1. The UK's new Bribery Act has been long in the making. After much debate and speculation, sometimes informed and sometimes not, it is to come into force later this summer, namely on 1 July 2011. It represents a determined assault on corrupt practices, taking an approach which is more severe and extensive in its reach than comparable legislation elsewhere, including even the US Foreign Corrupt Practices Act.
2. That much is apparent from the terms of the new Act which, briefly expressed: _ give clearer statutory definition to the general offences of bribery;
- Create the new offence of bribing a foreign public official;
- Create the new offence of failure, on the part only of commercial organizations, to prevent bribery;
- Apply to both the public and the private sectors;
- Do not permit 'facilitation payments';
- Have overwhelming reach, applying as they do i) to any transactions which take place in the UK; ii) to all UK residents, companies, partnerships and citizens transacting anywhere in the world; iii) to non-UK-based companies which carry on business in the UK;
3. Based on that summary alone, the observation that the Act utterly transforms the English law of bribery involves no overstatement. As can already be seen in outline, it re-defines the nature of bribery itself; it expressly criminalises the bribery of foreign public officials; it enacts a new corporate offence by virtue of which companies will become criminally liable if bribes are paid by its employees or agents (unless 'adequate procedures' are in place to provide safeguards against such payments); it widens UK jurisdiction over offences committed abroad in ways which extend the usual bases of legal jurisdiction; the uplift of maximum penalties to a 10 year maximum reflects its overall determination.
THE NEW OFFENCE OF BRIBERY
4. As to the new offence of bribery, no longer does the recipient have to be in a specific public position. Both the 'taking' and 'receiving' offences will, subject to available defences, apply within a business to those with even constructive knowledge of a bribe. Individuals seeking to ignore the realities by simply looking the other way are at personal risk, as is the company itself under the new corporate offence provisions.
5. The jurisdictional reach of the Act is of course one of its vital features. That reach, as regards different provisions, extends to:
Anyone, of any nationality, who does something in furtherance of a bribery offence which occurs in UK;
- Citizens of the UK or British Overseas Territories, wherever resident, and wherever the act in question takes place. (It may be relevant to notice in the offshore financial context that the 14 British Overseas Territories include Bermuda, BVI, Cayman Islands, Gibraltar and Turks and Caicos Islands)
- Residents of the UK, whatever their nationality, even if the act in question takes place outside UK
- UK incorporated companies / partnerships wherever the act in question takes place;
- Non – UK incorporated corporate entities carrying on even part of their business in the UK;
- ('act' in this context should be taken to include a relevant omission.)
6. The drafting is not easily digestible but s.7 as regards corporate entities and s.12 as regards territorial jurisdiction over individuals and UK incorporated bodies repay careful analysis.
PERSONAL LIABILITY PROVISIONS
7. The personal liability provisions are certain to be of important effect. Even if a board were sufficiently misguided to countenance hiding corrupt payments by means of off-the-books slush fund accounts or shell companies or otherwise to facilitate bribes within some hole and corner corporate accounting, the personal liability provisions are now likely to amount to a real deterrent. An analogue may well be provided by the US proceedings under which Siemens AG and three subsidiaries pleaded guilty to offences under the Foreign Corrupt Practices Act.
8. The directors on both the managing and supervisory boards were subject to internal investigation for failing to provide compliance oversight. They had to repay the company millions of dollars. Many Siemens executives were also investigated by the German criminal authorities with the consequent stress and disruption which that entailed.
9. The non-exemption for facilitation payments (i.e. payments to expedite or secure the performance of a routine governmental action) was logically to be expected, whatever the practical difficulties to which that gives rise on the ground. The proposition, realistic or otherwise, is that in the longer term the expectations of government officials in relevant jurisdictions will be changed.
NEW CORPORATE OFFENCE AND MINISTRY OF JUSTICE GUIDANCE
10. Another vital feature is the introduction of the new corporate offence. Usually, subject to limited exceptions, corporate criminal liability arises only where the owner of 'the directing mind' of the company has been involved and has personal criminal liability. Under the terms of the Act, however, if an employee, officer or agent of a commercial organization pays a bribe in connection with the organization's business, then the organization becomes criminally liable. That liability is subject to the defence that the organisation had 'adequate procedures' in place to prevent bribery.
11. The Act does not define 'adequate procedures' but by virtue of s.9 of the Act the Secretary of State must publish guidance about procedures that relevant commercial organisations can put in place to prevent persons associated with them from bribing as mentioned in section 7(1). The Ministry of Justice has issued such guidance. It is based on 6 key principles namely proportionality, top level commitment, risk assessment, due diligence; communication; monitoring/review. In brief, adequate procedures to defend the business against a charge of failing to prevent bribery will comprise the application of a risk based approach to identify potentially dangerous areas within the business and devising and implementing controls which are appropriate to meet those dangers.
12. It is fairly to be said that in this aspect the Act displays sensitivity to the needs of business in allowing the business to identify its own risks and counter measures. The guidance establishes broad principles and allows the business to devise risk based solutions specific to itself. This stands in contrast to the steps-specific base of comparable provisions in the US Foreign Corrupt Practices Act, which now dates back as far as 1977.
THE SERIOUS FRAUD OFFICE
13. In addition to the guidance issued by the Ministry of Justice, the Serious Fraud Office has stated its position.
14. In July 2009 it issued important guidance on its priorities in pursuing bribery offences. It said that overseas bribery investigations are a priority and are attracting significant resources. It estimates that a third of its workload is concerned with overseas corruption. It will consider imposing only civil penalties in cases of self reporting of bribery by the company. However, such leniency will depend on all of the circumstances, including corporate contrition evidenced by commitment to reform, as well as the conduct and attendant personal criminal liability of relevant personnel.
15. There is every reason to suppose that enforcement of the Act will be reasonable and proportionate and will not place heavy handed constraint upon existing practices of corporate hospitality which are congruent and within sensible bounds.
POLICING THE ACT
16. On the question of policing the Act, The prospective absorption of the SFO into the new Economic Crime Agency and cuts in police resources under the Comprehensive Spending Review of public sector finances might be taken to suggest that non-compliance with the Act is at low risk of detection. That is likely to be a seriously mistaken view.
17. The relevant corporate processes will involve people who are individually at risk of personal liability, not only under the Act but under existing regulatory statutes, the Proceeds of Crime legislation being a prime example. Auditors and bankers for example are likely to feel constrained to file defensive suspicious activity reports. Such is the existing understanding of a functioning regulatory framework within the regulated sector that the Act is likely to be self-policing to a significant extent in the way described.
18. The stakes are undoubtedly high. UK companies convicted of corruption face the risk of being unable to bid for public sector contracts under the EU Public Procurement Directive.
A NEW COMPLIANCE FRAMEWORK IN THE JERSEY CONTEXT
19. Know Your Customer, or KYC, was the dominant regulatory principle within the regulated sector from the 1990's onwards. The Act takes KYC as a given and shifts emphasis onto the prevention of bribery and corruption. What we are seeing is the development of a new compliance framework which in particular will need to be sufficiently efficient to meet threats which may arise from the emerging markets or from existing markets with an established culture of corruption.
20. The length and breadth of the jurisdictional reach described earlier places all personnel of Jersey service providers at risk should they become involved in prohibited activity. It is plain therefore that businesses should put in place written procedures adequately designed to identify relevant risk and to counter the possibility of involvement in bribery transactions. It is in a high degree likely that these would characteristically take the form of processing payments between clients and third parties.' Know your third party' may become a relevant watch phrase. Payments, for example, to offshore companies for 'marketing services', 'commission-sharing' and 'introduction fees' are the sort of items which will require the closest scrutiny.
21. It is true that the handing of such payments might already have given rise to criminal liability under the Proceeds of Crime (Jersey) Law 1999 so that the Act is not entirely innovative in its effect in Jersey (see the Qatar v Al Thani and associated litigation which ran in the Royal Court between 1998 and 2002 for detail). The matter did not result in criminal prosecution and the difficulties attendant on such a prosecution therefore remained untested. The Act removes areas of uncertainty and provides prosecutors with a clearer road to the criminal court.
GLOBAL INITIATIVE AND THE UNDERLYING PURPOSES
22. Through international instruments like the OECD convention and the U.N. convention against corruption, anticorruption efforts are being stepped up almost globally and there is little doubt that the trend will continue. It is these global aspects which give point to the demanding provisions of the Act. Shortly expressed, they are necessary to ensure that all companies, domestic and foreign, large and small, have equal access to the globalized markets.
23. The Act, moreover, has a humane purpose. That aspect is best seen in the words of the Acting US Assistant Attorney General in the aftermath of the Siemens case, mentioned earlier: 'For let there be no doubt that corruption is not a victimless offense. Corruption is not a gentlemen's agreement where no one gets hurt. People do get hurt. And the people who are hurt the worst are often residents of the poorest countries on the face of the earth, especially where it occurs in the context of government infrastructure projects, contracts in which crucial development decisions are made, in which a country will live by those decisions for good or for bad for years down the road, and where those decisions are made using precious and scarce national resources'.
FRONT LINE RESPONSIBILITY FOR COMPLIANCE
24. MLROs already have well developed experience of the sort of due diligence which will be required under the Act both inward and outward looking. There is anecdotal evidence that a good number of firms are putting the MLRO in change of anti-corruption. However it is equally true that many MLROs face demands on their time and expertise which already take them close to the limit of their capacity. It is equally true that they are not necessarily best placed to craft and implement 'adequate procedures'. It is becoming apparent that larger financial institutions are assigning a designated individual to manage their anti-corruption responsibilities. This mirrors the position with sanctions compliance which can be regarded as developing into a discrete discipline.
WHAT JERSEY SERVICE PROVIDERS SHOULD BE DOING
25. It is plain that the relevant Jersey businesses should now be developing the appropriate compliance procedures or reviewing existing procedures with a view to update.
26. As a minimum there should be: a documented assessment of the risk which bribery and corruption may pose to the business; amendment or implementation of policies to prevent involvement by the business in bribery transactions at any stage of process; a functioning system of compliance monitoring.
27. Should suspicion arise that the business has already been involved in a dubious transaction the need for early, specialised legal advice cannot be over emphasised.
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