Tougher Revised UK Bribery Act Policies

Following his appointment, the new Director of the SFO, David Green, reviewed SFO policies alongside recommendations made by the Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery. The revisions have been published to:

1. Restate the SFO's primary role as an investigator and prosecutor of serious and/or complex fraud, including corruption;
3. Ensure there is consistency with the approach of other prosecuting bodies; and
4. Take forward certain OECD recommendations.

The SFO stated that “[t]he revised policies make it clear that there will be no presumption in favour of civil settlements in any circumstances.” This change in policy may make it challenging for companies and their advisers to determine the value in self-reporting. The effect of this policy, on this issue, draws the Bribery Act 2010 closer to the FCPA in assessing the value and benefits of self-disclosure. It remains to be seen whether the SFO will grant any leniency to those who self-report. The SFO has provided a rather brief outline on self-reporting discussed below that practitioners should read carefully.

Self-Reporting Corruption

The SFO stresses 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.” See www.sfo.gov.uk/bribery'corruption/self-reporting-corruption.aspx.

The Guidance explains that:

[F]or 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 will turn on its own facts.

Finally, “[i]n 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 guidelines appear tougher than under the previous SFO regime, whose guidance seemed to indicate that civil resolution of self-reported incidents was the most likely outcome. The new guidance would not appear to be as reassuring. The situation may become clearer now that the UK Government has announced the results of its consultation on Deferred Prosecution Agreements (DPAs). See https://consult.justice.gov.uk/digital-communications/deferred-prosecution-agreements. While that consultation was delegated to the appointment of a new Justice Secretary in the recent Government reshuffle, the government has made clear the intention to introduce DPAs onto the statute code. The DPA system in the UK will in many respects be similar to that in the U.S. with the important exception that a judge in open court must approve DPAs. How the new self-reporting guidelines and the brand new DPA model will work together remains to be seen.

Facilitation Payments

In the Revised Policies Announcement, the SFO reiterates, “[a] facilitation payment is a type of bribe and should be seen as such. A common example is where a government official is given money or goods to perform (or speed up the performance of) an existing duty.” See www.sfo.gov.uk/bribery'corruption/the-bribery-act/facilitation-payments.aspx. The approach contrasts with the FCPA where the payment of a facilitation payment, even to a government official, may come within an exception. In practice, however, this exception has narrowed in recent years, and as a result, the SFO's restatement may make little difference.

Hospitality

Again, the Revisions on hospitality are less significant than the changes to the self-reporting regime. The new policy clarifies that “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 are sometimes disguised as legitimate business expenditure.” See www.sfo.gov.uk/bribery–corruption/the-bribery-act/business-expenditure.aspx.

Prosecutorial Guidelines

Finally, the SFO again identified the following existing policies that will continue to govern prosecutorial discretion with respect to facilitation payments:

• The Full Code Test in the Code for Crown Prosecutors;
• The Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. (“Joint Prosecution Guidance”);
• And, where relevant, the Joint Guidance on Corporate Prosecutions.

The Joint Prosecution Guidance is noteworthy in that it identifies factors tending in favor of prosecution:

• Large or repeated payments are more likely to attract a significant sentence (Code 4.16a);
• Facilitation payments that are planned for or accepted as part of a standard way of conducting business may indicate the offense was premeditated (Code 4.16e);
• Payments may indicate an element of active corruption of the official in the way the offense was committed (Code 4.16k); and
• Where a commercial organization has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and they have not been correctly followed.

See www.sfo.gov.uk/media/167348/bribery_act_2010_joint_prosecution_guidance_of_the_director_of_the_serious_fraud_office_and_the_director_of_public_prosecutions.pdf.

And, conversely, factors tending against prosecution:

• A single small payment likely to result in only a nominal penalty (Code 4.17a);
• The payment(s) came to light as a result of a genuinely proactive approach involving self-reporting and remedial action (additional factor (a) in the Guidance on Corporate Prosecutions);
• Where a commercial organization has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and they have been correctly followed;
• The payer was in a vulnerable position arising from the circumstances in which the payment was demanded.

Ultimately, “[i]f 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” (citing the Attorney General's guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002).

Conclusion

The above factors will likely chart a slightly new course for internal investigations related to possible Bribery Act 2010 violations. Given the new Act's tough penalties and the apparent ambiguity surrounding the consequences of self-disclosure, businesses may want to take extra care to comply with its provisions. Accordingly, businesses should consider seeking the advice of legal counsel in navigating this statute and its attendant revisions. Practitioners, in turn, should familiarize themselves with the Bribery Act 2010, keep close watch on the SFO's announcements and also pay attention to the interplay between new DPA guidance and the Act. In an increasingly global business environment, FCPA practitioners will be expected to have a working knowledge of this important statute and the significant recent developments in its enforcement.

Mauro M. Wolfe is a Duane Morris partner in the White Collar Criminal Defense & Investigations Practice. Jonathan Armstrong, a member of this newsletter's Board of Editors, is a Duane Morris partner who specializes in counseling multinational clients on their risk and compliance across Europe. Robert A. Peccola is an associate with the firm. The authors may be reached at [email protected], [email protected] and [email protected], respectively.

In a development that took some by surprise, on Oct. 9, 2012, the UK's Serious Fraud Office (SFO) issued new policies under the Bribery Act 2010, which could change the way some companies do business. It is critical for corporate counsel, white-collar and corporate practitioners to understand the changing contours of the Bribery Act 2010 and the impact the changes have on defense strategies, defenses, and counsel to their companies.

Now more than ever, understanding the similarities and, more importantly, the differences between the Bribery Act 2010 and the U.S. Foreign Corrupt Practices Act (FCPA) is paramount. For those unfamiliar, the SFO is the UK independent government agency that investigates and prosecutes serious or complex fraud, as well as corruption. Its powers are similar in some respects to those of the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice (DOJ). The new policies are related to facilitation payments, business expenditure (hospitality) and corporate self-reporting. See www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2012/revised-policies.aspx. The announcement is meant to revise existing SFO pronouncements on the enforcement of the Bribery Act 2010, which took effect on July 1, 2011.

The Revisions

Following his appointment, the new Director of the SFO, David Green, reviewed SFO policies alongside recommendations made by the Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery. The revisions have been published to:

1. Restate the SFO's primary role as an investigator and prosecutor of serious and/or complex fraud, including corruption;
3. Ensure there is consistency with the approach of other prosecuting bodies; and
4. Take forward certain OECD recommendations.

The SFO stated that “[t]he revised policies make it clear that there will be no presumption in favour of civil settlements in any circumstances.” This change in policy may make it challenging for companies and their advisers to determine the value in self-reporting. The effect of this policy, on this issue, draws the Bribery Act 2010 closer to the FCPA in assessing the value and benefits of self-disclosure. It remains to be seen whether the SFO will grant any leniency to those who self-report. The SFO has provided a rather brief outline on self-reporting discussed below that practitioners should read carefully.

Self-Reporting Corruption

The SFO stresses 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.” See www.sfo.gov.uk/bribery'corruption/self-reporting-corruption.aspx.

The Guidance explains that:

[F]or 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 will turn on its own facts.

Finally, “[i]n 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 guidelines appear tougher than under the previous SFO regime, whose guidance seemed to indicate that civil resolution of self-reported incidents was the most likely outcome. The new guidance would not appear to be as reassuring. The situation may become clearer now that the UK Government has announced the results of its consultation on Deferred Prosecution Agreements (DPAs). See https://consult.justice.gov.uk/digital-communications/deferred-prosecution-agreements. While that consultation was delegated to the appointment of a new Justice Secretary in the recent Government reshuffle, the government has made clear the intention to introduce DPAs onto the statute code. The DPA system in the UK will in many respects be similar to that in the U.S. with the important exception that a judge in open court must approve DPAs. How the new self-reporting guidelines and the brand new DPA model will work together remains to be seen.

Facilitation Payments

In the Revised Policies Announcement, the SFO reiterates, “[a] facilitation payment is a type of bribe and should be seen as such. A common example is where a government official is given money or goods to perform (or speed up the performance of) an existing duty.” See www.sfo.gov.uk/bribery'corruption/the-bribery-act/facilitation-payments.aspx. The approach contrasts with the FCPA where the payment of a facilitation payment, even to a government official, may come within an exception. In practice, however, this exception has narrowed in recent years, and as a result, the SFO's restatement may make little difference.

Hospitality

Again, the Revisions on hospitality are less significant than the changes to the self-reporting regime. The new policy clarifies that “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 are sometimes disguised as legitimate business expenditure.” See www.sfo.gov.uk/bribery–corruption/the-bribery-act/business-expenditure.aspx.

Prosecutorial Guidelines

Finally, the SFO again identified the following existing policies that will continue to govern prosecutorial discretion with respect to facilitation payments:

• The Full Code Test in the Code for Crown Prosecutors;
• The Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. (“Joint Prosecution Guidance”);
• And, where relevant, the Joint Guidance on Corporate Prosecutions.

The Joint Prosecution Guidance is noteworthy in that it identifies factors tending in favor of prosecution:

• Large or repeated payments are more likely to attract a significant sentence (Code 4.16a);
• Facilitation payments that are planned for or accepted as part of a standard way of conducting business may indicate the offense was premeditated (Code 4.16e);
• Payments may indicate an element of active corruption of the official in the way the offense was committed (Code 4.16k); and
• Where a commercial organization has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and they have not been correctly followed.

See www.sfo.gov.uk/media/167348/bribery_act_2010_joint_prosecution_guidance_of_the_director_of_the_serious_fraud_office_and_the_director_of_public_prosecutions.pdf.

And, conversely, factors tending against prosecution:

• A single small payment likely to result in only a nominal penalty (Code 4.17a);
• The payment(s) came to light as a result of a genuinely proactive approach involving self-reporting and remedial action (additional factor (a) in the Guidance on Corporate Prosecutions);
• Where a commercial organization has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and they have been correctly followed;
• The payer was in a vulnerable position arising from the circumstances in which the payment was demanded.

Ultimately, “[i]f 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” (citing the Attorney General's guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002).

Conclusion

The above factors will likely chart a slightly new course for internal investigations related to possible Bribery Act 2010 violations. Given the new Act's tough penalties and the apparent ambiguity surrounding the consequences of self-disclosure, businesses may want to take extra care to comply with its provisions. Accordingly, businesses should consider seeking the advice of legal counsel in navigating this statute and its attendant revisions. Practitioners, in turn, should familiarize themselves with the Bribery Act 2010, keep close watch on the SFO's announcements and also pay attention to the interplay between new DPA guidance and the Act. In an increasingly global business environment, FCPA practitioners will be expected to have a working knowledge of this important statute and the significant recent developments in its enforcement.

Mauro M. Wolfe is a Duane Morris partner in the White Collar Criminal Defense & Investigations Practice. Jonathan Armstrong, a member of this newsletter's Board of Editors, is a Duane Morris partner who specializes in counseling multinational clients on their risk and compliance across Europe. Robert A. Peccola is an associate with the firm. The authors may be reached at [email protected], [email protected] and [email protected], respectively.