The UK Bribery Act 2010 came into force on July 1, 2011 and represents an attempt to replace an outdated anti-corruption regime that had attracted strong criticism from influential international bodies such as the Organisation for Economic Co-operation and Development (OECD) and Transparency International.
The UK government sought to implement an enforcement tool that reflected modern global business practices, positioned the UK alongside the United States as a standard-bearer in anti-corruption efforts, and created an environment in which international businesses engaged in corrupt activity would no longer view the UK as a haven from enforcement.
This article examines whether the Act has been an effective tool in assisting the UK enforcement authorities’ work towards those objectives.
A new approach on the horizon?
In April 2012, David Green QC began his four-year term as director of the UK Serious Fraud Office (SFO) and, no doubt, will be keen to make his mark. In a statement at the start of his tenure, Green suggested that the regulator may concentrate more on effective prosecution rather than co-operative settlement: “The SFO is here to stay. It is and will remain a key crime-fighting agency targeting top-end fraud, bribery and corruption. We will play our part in maintaining in the national interest a level playing field for investors and the business community. We will work co-operatively with others in the emerging counter-fraud landscape. We will press for all the tools necessary to maximise our impact. The SFO will be tough but approachable.”
In an interview with the Financial Times, Green, a former director of the Revenue and Customs Prosecutions Office, re-emphasised the proposed policy change: “The perception has emerged over the last few years that perhaps there’s more willingness to compromise than to prosecute… I would like to look to rebalance the relationship between prosecution and civil settlement. We are primarily a crime-fighting agency, and we’ve got to remember that.” These comments suggest we may be entering an era of enhanced and determined prosecution in the fraud, bribery and corruption arena.
Enforcement under the Act
In November 2011, the Crown Prosecution Service prosecuted Munir Patel, a county court administrative clerk, in connection with the receipt of payments in exchange for tampering with court papers in driving offence cases. Patel was sentenced to three years’ imprisonment for bribery offences, to run concurrently with a six-year jail term for misconduct in public office.
This case represents a positive but low-level start to enforcement under the Act. The UK government will be hoping that future enforcement under the Act is more high-profile and international and includes the targeting of corporate defendants. In fact, reports suggest the SFO is already in the preliminary stages of a number of investigations into suspected offences under the Act.
Further SFO anti-bribery enforcement
While there has not been a flurry of enforcement under the Act, the SFO has recently brought a number of significant anti-corruption actions using other powers. For example:
• In February 2011, the SFO fined M.W. Kellogg just over £7 million in recognition of share dividends payable from profits and revenues generated by contracts obtained by bribery and corruption undertaken by its US parent company, Kellogg Brown and Root, and others in connection with the Bonny Island liquefied natural gas project in Nigeria. The fine was imposed despite the finding that the company took no part in the criminal activity that generated the funds.
• In January 2012, in the final part of long-running proceedings against Mabey & Johnson, the SFO obtained a civil recovery order against Mabey Engineering (Holdings), which agreed to repay the £130,201 dividend it received from its subsidiary, Mabey & Johnson. This action represented the first time the SFO had targeted the recovery of dividends paid to UK companies as part of anti-corruption enforcement.
While the Financial Services Authority (FSA) is not a designated prosecutor under the Act, it has also taken a tough stance against financial sector businesses under its jurisdiction. Significant recent anti-corruption enforcement includes:
• In July 2011, Willis Limited was fined £6.895 million in connection with financial crime systems and controls failures. The FSA recognised that Willis had taken a number of steps to implement anti-bribery policies, but found that the company had created a “weak control environment” that gave rise to an unacceptable risk that payments to overseas agents would be used for corrupt purposes.
• In January 2009, the FSA fined Aon £5.25 million for failing to take reasonable care to establish and maintain effective systems and controls to counter the risks of bribery and corruption associated with making payments to overseas firms and individuals.
The FSA has also sent strong messages to the financial sector through its conduct of sectoral investigations. Recent thematic reviews have revealed weaknesses in the anti-corruption systems and controls in place in businesses operating in the investment banking and commercial insurance broking sectors.
OECD review of UK bribery enforcement
In March 2012, the OECD Working Group on Bribery completed its latest report into the UK’s application of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and related instruments, giving a somewhat mixed review of the UK’s anti-bribery enforcement efforts.
The Working Group recognised that the SFO had significantly increased foreign bribery enforcement and that the UK government had made substantial efforts to raise awareness of the Act, resulting in a heightened understanding of foreign bribery-related issues in the UK.
However, the Working Group found that there was still room for improvement, with a particular need for the UK authorities to be more transparent when resolving cases. The Working Group found that the “opaque” settlement process could fail to instil public and judicial confidence. It noted that civil recovery orders, used to settle corruption matters with increasing frequency by the SFO, require less judicial oversight and are less transparent than criminal plea agreements. Finally, the lack of detailed information about settlements precludes the proper assessment of whether anti-corruption sanctions were effectively imposed, proportionate or dissuasive.
The Working Group made a number of recommendations, including that the UK should:
• Avoid confidentiality agreements that prevent disclosure of key information about settled cases; and
• Clarify the significance of “reasonable and proportionate” hospitality and promotional expenditures.
It is, perhaps, not much of a surprise that there has been limited enforcement under the Act in the year since its implementation. The Act does not have retrospective effect but covers corrupt activities taking place after July 1, 2011. Therefore, while future enforcement is likely to be brought under the Act, recent matters have necessarily been dealt with under the old regime. Further, indications suggest that the Act may already have had something of a preventative impact. Among respondents to the Fulbright & Jaworski 2011 Litigation Trends survey, 21% of UK companies predicted changes in the way their companies do business due to the implementation of the Act, while 25% of respondents reported that they had undertaken a review of existing procedures in light of the introduction of the Act.
It is still early days for enforcement under the Act. It seems certain that the UK regulators’ practice of proactive enforcement, increasing fines for corrupt activity and increased co-operation with international enforcement agencies are set to continue. That said, it remains to be seen how the UK authorities will respond in practice to the OECD’s concerns, and whether the SFO and the FSA can maintain the momentum of recent anti-corruption enforcement against a backdrop of budget cuts and changes in leadership.
Source : risk