Tag: UK Bribery Act

Compliance Bits and Pieces – UK Edition

The first case under the new Bribery Act in the United Kingdom has come down, so I’m devoting this roundup of posts to that story.

BREAKING: First Bribery Act charges brought in record time in BriberyAct.com

The Press Association is reporting that a court official in London is the first person charged under Section 2 of the Bribery Act following an expose by the Sun Newspaper.

The case is of interest because it is a domestic bribery case and the charges have been brought, not by the SFO, but by the UK Crown Prosecution Service.

First Case Brought Under UK Bribery Act Looks Nothing Like You Expected by Bruce Carton in Enforcement Action

The first-ever action under the UK Bribery Act has now been filed–but it probably doesn’t look anything like what you expected.

Court employee faces first prosecution under Bribery Act in the Blog of the Crown Prosecution Service.

We have decided that Munir Yakub Patel should be prosecuted under the Bribery Act 2010 in relation to allegations of misconduct during his employment at Redbridge Magistrates’ Court, Ilford, London. He is the first person to be prosecuted under the new Act.

Patel, an administrative clerk, faces a charge under Section 2 of the Act for requesting and receiving a bribe intending to improperly perform his functions.

Court clerk becomes first person charged under Bribery Act by Owen Bowcott in The Guardian

The first person to be charged under the new Bribery Act will be a magistrates court clerk who allegedly accepted £500 for fixing a motoring offence, according to the Crown Prosecution Service (CPS).

The First Days of the UK Bribery Act

It’s a been a few days since the UK’s Bribery Act became effective, making some questionable corporate behavior become clearly illegal. There have been thousands of news stories, legal alerts, and dire warnings about the line in the sand drawn on its date of effectiveness, July 1.

Now, there is a bit a waiting, a calm before the storm, until we hear the first government action. Companies with a UK presence have most likely taken a look at their operations and implemented the changes needed to comply with the new law. (Perhaps that is optimistic.) The SFO now has a loaded gun and is likely on the hunt for behavior that violates the new law.

It took decades before the FCPA became actively enforced. I don’t expect it will take as long to see the first action under the Bribery Act. The SFO has already seen how effective FCPA has been in the United States. (If you consider “effective” to be good headlines and relatively easy wins.)

When will the first action happen? Will it be a government investigation or self-reporting? What industry will be first?

Sources:

Compliance Bits and Pieces – UK Bribery Act Edition

With the recent release of the Guidance under the UK Bribery Act, I decided to pull together some other stories:

Howard Sklar decided to start from the back of the guidance and give his thoughts on the case studies:

From Securities Docket, Avoiding Prosecution Under the UK Bribery Act-Playing Offense and Defense, including Vivian Robinson, Q.C. discussing the position of the UK’s Serious fraud office.

Bribery Act in force from July 1: Ken Clarke’s statement in full from Bribery Act .com

“Today I have announced that the Bribery Act will enter into force on July 1st, replacing and bringing together the current bribery laws which date back to 1889.  I am also publishing guidance to businesses about how they can reduce their exposure to bribery and understand the Act.  This guidance is available on the Ministry of Justice’s website here http://www.justice.gov.uk/guidance/bribery.htm

UK Bribery Act guidelines: has the lobbying worked? By Helen Parry, senior regulatory intelligence expert, Complinet

Seemingly unnerved at the anti- Bribery Act lobby’s dire predictions of British corporations losing out to competitors hailing from jurisdictions with a more relaxed approach to such matters, the Ministry of Justice appears to have taken heed. This is clearly demonstrated by the reassuring, empathetic and positively emollient tone employed in the revised version of the guidance for companies issued last week, particularly when sensitive issues such as facilitation payments and corporate hospitality are being addressed. This change of heart can be clearly discerned by comparing the original and revised versions of the case study on facilitation payments featured in the guidance documents.

UK Bribery Act guidance fails to clarify compliance issues by Mark Sands on Risk.net

New guidance from the Ministry of Justice and the Serious Fraud Office (SFO) on the UK’s Bribery Act does not clear up issues of prosecutorial discretion, according to first responses to the papers.

The papers are designed to clarify both the way in which the new bribery laws will be enforced and the appropriate procedures that firms can put in place to make sure they are not liable. However, sources have responded by saying that, while the guidance does help in some areas, it also muddies the waters.

“I think the issue is that this new guidance doesn’t have force of law, so it’s up to the SFO and the courts to decide to prosecute,” says one source at a UK consultancy. They say although Kenneth Clark, in his role as the UK’s secretary of state for the Ministry of Justice, is required to provide guidance to firms, it is not absolute. “You could actually do everything it says and still be prosecuted. Because it’s not prescriptive guidance, it won’t give you the silver bullet,” they say.

Don’t get hysterical – taking an extra biscuit won’t get you arrested under the Bribery Act by Andrew Clark in the Guardian

Rather like the All Blacks performing the haka, a full-scale tantrum by Britain’s business elite can be majestic in its fury. So it was difficult to ignore the histrionic reaction afforded to Jack Straw’s Bribery Act, which got royal assent in the dying days of the Labour government.

The act, intended to update a patchwork of anti-corruption legislation dating back to 1906, clamps down on backhanders, sweeteners and brown envelopes lubricating the progress of transactions and is largely aimed at British companies operating overseas.

Good Act, Deplorable Guidance from Transparency International

Corruption matters to the UK Government. Taking a strong anti-corruption stance should allow the UK to speak with authority at times when it matters, such as in Afghanistan and in the Arab Spring. The new Government is a year old, and has yet to set out its anti-corruption strategy. Judged by its deplorable approach to the Bribery Act, it has made a very poor start.

Life After Guidance: No Change by Michael Volkov in the FCPA Blog

What now? Companies need to review existing anti-corruption programs and make sure U.K. compliance is covered. Because one fact has always been certain: No one wants to become known as the first defendant in a prosecution under the Bribery Act.

‘Questionable Guidance’ From Justice Secretary by Bill Waite in the FCPA Blog

The recent friction between the SFO and Lord Justice Thomas and Mr Justice Bean suggest to me at least that the judiciary will remain staunchly independent in this area and reject guidance where they consider that it conflicts with the statute.

Guidance Under the UK Bribery Act

We have been waiting for some guidance from the United Kingdom about their new Bribery Act since it received Royal Assent last April. The delay on the guidance has delayed the implementation of the Bribery Act itself. Now the guidance is out.

The Bribery Act 2010 creates a new offence under section 7 which can be committed by commercial organisations which fail to prevent persons associated with them from bribing another person on their behalf.

An organisation that can prove it has adequate procedures in place to prevent persons associated with it from bribing will have a defence to the section 7 offence.

The guidance, published here under section 9 of the Act, will help commercial organisations of all sizes and sectors understand what sorts of procedures they can put in place to prevent bribery, as mentioned in section 7.

With the release of the guidance, Kenneth Clarke, Lord Chancellor and Secretary of State for Justice, announced that the Bribery Act will go into force on July 1.

Bribery and Corruption are bad and we want to have systems in place to prevent them and to detect them if they happen. Tucked into Section 9 of the Bribery Act was requirement that the Secretary of State publish guidance about procedures which commercial organizations can put in place to prevent persons associated with them from bribing. Under section 9 of the Bribery Act, the only defense against criminal liability for a commercial organization which has “failed to prevent bribery” is that the organization had adequate procedures” to prevent bribery.

In what appears to be a very user-friendly approach the Ministry of Just has published a Quick start guide (PDF 0.27mb 9 pages) to get you up to speed on the Bribery Act.

Commercial Organization

Of course there is some question about the applicability and enforcement beyond the borders of the United Kingdom. Clearly, if you have operations in the UK and those employees are paying bribes for business to be sent to those operations then it falls under.

If you have an office in London, are all of your operations worldwide subject to the Act? I’m sure we will find out, eventually.

It will be up to the court to decide whether or not any individual organisation can be said to be ‘carrying on a business’ in the UK. They obviously take a range of factors into account – mere listing on the London Stock Exchange or just the fact of having a UK incorporated subsidiary would not necessarily mean the Act applies. To be clear: this is not a ‘carve-out. Under the terms of the Act, it has always been a decision for the courts. – Kenneth Clarke, Lord Chancellor and Secretary of State for Justice

If you have a London office (or operations somewhere in the United Kingdom), or other “demonstrable business presence in the United Kingdom” you should pay attention to the Act. However, merely being listed on the London Exchange alone would not be enough. (See paragraph 36 in the guidance.)

Hospitality

According to Quick Start Guide:

The government does not intend that genuine hospitality or similar business expenditure that is reasonable and proportionate be caught by the Act.

In any case where it was thought the hospitality was really a cover for bribing someone, the authorities would look at such things as the level of hospitality offered, the way in which it was provided and the level of influence the person receiving it had on the business decision in question. But, as a general proposition, hospitality or promotional expenditure which is proportionate and reasonable given the sort of business you do is very unlikely to engage the Act. So you can continue to provide tickets to sporting events, take clients to dinner, offer gifts to clients as a reflection of your good relations, or pay for reasonable travel expenses in order to demonstrate your goods or services to clients if that is reasonable and proportionate for your business.

That may actually be a broader ability to deal with government officials than under the FCPA.

Facilitation Payments

Facilitation payments, which are payments to induce officials to perform routine functions they are otherwise obligated to perform, are bribes. There was no exemption for such payments under the previous law nor is there under the Bribery Act.

That is more strict than the FCPA. They do leave it open to prosecutorial discretion, that based on the facts and circumstances they can decide whether prosecution is in the public interest.

Foreign Public Official

Over here in the US it looks like there some be some court decisions coming down that will add clarity to the definition of a foreign official under the US FCPA. Here is the guidance under the Bribery Act as to who is a foreign public official:

A ‘foreign public official’ includes officials, whether elected or appointed, who hold a legislative, administrative or judicial position of any kind of a country or territory outside the UK. It also includes any person who performs public functions in any branch of the national, local or municipal government of such a country or territory or who exercises a public function for any public agency or public enterprise of such a country or territory, such as professionals working for public health agencies and officers exercising public functions in state-owned enterprises. Foreign public officials can also be an official or agent of a public international organisation, such as the UN or the World Bank.

There is lots to digest in the guidance. Ultimately, other than the removal of facilitation payments I does not seem that compliance with the UK law would be any different than compliance under the FCPA.

Sources:

The Impact of the UK Bribery Act on U.S. Companies

Securities Docket put on another fantastic webcast on topics relevant to compliance professionals. Today’s focused on the upcoming Bribery Act in the United Kingdom. If your company has operations in the United Kingdom, you need to pay attention to this law.

The upcoming law applies to individuals and companies and outlaws bribes to public officials and private individuals. That makes it broader than the US FCPA. There is also a new corporate offense for failure to prevent bribery. Conviction can have jail sentences up to 10 years and provides for unlimited fines.

Webcast Presenters:

  • Vivian Robinson QC, general counsel to the UK’s Serious Fraud Office
  • Barry Vitou, partner in Winston & Strawn’s London office
  • Richard Kovalevsky QC, 2 Bedford Row
  • David Childers, CEO of EthicsPoint

For compliance professionals, the key will be putting “adequate procedures” in place inside the business to prevent bribery. We are still waiting for the UK government to publish guidance on that standard.  One recommendation from the panel was to look at Transparency International’s Adequate Procedures – Guidance to the UK Bribery Act 2010.

It’s not an offense if you lack “adequate procedures.” It is merely a defense to the charge against the company for violation of the Bribery Act.

You can watch a rebroadcast of the webcast and download the materials

The London Olympics and the Bribery Act

The London Olympics in 2012 will be a test of strength, agility and endurance. That’s just be for the corporate sponsors trying to comply with the UK’s Bribery Act.

Unlike the US Foreign Corrupt Practices Act, the UK’s Bribery Act applies equally to payments made to foreign government officials as it does to payment made to domestic companies. Should a potential bribery case arise under the Bribery Act, the only defense of the organization is to show that it had “adequate procedures” in place to stop bribery. Guidance on what are “adequate procedures” will not be promulgated until at least early 2011.

It is estimated that £100m will be spent on hospitality during 2012 London Olympic games. It will be a compliance headache for companies with hospitality tents, events and other rewards for customers.

Here in Massachusetts, you can’t offer a public official tickets to a playoff game or World Series game. That’s true even if the official pays for the ticket. It’s considered special access and you are getting a benefit of access that is not available to the general public.

If you take that same position, maybe corporate sponsors should only be handing out tickets to Olympic events that are not sold-out. That sounds silly. But it may be one of the challenges faced with corporate sponsors at the London Olympics in 2012.

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Adequate Procedures to Prevent Bribery in the UK

On 14 September 2010, the United Kingdom’s Ministry of Justice  issued its Consultation Paper on what might be “adequate procedures” prevent bribery. Under section 9 of the Bribery Act, the only defense against criminal liability for a commercial organization which has “failed to prevent bribery” is that the organization had adequate procedures” to prevent bribery.

The consultation is a designed to seek public comment. Responses are due by November 8.

It lays out six principles for bribery prevention:

Risk Assessment – this is about knowing and keeping up to date with the bribery risks you face in your sector and market;
Top level commitment – this concerns establishing a culture across the organisation in which bribery is unacceptable. If your business is small or medium sized this may not require much sophistication but the theme is making the message clear, unambiguous and regularly made to all staff and business partners;

Due diligence – this is about knowing who you do business with; knowing why, when and to whom you are releasing funds and seeking reciprocal anti-bribery agreements ; and being in a position to feel confident that business relationships are transparent and ethical;

Clear, Practical and Accessible Policies and Procedures – this concerns applying them to everyone you employ and business partners under your effective control and covering all relevant risks such as political and charitable contributions, gifts and hospitality, promotional expenses, and responding to demands for facilitation demands or when an allegation of bribery comes to light.

Effective implementation – this is about going beyond ‘paper compliance’ to embedding anti-bribery in your organisation’s internal controls, recruitment and remuneration policies, operations, communications and training on practical business issues.

Monitoring and review – this relates to auditing and financial controls that are sensitive to bribery and are transparent, considering how regularly you need to review your policies and procedures, and whether external verification would help.

It also sets out a few scenarios and how the principles would be applied.

Sources:

UK Bribery Act Delayed

When I saw there was a press release from the UK’s Ministry of Justice, I was expecting an announcement of what it meant for a commercial organization to have “adequate procedures” to prevent bribery. That being the only affirmative defense under the Bribery Bill.

It turns out that implementation of the Bribery Act will be delayed until April 2011. They will start the regulatory process for guidance on procedures which commercial organizations can put in place to prevent bribery. That guidance is scheduled to be released in early 2011 in time for organizations to ramp up for the compliance deadline.

I view the UK Bribery Act as being more strict than the Foreign Corrupt Practices Act since it has no exclusion for “facilitation payments” and is not limited to government officials. The US DOJ and SEC have stepped up their enforcement of the FCPA which makes it a big concern for any company with international operations. We have yet to see how the UK government will enforce its Bribery Act.

In light of the delay, Transparency International is planning to publish its own guidance to “allow companies to get a ‘head start’ in tightening up their anti-corruption procedures.”

Sources:

U.S. DoJ Asst. Attorney General, Criminal Division, Lanny Breuer Speaks at Compliance Week

Lanny Breuer, selected by President Obama to head the Criminal Division of the Justice Department in January 2009, will discuss practical matters for companies dealing with the Justice Department, including topics such as cooperation, attorney-client privilege, and the importance of pre-existing compliance programs. Breuer will also discuss the Department’s increasing use of proactive law-enforcement strategies and tools, such as wiretaps, to combat financial fraud.

These are my notes, live from the keynote:

Prosecutions promote the rule of law, deter future bad behavior and punish wrong-doers. Compliance is largely the opposite of criminality.

He wants a new era in white collar crime prosecution.

The Obama administration is giving great attention to financial fraud and the establishment of the Financial Fraud Enforcement Task Force. Over 2 dozen state and federal agencies are part of the group. A companion is the deployment of additional resources. The budget has increased allowing the hiring of additional prosecutors and support.

They using more aggressive law enforcement techniques, including wire taps and undercover stings. They will continue to look toward innovative techniques and existing techniques used against organized crime and blue collar crime. (Is there a meaningful distinction anymore?)

He is looking to continue strengthening their partnership with the SEC.

Foreign bribery is a law enforcement challenge.  Since 2004 the DOJ has filed 37 FCPA cases, with fines over $1.5 billion. Over 80 individuals have been charged under the FCPA. Aggressive enforcement is meant to deter others from engaging in bribery.

He cited the new UK Bribery Act and the need for a company to have “adequate procedures” to detect and prevent bribery.

There are benchmarks. The principles of federal prosecution of business entities are the OECD guidance on effective compliance are key standards. But you need to customize these to your company. Direct reporting lines are important. Testing effectiveness is important.

If you come forward, cooperate with the investigation and institute meaningful remediation, the DOJ is committed to giving you meaningful credit. But not amnesty.

He used the Siemens case as a benchmark for the value of cooperation and remediation. The Siemens fine was huge at over $400 million. However, the sentencing guidelines called for a fine of over $1.4 billion. (He didn’t mention whether taking federal contracting debarment off the table was part of the discussion with their cooperation credit.)

As for compliance monitors, he would want one in place when the corporation needs to implement or significantly redesign a compliance program. Largely, it sounds like a monitor would be more likely if there is still significant remediation to be done.

He then sat down with Compliance Week‘s Matt Kelly.

Complying with the FCPA is harder in some countries is harder than others (China versus Belgium)?

You don’t get a free pass. They expect a more robust compliance program when entering into markets where bribery is more common. They would want to see new tools to detect and try to prevent bribery.

Now that the UK Bribery Law has banned facilitating payments will they be prohibited under the FCPA?

It will take an act of Congress, but he is looking forward to the evolution of law in the area of bribery of government officials.

Interpreting “Tone at the Top”, does firing someone and not supplying legal fees a bad tone?

The DoJ has changed their position on this. The key is removing the person from authority at the company, at least temporarily. The company has to make some real changes.

What about consistency throughout the DOJ and US Attorney Offices?

All FCPA has come in through the fraud unit, so that helps ensure consistency in that area. (It sounds like he recognized some inconsistencies.)

Bribery in Britain

The British government is working on a new Bribery Bill “to reform the criminal law of bribery to provide for a new consolidated scheme of bribery offenses to cover bribery both in the United Kingdom (UK) and abroad.”

The Bribery Bill would replaces the offenses under the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916 with two crimes. The first makes it a crime to bribe another person. The second makes it a crime to accept a bribe.

The Bribery Bill also creates a discrete offense of bribery of a foreign public official and a new offense where a commercial organization fails to prevent bribery. This would create a British version of the US Foreign Corrupt Practices Act and and bring the United Kingdom compliant with its obligations under the OECD.

There is an affirmative defense for the failure of a commercial organization to prevent bribery: “adequate procedures.” The Bribery Bill requires the Secretary of State to publish guidance about procedures that a company can put in place to prevent bribery.

The Bribery Bill is widely expected to come into force later this year.

According to research from the Eversheds, many businesses are unaware of this new Bribery Bill, with 60% of businesses unaware that failing to prevent bribery will be a criminal offense.

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