Bribery Risk Management

Jennifer Carter-Manning

www.aicp.im

Bribery

Jennifer Carter-Manning

and Stephen Ferson

Why bribery?

Customer Due Diligence

Data protection

Compliance

AML

Transaction monitoring

SARs

• Higher living costs in developing countries which can least afford it.

• Uncertainty reduces investment from international companies.

• Prevents the proper operation of free markets generally.

Bribery is a bad thing

The statutory regimes

• The US Foreign Corrupt Practices Act 1977 (FCPA)

• The UK Bribery Act 2010 (UKBA)

• The Isle of Man Bribery Act 2013 (IOMBA)

• Payments to officials to obtain government contracts

• Paying to ensure that a product is purchased by a particular business

• Giving benefits / payments to persuade somebody to use a particular supplier

• Payments to smooth the path of business in an unfamiliar country

• Payments connected to the selection of advisers and administrators

• Lavish pre-deal entertainment

• Charitable / political donations in foreign jurisdictions

What is / might be bribery?

• The main sections of the IOMBA 2013 are identical to the UKBA 2010.

• There are four core bribery offences under each statute:

1. Offering, promising or giving a bribe;

2. Requesting, agreeing to receive or accepting a bribe;

3. Bribing a foreign public official; and

4. A corporate offence of failing to prevent bribery.

IOMBA and the UKBA

• Under the IOMBA (s13), certain public officials in the Isle of Man have a duty to reporttheir suspicions to the authorities if they believe that bribery has taken place.

• There is a clear duty upon the public officials to report to a proper authority, be thatan employer, or a police constable. Any failure to disclose an offer or advantage thatmay constitute an offence under the Bribery Act 2013 is itself an offence.

How are the IOMBA and the UKBA different?

• In 2018, under the Criminal Justice (Corruption Offences) Act 2018 the Irish governmentintroduced a raft of new offences and penalties.

• ‘Active' and 'passive' corruption. Corresponds broadly to the offering and accepting of abribe. Active and passive 'trading in influence’- promising an undue advantage to someoneclaiming to exert improper influence over the decisions of a public official.

• The Act creates a number of new offences targeted at Irish public officials.

• A company will have a defence against corruption proceedings if it can prove that it tookall reasonable steps and exercised all due diligence to avoid the commission of theoffence. Similarities to the 'adequate procedures' defence available to UK companiesunder the UKBA.

The Irish join in…

USA – what’s different?

• The UKBA covers corruption in a private-to-private commercial context and is notlimited to bribery relating to public officials.

• Most bribery in the private sector will not be covered by the FCPA.

• The FCPA only covers active bribery involving foreign officials.

• Prosecutors in the US have a wide range of other tools at their disposal:

• Commercial bribery (including commercial bribery overseas) can sometimes beprosecuted in the US under other statutes, including, in particular, the Travel Act (18U.S.C. § 1952).

• Although the FCPA has no directly equivalent provision to the UKBA section 7 offenceof of failing to prevent bribery, the fact that companies subject to US jurisdiction canbe held vicariously liable for acts of their employees and agents regardless of theirseniority means that such companies are much more susceptible to being prosecutedfor the FCPA bribery offence itself.

USA – how different is it really?

• Accounting requirements:

• In the UK - Companies Act 2006 contains similar provisions to the accounting

requirements in the FCPA.

• It can be easier for the US prosecutor to take action in relation to a failure in

accounting than through the FCPA’s anti-bribery provisions.

• The penalties for breach of the books and records or internal controls provisions are

as severe (potentially more severe) as for violating the FCPA’s anti-bribery provisions.

• BAE (2010). Settlement with the SFO re accounting provisions. Coordinated

settlement with the prosecution in the US for breach of the FCPA, for which BAE was

fined US$400 million.

USA – how different is it really?

• UKBA, IOMBA and FCPA: broadly similar territorial scope.

• UKBA & IOMBA: apply to foreign entities who do business in the UK / IOM as well as those

incorporated there.

• The actions of the “associated persons” giving rise to liability can take place anywhere.

• UK government view: listing on the London Stock Exchange would not in itself constitute

carrying on a business in the UK. All “US issuers” are specifically covered by the FCPA.

• Under US law, parent companies are responsible for ensuring the compliance with the

FCPA of overseas subsidiaries which they effectively control.

Jurisdiction / scope

Bribery cases

• SFO v Standard Bank (2015)

• SFO v XYZ (2016)

• SFO v Sweett Group (2016)

• SFO v Rolls Royce (2017)

Cooperation, self-reporting, guidance

Self-report

Wait it out

Employment issues

Investigate

Cooperate

AML

Remediate

• DPA?

• Settlement?

• Civil liability?

• Press?

• Timing

Self-reporting

• The s10 IOMBA offence is committed where a person associated with a relevant

commercial organisation commits a bribery offence intending to gain a business

advantage, and the organisation cannot show it has adequate procedures in place to

prevent that behaviour.

• The effect is to place the burden on the organisation to demonstrate that it has suitable

anti-corruption procedures in place to the civil standard.

● An “associated person” can extend to not only employees, agents and contractors

but also suppliers, subsidiaries and joint venture arrangements and other external

third parties.

● A “relevant commercial organization” includes companies and partnerships,

wherever formed, which carry on a business in the Island.

s.10 IOMBA and risk management

• It is a defence to the s10 IOMBA offence of a commercial organisation failing to preventbribery that the organisation had adequate procedures in place to prevent bribery.

• What will constitute adequate procedures will depend on the circumstances of the case.

• The Isle of Man Department of Home Affairs has published guidance on what ‘adequateprocedures’ should include, which reflects the UK’s guidance relating to the UKBA. It setsout six broad principles for organisations to consider.

• https://www.gov.im/media/1357523/the-bribery-act-2013.pdf

S10 IOMBA and risk management

1. Proportionate Procedures

2. Top-level commitment

3. Risk assessment

4. Due diligence

5. Communication (including training)

6. Monitoring and review

Six principles to adopt

Proportionate procedures

Clear, practical, accessible and proportionate procedures. Will depend on industry and

geographical locations of the markets in which the Organisation operates. Anti-bribery

covenants could be inserted into contractual agreements and required of subcontractors.

Six principles

Top level commitment

Involvement from top level management in developing

bribery prevention procedures. Promotion of a culture of

integrity where bribery is never acceptable.

Effective implementation enforcement and communication.

Risk assessment

Periodic risk assessments of the nature and extent of exposure to risks of bribery.

Clear policies on gifts, hospitality, promotional expenditure and charitable donations should be communicated to employees and business associates.

Adequate financial and audit controls.

Due diligence

Proportionate and risk based approach and a clear policy on the selection of associated persons.

Six principles

Communication

Bribery policies and procedures need to be understood throughout an Organisation at

all levels. Tailored training to all employees and third party representatives on a

regular basis and not just as a one off.

Six principles

Monitoring and review

Monitor, review and improve anti-bribery procedures to

ensure they work effectively and are being consistently

followed. If appropriate, external verification of their

procedures should be sought.

• Skansen Interioirs Lts and two of its directors faced charges under the Bribery Act 2010 (“UKBA”), relating to making improper payments in order to secure contracts for two City of London office refurbishments worth about £6m.

• The case was a legal first in the UK in that the company, despite having carried out an internal investigation and self-reported to the UK National Crime Agency, then faced a Section 7 UKBA prosecution before a jury in the Crown Court.

• The jury rejected Skansen’s defence that it had adequate procedures in place to prevent bribery. Skansen was dormant at the time of its conviction. Accordingly, the only disposal available to the court was an absolute discharge for the company.

R v Skansen Interiors Ltd - case study

“Cousin of POCA”

• A person commits an offence if that person enters into or becomes concerned in an arrangement which the person knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person. s.140, POCA 2008

• Predicate offence

• Civil recovery orders

• Freezing orders

• Failing to disclose

POCA

BRIBERY ACT

2013

Bribery – not a discrete topic

• Are you holding the proceeds?

• Customer Due Diligence

• Unusual and suspicious activity

• Transaction monitoring

• Risk assessments