Bribery – when failure to prevent becomes a crime…

London, UK: The Bribery Act 2010 that came into force in July creates an offence for commercial organisations of ‘failing to prevent bribery’.

Richard Sallybanks, partner, at BCL Burton Copeland explains what do you do if your procedures fail.

“The act creates two general offences of bribing another person and being bribed and discrete offences of bribery of a foreign public official and a failure of commercial organisations to prevent bribery by persons associated with them (such as an employee, agent or joint venture partner). This last offence can only be committed by a company, not an individual, but there is a statutory defence if the company can show it had ‘adequate procedures’ in place to prevent persons associated with it from bribing.

“Bribery comes in different forms including large corrupt payments made to obtain or retain business, lavish hospitality intended to influence a public official, and small unofficial ‘facilitation’ payments to expedite the performance of a routine or necessary action such as the granting of a visa. All are illegal under the new law and, if committed by an agent on behalf of a company, may give rise to criminal liability for the company (with the risk of an unlimited fine, debarment from public procurement contracts, and reputational damage) notwithstanding that it had implemented anti-bribery procedures and the directors were unaware of the conduct.

“If this happens, what does the company do? Should it report the matter to the authorities and, if so, how can it mitigate the risk that a prosecution will follow?

“Joint guidance issued by the Director of the Serious Fraud Office (SFO) and the Director of Public Prosecutions (DPP) acknowledges that the act “is not intended to penalise ethically run companies that encounter a risk of bribery” and that “a single instance of bribery does not necessarily mean that a company’s procedures are inadequate.” Consistent with this, the SFO and DPP have also made it clear that the public interest factors in favour/against a criminal prosecution of a company include whether there has been a history (or lack of history) of similar conduct.

“Therefore, a company that has genuinely and appropriately tried to prevent bribery but has failed may avoid prosecution if it can show that the conduct was an isolated incident. However, it is clear that the more prevalent bribery is within the organisation, the greater the risk of prosecution. So, what does a company do if it identifies bribery within its organisation which has been ongoing or is part of an established business practice? Perhaps counter-intuitively, the company’s best interests may still lie in reporting the matter to the authorities.

“Companies should note that if they do not self-report and bribery within their organisation is reported to the SFO by a third party (such as a disgruntled competitor), this will be viewed as a significant aggravating factor tending in favour of prosecution. Conversely, self-reporting (when allied with a genuinely proactive approach from senior management including a comprehensive internal investigation, remedial action and a commitment to effective corporate compliance going forward) can result in the possible resolution of the matter by civil, as opposed to criminal, proceedings. The availability of a civil remedy, namely proceedings to recover monies obtained in connection with the corrupt conduct, is a factor tending against prosecution but this will only be on offer if the company self-reports in the way described above.

“In any event, the company may have little choice but to self-report as the Bribery Act provisions cannot be considered in isolation. There is a real risk that monies obtained by a company in connection with a corruptly obtained contract would be considered ‘criminal property’ under the Proceeds of Crime Act 2002. The company (and its directors once informed of the suspicion that the contract was won through corruption) would be at risk of committing money laundering offences unless it disclosed that fact to the appropriate authority, the Serious Organised Crime Agency (SOCA), as soon as practicable. A disclosure to SOCA will give rise to the likelihood of the information being passed to the SFO, giving the company little choice but to report the underlying conduct to the SFO simultaneously.

“Companies clearly need to implement a compliance programme to minimise the risk of bribery being undertaken on their behalf. With a programme in place, a company will be better positioned to deal with the fall-out if it discovers an instance of bribery and if it self-reports, it will substantially mitigate the risk of prosecution. However, companies cannot make a decision on whether to self-report bribery without regard to the Proceeds of Crime legislation and the possible need to make a disclosure to SOCA under that regime. Any company which decides against a disclosure to SOCA because it wants to keep the bribery under wraps runs the risk of exposing its directors and the company itself to criminal investigations for both bribery and money laundering.”

• Richard Sallybanks is a partner at BCL Burton Copeland and specialises in business crime and regulatory defence work.

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