CBI Bribery Act Briefing

Rachna Gokani

QEB Hollis Whiteman

Serious Fraud Office/Financial Services Authority

Serious Fraud Office: the lead agency in England, Wales and Northern Ireland for investigating and prosecuting cases of domestic and overseas corruption.

Financial Services Authority: making strident attempts to combat corrupt activity within the financial sector.

Agency cooperation: an example is the LIBOR investigation in which the SFO have taken on board a huge amount of FSA data

The Serious Fraud Office (SFO): Shift in approach?

"I would like the SFO to have a hard-edged, tough reputation. It should be something which is feared. You don't want to be investigated by the SFO... I am really going to ramp up our intelligence ability. There is a vast amount of information available in open-source material. It is all over the place. It needs to be collated and worked up, and then blended with more sophisticated intelligence. This will then be blended with more exotic intelligence which we can get from an outside source like the City of London Police, right the way up to using covert human intelligence sources if appropriate and any more exotic intelligence.”

- David Green CB QC Director of the SFO

Myths

Myth 1: That the SFO will never find out. The response from the SFO: think again. We are expanding our intelligence capacity. We will obtain

information from whistle-blowers, foreign jurisdictions, the Security Services, other prosecuting agencies. We are also looking to carry out live investigations by using all means available including covert surveillance

Myths (2)

Myth 2: That the SFO cannot afford to prosecute

Ministers have agreed that the SFO will not be prevented from prosecuting due to lack of resources.

The SFO has obtained ministerial agreement for additional funding in the 'blockbuster' cases

Example of ‘blockbuster funding’ is LIBOR: the Treasury has underwritten the SFO up to £3.5 million in order to cover LIBOR.

Myths (3)

Myth 3: That the SFO don't have the stomach for a fight.

Message from the SFO: “We do.” The SFO is here to fight crime - serious fraud.

Recalibration of the mission and approach of the SFO.

Complete structural reorganisation of the office, building in layers of quality control.

SFO revised policies

On 9th October 2012, the SFO published less compromising revised policies on:

(a) corporate self-reporting;

(b) facilitation payments; and

(c) business expenditure

Took immediate effect and superseded all previous statements

of policy.

The earlier guidance put an unnecessary gloss on test to be applied

Why were revisions published?

To restate the SFO's primary role as an investigator and prosecutor of serious and/or complex fraud, including corruption;

To ensure there is consistency with the approach of other prosecuting bodies; and

To take forward certain OECD recommendations.

The SFO's primary role is to investigate and prosecute. The revised policies make it clear that there will be no presumption in favour of civil settlements in any circumstances.

Self-reporting

If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so.

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.

Must form part of a "genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice".

Self-reporting (2)

Self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.

In appropriate cases the SFO may use its powers under proceeds of crime legislation as an alternative (or in addition) to prosecution

In 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).

Self-reporting (3)

“What I have done most specifically, which certainly excited some -perhaps they are easily excited- is to withdraw the exclusive pledge that the SFO would not prosecute if you self-report. Why did I do that? In my view, it is not something that a responsible prosecutor should be saying, simply because you have no idea what kind of facts or combination of facts you might be presented with when somebody comes through your door with an expensive lawyer. You have no idea, so you cannot cater for it in advance. What you can say, without question, is that the fact of a genuine self-report- by a genuine self-report I mean, in its purest form, telling us something that we did not know already, and the corporate acting proactively to investigate it- must be very significant as a factor in weighing up the public interest limb of the decision to prosecute; that is the code test.”

-David Green CB QC

Director of the SFO

Facilitation Payments

A facilitation payment is a type of bribe and should be seen as such.

Facilitation payments were illegal before the Bribery Act came into force and they are illegal under the Bribery Act, regardless of their size or frequency.

If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so.

Corporate Hospitality

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.

If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so.

Corporate Hospitality (2)

The SFO will prosecute offenders who disguise bribes as business expenditure, but only if (a) the case is a serious or complex one that falls within the SFO's remit and (b) the SFO concludes, applying the Full Code Test, that there is an alleged offender that should be prosecuted.

"I am sceptical of guidance notes. I suspect the motives of those that want absolutely precise guidance, because I suspect they want to wait round the corner and hit you over the head with it, and say, you are acting contrary to your guidance. The criminal law covers an endless multitude of possibilities and possible sets of facts. It is very hard to be specific. On corporate hospitality, it rather depends on the motive and the context and the timing and the value. You can't just say, Wimbledon tickets are OK. They'll say that you said, 'Wimbledon tickets are all right.'"

Corporate Hospitality: Ministry of Justice Guidance

Conduct a bribery risk assessment relating to your dealings with business partners and foreign public officials and in particular the provision of hospitality and promotional expenditure.

Publish a policy statement committing to transparent, proportionate, reasonable and bona fide hospitality and promotional expenditure.

Issue internal guidance on procedures that apply to the provision of hospitality and/or promotional expenditure

Corporate Hospitality: Ministry of Justice Guidance (2)

Regularly monitor, review and evaluate the internal procedures and the company’s compliance with them.

Provide appropriate training and supervision to staff.

The recipient should not be given the impression that they are under an obligation to confer any business advantage or that the recipient’s independence will be affected

Corporate Hospitality: Transparency International Guidance

Have written policies covering gifts, hospitality and expenses;

Those policies must prohibit the offer or receipt of gifts, hospitality or expenses whenever these could affect or be perceived to affect the outcome of business transactions and are not reasonable and bona fide expenditures

Have in place procedures and controls, including thresholds and reporting procedures, to ensure that the company’s policies relating to gifts, hospitality and expenses are followed

Ensure there are clear guidelines to enable employees to know how to handle the giving or receiving of gifts, hospitality and expenses

Corporate Hospitality: Transparency International Guidance

Ensure there is a procedure to communicate to employees the guidelines for gifts, hospitality and expenses

Give tailored training to employees on the rules for gifts, hospitality and

expenses Ensure there is a procedure for communicating to business partners the

guidelines for gifts, hospitality and expenses Gifts, hospitality and expenses given are to be recorded accurately in the

books

Ensure that gifts, hospitality and expenses given or received are documented and reviewed by management to ensure compliance with the policies

First Bribery Act prosecution: R v Patel

A former magistrates' court administrative officer admitted taking a £500 bribe to "get rid" of a speeding charge.

In order to induce or persuade some defendants to give him bribes, he informed them that if they came before the magistrates there would be prejudice against them on racist grounds

Described as: “a systematic and prolonged breach of trust”

R v Patel: Sentence

A man of good character

Sentenced to 6 years’ imprisonment by the Recorder of Westminster, HHJ McCreath

Reduced to 4 years’ imprisonment on appeal

Publicised investigations

17 December 2012: Four charged in Nigerian Corruption Investigation;

11 December 2012: Three arrested in LIBOR investigation

Request for information about potential bribery from Rolls-Royce

Deferred Prosecution Agreements (DPAs)

Voluntary agreement between a prosecutor and an organisation that, in return for compliance with certain requirements, the prosecutor will defer and ultimately discontinue criminal prosecution of the organisation.

Not available to individuals.

Available for a wide range of financial crime, money laundering and corruption offences.

Royal Assent is expected in spring 2013.

Debarment

Debarment is the exclusion of an entity from public contracts whether as supplier, contractor or service provider.

Mandatory debarment: Section 1 or 6 Bribery Act 2010 offence

Discretionary debarment: Section 2 or 7 Bribery Act 2010 offence

Self-reporting and debarment

Debarment from World Bank or multilateral development bank funding and difficulties in obtaining Export Credit Agency funding

Discovering Bribery: Guiding principles

Identify who is in charge of leading the internal investigation – consider whether it should be conducted by an individual who is independent of the company;

Compile a team to conduct the investigation – this must include lawyers and will usually include accountants. Those individuals will need to consider guidance issued by the relevant authorities on the conduct of such investigations;

Preserve the evidence – this will include both hard copy

and electronic copy documents;

Discovering Bribery: Guiding principles (2)

Swiftly obtain independent legal advice on:

a. what the real issues are; b. self-reporting; c. the internal investigation process; d. whether separate representation should be arranged for

directors/staff; e. Legal Professional Privilege; f. who speaks for the company.

Discovering Bribery: Guiding principles (3)

Consider what you are permitted to do by the Data Protection Act and the Regulation of Investigatory Powers Act;

Ensure that retaliatory action is not taken against any whistleblower;

Consider whether to self-report and when to do it;

Ensure that there is an external review of the company’s policies and procedures;

Take remedial action

CBI Bribery Act Briefing

Rachna Gokani QEB Hollis Whiteman

www.qebholliswhiteman.co.uk

rachna.gokani@qebhw.co.uk