Foreign Corrupt Practices Act and UK Bribery Act
Firms operating globally should take note. Revised guidance from both the US and UK authorities together with strong statements of renewed intent signal that enforcement actions are expected to continue to heat up in the years ahead.
The United States Department of Justice (DoJ) has put on record that, together with the U.S. Securities and Exchange Commission (SEC), it is “leading a fight against corruption around the globe”. For its part, the Serious Fraud Office (SFO)in the UK, now under new leadership, has pledged to rebuild its reputation as “primarily a crime-fighting agency”, focused on prosecuting corruption.
United States—Foreign Corrupt Practices Act
Firms should not be lulled into a false sense of security. While recent figures show that the number of new enforcement actions have gone down, the scope of enforcement activity under the Foreign Corrupt Practices Act (FCPA) of 1977 has expanded.
Last year saw the launch of high profile investigations against Marubeni Corporation, Eli Lilly and Company, Allianz SE and others, as well as the imposition in some cases of independent monitors, such as compliance consultants.
Underlining its approach, US President Barack Obama’s administration has confirmed that, despite ongoing calls for reform, it is “unequivocally opposed to weakening the [FCPA]”.
In November 2012, the DoJ and SEC published A Resource Guide to the US Foreign Corrupt Practices Act. The guide is intended to provide information about the DoJ and SEC’s FCPA enforcement approach and priorities.
Key features of the guide include confirmation of the far-reaching jurisdiction of the FCPA—even actions with apparently tenuous connections to the US may fall within its remit, such as, sending emails, texts or a wire transfer through the US or its banking system.
Also emphasised is the importance of having in place clear guidelines and processes for corporate hospitality. The key question is whether any corrupt intent lies behind the gift. The guide also sets out factors the DoJ and SEC have historically taken into account when determining whether to prosecute FCPA cases.
United Kingdom—Bribery Act 2010
The Bribery Act 2010 came into force in July 2011, amid increased global anti-corruption activity and, although the legislation represented a determined attempt to emulate the more aggressive approach of US authorities, the SFO soon faced criticism for its poor enforcement record.
There has not been a single corporate prosecution and only three relatively modest individual prosecutions under the bribery act. It is this record that the SFO is aiming to change.
The bribery act created a number of new offences, including prohibitions on bribery of foreign and domestic officials, commercial bribery, receipt of bribes and failing to prevent bribery. It also extends the arm of British law far beyond its territorial reach, applying to any UK firm or citizen operating anywhere in the world.
Further, any firm that “carries on a business” in the UK may be liable for failing to prevent bribery that occurs under its watch anywhere in the world. The penalties that may be imposed include unlimited fines and up to 10 years’ imprisonment.
Despite the tough new legislative regime, the SFO’s approach was widely perceived to be unduly skewed in favour of compromise over prosecution.
Following a leadership change at the SFO in early 2012, the office has indicated its intention to prosecute offences under the bribery act. By way of illustration, the guidance previously issued on facilitation payments, self-reporting and corporate hospitality (which had indicated a lenient approach) has been withdrawn. In addition, the SFO’s more recent policy statements stress that it will prosecute where appropriate, and that self-reporting is no guarantee of civil settlement.
However, the more collaborative approach previously adopted by the SFO was in no small part due to the agency’s dwindling budget (currently at about £30mn). The budgetary constraints are likely to worsen, and it therefore remains to be seen whether the promised tougher stance will materialise, given the continued lack of resources available to the SFO for investigation and prosecution of bribery offences.
The UK government has introduced a parliamentary bill that, if passed, will permit the use of DPAs to reach a negotiated settlement with firms that have fallen foul of the anti-corruption regime.
DPAs, which are already available to US prosecutors, would encourage self-reporting and allow the SFO to agree not to prosecute corruption offences in return for compliance with any investigation, financial penalties and other conditions. If such civil settlement agreements do become available, they are likely to prove a useful tool to the SFO, given its restricted budget.
Practical Consideration for Global Business
A quick look at surveys, such as Transparency International’s annual Corruption Perceptions Index, shows that the existence of corruption in developing countries and those with still growing economies where global businesses are increasingly looking to invest, remains a significant issue.
These recent developments in the US and UK, and the renewed enthusiasm for prosecutions (perhaps in part driven by the need, at least in the UK, to fund subsequent investigations) indicate that the danger to firms doing business internationally is growing. Thus, there is an ever-increasing need to give proactive attention to compliance with anti-corruption laws and prevention of corporate misfeasance.
Firms should regularly review their internal anti-corruption policies and procedures, in relation to facilitation payments, for example, and consider seeking independent assistance to rigorously stress test their compliance programmes and ensure such procedures are adequate.