:
- Bribing another person;
- Being bribed; and
- Bribery of foreign public officials.
Where the act or omission takes place outside the UK, the offences can apply to any person or entity having a ‘close connection’ to the UK. Under the Bribery Act, UK companies/partnerships, other UK commercial organisations, British citizens, British nationals and individuals who are ordinarily resident in the UK are deemed to have a close connection with the UK.
Any other commercial organisation (wherever incorporated) which carries on a business, or part of a business in any part of the UK, can face prosecution for its failure to prevent bribery where a person associated with it (for e.g. an employee) bribes another person intending to obtain a commercial advantage for the business.
The potential impact of the SFO’s announcement
The new guidance is much more ‘black and white’ – and companies will be right to perceive a much greater risk of a criminal prosecution even if they self-report.
“The SFO encourages corporate self-reporting and will always listen to what a corporate body has to say about its past conduct: but the SFO offers no guarantee that a prosecution will not follow any such report… The revised policies make it clear that there will be no presumption in favour of civil settlements in any circumstances,” the agency said on its website on the 9 October 2012.
In its previous guidance, the SFO acknowledged that facilitation payments, for e.g. payments made to public officials to carry out functions they normally should do, were endemic in some countries and would take time to eradicate. The new guidance states simply: “A facilitation payment is a type of bribe and should be seen as such.” On the basis of the new guidance, the fact that such payments are central to an organisations ability to do business in a particular country will not be considered an adequate defence, and the company risks prosecution by the SFO if it has or continues to make facilitation payments.
On corporate hospitality, the SFO does recognise that “bona fide hospitality or promotional or other legitimate business expenditure” is an established and important part of doing business. Cleary each case will turn on its own facts, but the guidance appears to indicate that the SFO will consider the nature of the hospitality and the associated expenditure, and where it is considered disproportionate the SFO may interpret it as a bribe.
The stance taken by the SFO puts evidential sufficiency and public interest at the heart of its considerations when deciding to prosecute. The Guidance on Corporate Prosecutions states that it will be for a self-reporting company to evidence they took “a genuinely proactive approach” when the offending was discovered, by demonstrating for example (non-exhaustive list):
- That self-reporting to the SFO happened within a reasonable time frame;
- They have fully reported the true extent of the wrongdoing; and
- That there either exists / or there is a process underway to adopt an effective corporate compliance program.
These factors, amongst others, will be considered by the SFO when determining whether to take criminal or civil action against the offending company.
The Guidance on Corporate Prosecutions also states that the decision to prosecute a company should not be a substitute to proceeding with a prosecution against implicated individuals. Where there is a high risk of prosecution against the company, there will clearly be board level issues to contend with involving both the company’s and individual board members’ interests in respect of the prosecution.
On the same day as the SFO’s announcement the UK’s Financial Services Authority (“FSA”) said it would extend its review of anti-bribery controls – which apply to insurance brokers and investment bankers – to asset managers. The FSA said in March 2012 its review of 15 investment banks found most of them had not properly taken account of rules covering bribery and corruption.
The SFO’s announcement is being widely considered as a statement by its Director, David Green, that fraud and corporate wrongdoing will be prosecuted if it is in the public interests to do so and self-reporting will be no guarantee that a criminal prosecution will not follow. It is not certain however, whether such a stance will be maintained once the UK Government makes its anticipated conclusions on US-style deferred prosecution agreements. Clearly, if adopted and recommended by Government, these would make it easier for the SFO to make deals with companies, extracting agreement on financial penalties in exchange for postponement of criminal charges.