BRIBERY

The Bribery Act has the potential to make criminals out of most businesses, their owners and senior management. It requires businesses to have in place arrangements to prevent bribery occurring in that business. The problem for a business is that if someone associated with it commits an act of bribery then the business is also guilty unless it proves that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct. Note the wide definition of ‘associated person‘.

Government claims that the Bribery Act will benefit, not hinder, British business. It will ensure that the UK is at the forefront of the battle against bribery; clamping down on corruption without being a burden on business. Government claimed also that combating bribery is about commonsense, not burdensome procedures. It claimed to have listened carefully to business to ensure that the Bribery Act is implemented in a workable commonsense way which is simple for both the smallest firm and largest corporation to get to grips with.

It is doubtful that anybody believed this rhetoric but the reality is that business does need to take note so as to avoid falling prey to the possible ambitions of government who may decide it has a point to prove by prosecuting some businesses to show how much better they are than any other government.

The Serious Fraud Office has already brought a serious case that has resulted in convictions. The three defendants shared 28 years of prison for their part in an enterprise referred to as Sustainable AgroEnergy plc. There were earlier but smaller cases including the court clerk who agreed to wipe a speeding conviction from the court record and the student who tried to bribe his professor. However, the SAE case is the one that is most likely to set the tone for the future where cases include an international element with large sums of money.

The arrangements needed to comply with the Act are quite simple to implement. We can assist you to comply with the Act and have a suitable policy in place to protect you and your business from prosecution under section 7 of the Bribery Act. If your business is convicted of a bribery offence the consequences will be very great. It is possible that the business may have to prove that all its income for the period of six years prior to any charge was legitimate income with the prospect of confiscation of all monies where you fail to prove this. Let me put that another way. Any income or expenditure that you cannot prove was through legitimate transactions will be assumed to be criminal proceeds and liable to be confiscated. Confiscation is draconian, seriously so.

The cost of securing your business against prosecution is small. The implications of a prosecution are great. If an employee or other person connected to your business should happen to become involved in offering/receiving a bribe then you will need to avoid a prosecution for the business and you. Conviction will lead to confiscation proceedings. Even if you manage to prove the legitimacy of the income of the business the cost of achieving this will be massive. Will the business be able to survive this burden? There is no legal aid for the business to deal with this.

With a small outlay in terms of cost and time you can do what is necessary to avoid this problem happening to you. Remember that the business does not need to be at fault for a successful prosecution under Section 7 of the Bribery Act. It only needs to have failed to plan for the possibility that someone else would commit an offence under the Act. If you have a policy in place you may find that insurance cover can be given and should be inexpensive.

If your company becomes aware of an incident of bribery by a ‘related person’ then advice should be taken immediately from expert solicitors as there are ways of minimising the impact on the business and others involved in the business. We expect this government to introduce a new system of deferred prosecution agreements at some time. These will add another layer of protection for good businesses who found a problem but are doing what it can to avoid such matters in future.

Contact Dennis Clarke to discuss your needs and agree a fee to resolve this. At the same time why not have a policy to deal with other eventualities that are usually ignored but which will be expensive if no plan is in place. See our business section for more.

This Act deals only with bribery – not other forms of white collar crime. There has previously been legislation in place to prevent bribery but this Act was brought in as if to convince the rest of the world that the UK was a land of virtue. In some way the Government at the time must have thought that other countries were more likely to trade with a country with a strong law against bribery.

Your business may be liable for failing to prevent a person from bribing on your behalf but only if that person performs services for you in business. It is very unlikely therefore that you will be liable for the actions of someone who simply supplies goods to you. There is a full defence if you can show you had adequate procedures in place to prevent bribery. But you do not need to put bribery prevention procedures in place if there is no risk of bribery on your behalf.

Hospitality is not prohibited by the Act but on a cursory reading of the Act you might be excused for believing that assertion needs to be taken very carefully and with some disbelieve. The truth is that low level hospitality is not going to be prosecuted (although it is possible to imagine some scenarios where quite small payments could be the subject of investigation) as the prosecutors know it will be difficult to gain convictions for something that is not extravagant and is the norm for the industry.

Bear in mind that facilitation payments are bribes under the Act just as they were under the old law.

You could easily conclude that this is an area you would prefer to keep clear of and to do that the steps you need to take are likely to be simple if the correct advice is taken and acted upon.

By its nature corruption can be difficult to detect as it usually involves two or more people entering into a secret agreement. The agreement can be to pay a financial inducement to a public official for securing a favour of some description in return.

In overseas corruption this can manifest itself in a UK company paying a bribe for the benefit of an overseas public official in order to win a contract. This can be done through a third party – known as an agent or advisor – who then passes the bribe on to the public official or directly by the UK company to the public official.

Ingenious methods of making the payments are used by those involved, including moving the money through a number of offshore companies (which, on the face of it, have nothing to do with the intended recipient) registered in various jurisdictions.

The secret nature of the agreement means that it is difficult for anyone other than those involved to know what is going on. The SFO has conducted research and they have identified a number of questionable practices within various sectors. These are referred to as corruption indicators.

A problem with corruption cases can be that the end result might be obvious to the authorities but they cannot see the real thread and certainly have no obvious interest in the possibility that you and/or another may be set up to appear to be the person conducting the illicit business. To follow the money can be too difficult for the authority or its investigators therefore you need expert legal assistance to assist you to unravel a complex thread.

To achieve this we work with expert Counsel and experienced forensic accountants to investigate and then present your case. A very good team is essential in any complex financial criminality especially if it involves a foreign element. Of course, a foreign element might mean that other investigatory and prosecutory authorities might also be interested in sorting out the matter and their regime might be even more oppressive than that in the UK.

It is possible that in your day to day life or in your working environment you have or will come across questionable practices; things that, given your knowledge and experience, just do not seem to add up. This may not necessarily mean that corruption is present but it may be something that you wish to bring to the attention of your manager or contact the SFO who only investigate cases where the seriousness and complexity of the corruption meets their acceptance criteria.

If you have information that fits this criteria, then you may want to report it in confidence. You can do so using their secure online reporting form or you can send details to them in writing. First of all you may take the view that legal advice will be a good idea. That is where we come in. Our task is to make sure that you do not make mistakes in the way you deal with the authorities who might decide it suits their purposes to investigate and prosecute you to get to the offenders.

The question whether an organisation had adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case. The availability of bribery defences needs the involvement of experienced and good criminal solicitors working with the best of barristers to make sure the correct steps are taken to prepare your case at an early time as the correct decisions need to be taken.

The onus remains on the organisation, in any case where it seeks to rely on the defence, to prove that it had adequate procedures in place to prevent bribery. To make sure your case is prepared adequately you should let us get involved at the earliest opportunity and not rely on luck. The investment in our services will be money well spent.

Just because there are departures from your suggested procedures contained within your guidance will not of itself give rise to a presumption that your organisation does not have adequate procedures. On the other hand it is essential a decision is taken with proper advice as early as possible in case a different approach needs to be adopted to minimise the potential risks.

If your organisation is small or medium sized the application of the principles is likely to suggest procedures that are different from those that may be right for a large multinational organisation. The guidance suggests certain procedures, but they may not all be applicable to your circumstances. Sometimes, you may have alternatives in place that are also adequate. Procedures should be proportionate to the risks faced by an organisation. Do not expect investigators to help you to put your case properly or to question you on the basis other than expecting your organisation to have the perfect system to be expected of the largest of international organisations.

The problem with a bribery case based on over-generous hospitality is that there is nothing to assist with the determination of the correct level of hospitality, what is merely generous and what is so over-generous that it is caught by the Act. Business expenses are likely to be a difficult issue for some time as the courts develop a system of addressing the issue. In the meantime solicitors with a proven track record of dealing with complex financial investigations will be your optimum choice to give you the best chance of showing your business is run honestly.

There will be obvious examples of the over-generous but deciding where the bottom end should be is a real problem as some small items of expenditure could be over-generous. There will be a de minimis attitude by prosecutors as the cases will always be fought and the chance of conviction may be slight.

Bona fide hospitality or promotional or other legitimate business expenditure is recognised as an established and important part of doing business. It is also the case, however, that bribes can sometimes be disguised as legitimate business expenditure.

Whether or not the SFO will prosecute in respect of a bribe presented as hospitality or some other business expenditure will be governed by the Full Code Test in the Code for Crown Prosecutors and the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. Where relevant, the Joint Guidance on Corporate Prosecutions will also be applied.

If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so. In appropriate cases the SFO may use its powers under proceeds of crime legislation as an alternative (or in addition) to prosecution; see the Attorney General’s guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002.

The SFO has produced a list which is not exhaustive but at least it demonstrates some of the behaviour the SFO will be interested in. They will have regard to:

• abnormal cash payments
• pressure exerted for payments to be made urgently or ahead of schedule
• payments being made through a third party country – for example, goods or services supplied to country ‘A’ but payment is being made, usually to a shell company in country ‘B’
• an abnormally high commission percentage being paid to a particular agency. This may be split into two accounts for the same agent, often in different jurisdictions
• private meetings with public contractors or companies hoping to tender for contracts
• lavish gifts being received
• an individual who never takes time off even if ill, or holidays, or insists on dealing with specific contractors himself or herself
• making unexpected or illogical decisions accepting projects or contracts
• the unusually smooth process of cases where an individual does not have the expected level of knowledge or expertise
• abuse of the decision process or delegated powers in specific cases
• agreeing contracts not favourable to the organisation either because of the terms or the time period
• unexplained preference for certain contractors during tendering period
• avoidance of independent checks on the tendering or contracting processes
• raising barriers around specific roles or departments which are key in the tendering or contracting processes
• bypassing normal tendering or contracting procedures
• invoices being agreed in excess of the contract without reasonable cause
• missing documents or records regarding meetings or decisions
• company procedures or guidelines not being followed
• the payment of, or making funds available for, high value expenses or school fees (or similar) on behalf of others.

A bribery investigation can begin in many ways. Information may have been given by an employee, a related person, someone who heard something, another authority or from someone who remains anonymous throughout.

It is unlikely that a bribery investigation would be launched unless the investigators had already decided that the alleged offence was sufficiently serious to pass the ‘interests of justice’ test. That does not mean a prosecution is a foregone conclusion but the complications of such an investigation and the very serious repercussions of an adverse court decision makes taking expert legal advice as early as possible an essential decision. Being represented does not imply guilt and does not suggest you have something else to hide. The message it sends is that you want to have this addressed professionally.

Any business with shareholders needs to demonstrate to its owners that it is dealing with problems professionally and the taking of expert legal advice is part of that process.

Section 12 of the Act provides that the courts in England and Wales will have jurisdiction over sections 1, 24 or 6 offences committed in the UK, but they will also have jurisdiction over offences committed outside the UK where the person committing them has a close connection with the UK by virtue of being

• a British national or ordinarily resident in the UK,
• a body incorporated in the UK or
• a Scottish partnership.

However, as regards section 7, the requirement of a close connection with the UK does not apply. Section 7(3) makes clear that a commercial organisation can be liable for conduct amounting to a section 1 or 6 offence on the part of a person who is neither a UK national or resident in the UK, nor a body incorporated or formed in the UK.

In addition, section 12(5) provides that it does not matter whether the acts or omissions which form part of the section 7 offence take part in the UK or elsewhere. So, provided the organisation is incorporated or formed in the UK, or that the organisation carries on a business or part of a business in the UK (wherever in the world it may be incorporated or formed) then UK courts will have jurisdiction.

There are many multi-national companies incorporated abroad that could be caught out if they operate under the regime in the USA as that is not as strict as the UK law. We await consequences if the UK picks on a large USA corporation.

In the context of the UK Bribery laws, the relevant crime will be the bribe itself. Broadly speaking, any contract obtained directly or indirectly as a result of a bribe will qualify as criminal property. Any property or value derived from that contract will likewise be criminal property. Importantly, this does not mean net profits, it means all revenues, or put another way, the value of the contract.

Turning to POCA. It is broadly defined and interpreted and the courts consider it to be justifiably “draconian”. POCA’s aim is simple: to remove any gain resulting from crime. If the Act errs in any way then it errs on the side of taking too much from offenders. If the ‘criminal lifestyle’ provisions apply the burden on an offender can become extremely difficult. Criminal responsibility under POCA will apply to the members of the Board who have received the information about the contract as well as the organisation itself and perhaps the in-house lawyer.

The prospect of any in-house lawyer and the Directors facing personal criminal liability tends to focus the mind. This is doubly so when considering the penalties which range up to 14 years in prison, with lawyers being shown no mercy by the courts.

A fresh stand alone offence (Section 328 of POCA) with a penalty of 14 years in prison would be committed if someone enters into or becomes concerned in an arrangement which they know or suspect facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another.

For a definition of suspicion, in the case of Da Silva [2006] EWCA Crim1654 it was held that:

“the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice. But the statute does not require the suspicion to be ‘clear’ or ‘firmly grounded and targeted on specific facts’ or based on ‘reasonable grounds’.”

In other words it’s a subjective test of what the individuals think.

If your business is in the “regulated sector” then this extremely low threshold is reduced further. Under Section 330 no suspicion is required at all! Instead, it is simply enough that there was sufficient material to provide reasonable grounds for having a suspicion even if no such suspicion was in fact held by the individual.

If your business is in the regulated sector then you must tell the police failing which you will commit an offence of failing to report which carries a penalty of five years in prison.

If your business is in the unregulated sector then, while there is no obligation to tell the police, but the only defence to the underlying money laundering offence in Section 328 requires that you do so. Failing which, a brand new money laundering offence will be committed carrying with it a 14 year prison sentence.

To work out whether or not the SFO will prosecute a corporate body in a given case you need to read:

• the Full Code Test in the Code for Crown Prosecutors,
• the joint prosecution Guidance on Corporate Prosecutions and, where relevant,
• the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010.

So that is simple enough!

If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so. The fact that a corporate body has reported itself will be a relevant consideration to the extent set out in the Guidance on Corporate Prosecutions. That Guidance explains that, for a self-report to be taken into consideration as a public interest factor tending against prosecution, it must form part of a “genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice”.

Self-reporting is no guarantee that a prosecution will not follow. Each case turns on its own facts. In appropriate cases the SFO may use its powers under proceeds of crime legislation as an alternative (or in addition) to prosecution; see the Attorney General’s guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002.

If the SFO uses its powers under proceeds of crime legislation, it will publish its reasons, the details of the illegal conduct and the details of the disposal. In cases where the SFO does not prosecute a self-reporting corporate body, the SFO reserves the right

• (i) to prosecute it for any unreported violations of the law; and
• (ii) lawfully to provide information on the reported violation to other bodies (such as foreign police forces).

The self reporting system is not so simple and taking legal advice as early as possible will enhance your company’s chances of a satisfactory result.