UK: Financial Services Quarterly Report - June 2011

Last Updated: 30 June 2011
Article by Jonathan Pickworth, Andrew Hearn and Deborah Williams


  • UK Bribery Act 2010 – What It Means for the Financial Services Industry
  • New U.S. Reporting Requirement Regarding Cross-Border Holdings
  • Banking Regulatory Consequences for German Banks Holding Investment Funds
  • Recent French Tax Instruction Renders French SICAV More Attractive to Non-Resident Investors
  • News on the Regulatory Front in Luxembourg
  • UK Remuneration Code – Poacher's Paradise?
  • Ireland Proposes a Voluntary Corporate Governance Code for Its Funds Industry
  • Recent Developments in Chinese Securites Regulation
  • Risky and Complex? Recent Trends in Investor Suitablity Regulation in Asia
  • Upcoming and Recent Events

UK Bribery Act 2010 – What It Means for the Financial Services Industry

The UK Bribery Act 2010 ("Act") comes into force on 1 July 2011. It amounts to a landmark in the UK's desire to play a leading role in international efforts to combat corruption. The UK's commitment was underlined by the Secretary of State for Justice:

Tackling this scourge is a priority for anyone who cares about the future of business, the developing world or international trade.1

Although UK legislation, the jurisdictional reach of the Act is broad and it is perfectly capable of applying even where the acts in question are committed outside the UK, by non-UK nationals, and even if the corruption in question benefits (or is intended to benefit) a non-UK business.


The impetus for the UK Government to enact this new legislation was the criticism levelled at it over recent years for its failure to take enforcement action effectively against corruption, particularly involving companies.

The Act replaces, and builds upon, a myriad of existing anti-corruption legislation in the UK, which was viewed by some as outdated, complex and disjointed. In reality, the main issues with the earlier legislation were that (a) it was not enforced rigorously, and (b) it allowed no easy way to secure prosecutions of corporate entities (English law making it hard for a prosecutor to attribute the necessary mental element of a crime to a corporate entity).

The Act provides a unified and modernised list of bribery offences. It allows for prosecution of corruption— in the UK as well as overseas. And, critically, it creates a new corporate offence of failing to prevent bribery, which will allow criminal action to be brought against corporate entities much more easily than ever before because it is a strict liability offence. The difficulty of proving that the corporate entity had the necessary mental element to commit the offence is removed (as explained further below).

The jurisdictional reach of the Act is broad and it is perfectly capable of applying even where the acts in question are committed outside the UK, by non-UK nationals, and even if the corruption in question benefits (or is intended to benefit) a non-UK business.

Scope of the Act

The Act has far-reaching implications for individuals and companies both in the UK and overseas. Many of the main players in the financial services industry, already subject to extensive regulation by the Financial Services Authority ("FSA") and other bodies, are likely to have anti-corruption policies and procedures in place to minimise the risk of falling foul of existing global regulation—particularly the U.S. Foreign Corrupt Practices Act ("FCPA")—and to meet the FSA's Systems and Controls requirements. However, the Act is far wider in its scope than the FCPA, and those within the industry will need to adapt and build upon existing policies to avoid exposure to criminal liability under the Act.

The Act is broader than the FCPA in the following key ways:

  • Receipt of bribes – The Act extends to the receipt of bribes, not just the giving of them.
  • Domestic bribery – The Act prohibits bribery both in the UK and abroad.
  • It is not limited to the bribing of foreign officials – Although the Act contains a specific offence of bribing a foreign public official (Section 6), the offences it contains (relating to the giving and receiving of bribes and the failure to prevent bribery) are not limited to the bribery of public officials. They extend to all forms of commercial bribery.
  • Facilitation payments are not exempt – The Act does not exempt facilitation payments from its scope. To the contrary, the Guidance on the Act makes it clear that such payments can constitute bribery under the Act.
  • New strict liability offence – The new corporate strict liability offence of failing to prevent bribery has no equivalent in the FCPA.

Failure to Prevent Bribery

As noted above, in addition to the offences of (i) bribing another person (Section 1), (ii) receiving a bribe (Section 2) and (iii) bribing a foreign public official (Section 6), Section 7 of the Act introduces a new, strict liability offence where a relevant commercial organisation ("RCO") fails to prevent bribery.

The Section 7 offence is committed by an RCO if a person associated with the RCO bribes another person, with the intention of obtaining or retaining business or an advantage in the conduct of business for the RCO.

This is by far the most onerous provision of the Act for the reasons set forth below.

Strict liability nature – Unlike the other offences under the Act, the new Section 7 offence of failure to prevent bribery is a strict liability one. There is no requirement to prove that senior management had the necessary mental element normally required. The only defence available to an RCO that is prosecuted under Section 7 will be to show that it had "adequate procedures" in place (see next page). Lack of intent or "turning a blind eye" will provide no defence to an RCO.

Associated persons – For the Section 7 offence to have occurred, a person "associated" with the RCO must have committed a bribery offence anywhere in the world under Sections 1 or 6 (though they need not have been prosecuted for it), with the intention of obtaining or retaining business or an advantage in the conduct of business for the RCO. Under Sections 1 and 6, it is an offence not only to give a financial or other advantage, but also to offer or promise such an advantage. The meaning of "associated person" in Section 8 of the Act is very broad and is "a person who performs services for or on behalf" of the RCO. This can include, but is not limited to, the RCO's employees, agents and subsidiaries. The Guidance acknowledges that, in addition to employees of the RCO, its agents or subsidiaries, contractors and suppliers could also be "associated" persons if they are performing services for or on behalf of an RCO. However, this is not likely to be the case if the contractor is merely acting as a seller of goods. The Guidance suggests that, where a contractor is just one link in a long supply chain involving several entities, it is likely that it will only be treated as an "associated" person of its contractual counterparty (subject to the facts of the case).

Critically, it creates a new corporate offence of failing to prevent bribery, which will allow criminal action to be brought against corporate entities much more easily than ever before because it is a strict liability offence.

Carrying on business (or part of a business) in the UK – An RCO is defined in Section 7 as including (i) any company or partnership formed/incorporated in the UK carrying on business anywhere, and (ii) any company or partnership (wherever formed) that carries on business, or part of a business, in any part of the UK. The second limb of this definition is extremely broad, but the Guidance indicates the Government's view that it should be approached in a common sense way so that, for example, the mere fact that a foreign corporate entity has a UK listing, or that a foreign parent company has a UK subsidiary, should not, in itself, make it an RCO. Nevertheless, whether this requirement is met will always be fact dependent and will be for a court to decide. The financial services industry may well be particularly cautious of this, in light of the wide interpretation given to a similar provision under the Financial Services and Markets Act ("FSMA") in relation to the carrying on of a regulated activity in the UK.2 It is clear that the FSA may consider that organisations could carry on an activity for the purposes of FSMA without much of a physical presence in the UK. However, whether Section 7 of the Act will be given as wide an interpretation is not clear.

Only defence is "adequate procedures" – Once it is established that a business is an RCO, any bribery committed by an "associated" person anywhere in the world exposes the RCO to a potential Section 7 prosecution, provided the bribery was committed with the intention of obtaining or retaining business or an advantage in the conduct of business for the RCO. The breadth of this offence is therefore extremely wide. That breadth makes it all the more important for an RCO to ensure that it can confidently rely on the one defence that exists to a Section 7 prosecution—that it had "adequate procedures" in place designed to prevent persons associated with it from taking part in bribery offences under the Act.

"Adequate procedures" are not defined in the Act, but the Guidance sets out the following six key principles intended to assist organisations in minimising their risk of corporate liability under the Act: proportionate procedures; top-level commitment; risk assessment; due diligence; communication (including training); and monitoring and review.

What is clear is that having adequate procedures is about much more than simply having a book of procedures. For the procedures to be adequate, a company will need to be able to demonstrate a genuinely compliant culture. For this reason, those companies with good and effective FCPA compliance programmes already in place will have a distinct advantage. Such programmes will need upgrading though to bring them into line with the requirements of the Act—which undoubtedly sets a new gold standard—but at least for those companies, the culture is already established.

Key Considerations for the Financial Services Industry

The following considerations are likely to be particularly relevant for the financial services industry:

Intermediaries – The use of intermediaries is widespread in the financial services industry (for example, insurance) and, given that intermediaries who contract directly with an RCO are likely to be considered "associated" persons for the purposes of Section 7 of the Act, measures should be taken to ensure that the risk of bribery is minimised and that the RCO can feel confident, and can demonstrate, that it has adequate procedures in place. Although what is needed may depend on the nature of the RCO's business (for example, its size and the precise sectors and countries in which it operates), such measures may include: (i) vetting potential intermediaries; (ii) ensuring that intermediaries are familiar with corruption policies and are adequately trained; (iii) ensuring that adherence to anti-corruption policies (and the consequences if they are breached) is set out in written agreements; (iv) ensuring that those agreements also require the intermediary to impose similar contractual requirements on any third parties with whom the intermediary contracts to do work for the benefit of the RCO; and (v) conducting periodic reviews to detect any problems that have been encountered and to update anti-corruption policies accordingly. Similar consideration should be given in relation to all parties that could be considered "associated" persons under the Act.

A non-UK parent company should not attempt to avoid liability under the Act by contracting directly with agents for or on behalf of its UK subsidiary, since the non-UK parent company could be considered an RCO for the purposes of the Act in any case.

Corporate hospitality – The Guidance makes clear that the provision of corporate hospitality is entirely permissible, provided it is not being used as a bribe; the key will be to ensure that hospitality is offered for a legitimate purpose (such as to improve the image of a commercial organisation or establish cordial relations) and is both appropriate and proportionate. The latter involves a subjective assessment, which may be influenced by factors such as the seniority of the people involved, and what conduct is generally regarded as an accepted norm in a particular sector. Corporate policies and procedures should be reviewed and amended to ensure that (a) adequate guidance in clear language is in place to enable "associated" persons to know what conduct is or is not acceptable, and (b) relevant procedures are in place for securing approvals and reimbursement. Such approvals may, for example, require advance approval from different levels of management depending on the value of the hospitality being provided. Overall, perhaps too much has been written about the impact of the Act on corporate hospitality; used appropriately and proportionately, it is unlikely to give rise to any issue for most organisations.

The Guidance sets out some useful examples of what may be acceptable hospitality that would fall outside of the Act—for example, the provision by a UK mining company of reasonable travel and accommodation to allow foreign officials to visit distant mining operations so that those officials can satisfy themselves as to the physical operations. Likewise, taking to a business lunch a client or contact who refers work, should not, in itself, fall within the Act.

Relationships between regulators – The financial services industry is likely to be already aware of the information- sharing powers of both domestic and international regulators. One of the key methods by which a regulator may be alerted to the commission of a bribery offence is by way of information-sharing. In the UK, bribes are reportable to the Serious Organised Crime Agency under the Proceeds of Crime Act 2002 and, inevitably, reports may be shared with other regulators such as the Serious Fraud Office and the FSA. In addition to criminal penalties under the Bribery Act, action can be taken by regulators, including the FSA, in respect of corruption concerns.

High-risk jurisdictions Particular thought should be given to high-risk countries in which corporate entities operate, to ensure that adequate procedures are in place, having regard to the risk of conducting business there. In deciding whether a country is high-risk, regard may be had for sources such as Transparency International's rating of countries by reference to their perceived prevalence of corruption. It is important to bear in mind that claiming that the practice of bribery is prevalent somewhere, or a that a particular action is regarded as customary there, will provide no defence under the Act (except in those rare instances where it can be shown that what occurred is positively permitted under local legislation or case law).

Impact of the Act Personal convictions for corruption offences under the Act may lead to substantial prison sentences, unlimited fines and ancillary orders (such as the confiscation of revenues that flow from an illegal act) and disqualification as a director. Corporate convictions expose corporate entities to unlimited fines (not to mention reputational damage), and the penalties may extend to confiscation orders and will (or, in the case of a Section 7 conviction, may) lead to debarment from tendering for Government contracts across the EU in perpetuity—and this is without even mentioning the devastating cost and impact of a protracted and public investigation.

Personal and corporate convictions for approved persons and regulated entities could also be taken into account by domestic and overseas regulators in considering whether to grant authorisation to carry out regulated activities. For example, in the UK, the FSA is able to take into account, among other things, domestic and overseas convictions (as well as ongoing regulatory investigations) when assessing the integrity of regulated firms for the purposes of authorisation, and whether a person is "fit and proper" for the purposes of granting "approved person" status.3

Although the bribery offences under the Act carry criminal liability, there may well be wider financial and commercial implications. Any investment in (or loans to) a business that has corruption compliance issues could become impaired if the business falls foul of the Act, leading to very serious repercussions. Apart from the consequences for the business where the bribery offence occurred, the impact on the investor/lender, both financially and reputationally, may also be substantial. Comprehensive anti-corruption due diligence is therefore recommended prior to any significant investment being made.


1 The full title for the guidance issued on 30 March 2011 (the "Guidance") is "The Bribery Act 2011 – Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing (Section 9 of the Bribery Act 2010)".

2 See FSA Perimeter Handbook: PERG 2.4.

3 See FSA Handbook (for example, PRIN, COND, APER, FIT handbooks).

To read this article in full please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.