April 22, 2023

US and UK anticorruption regime

By Dmitry Dementyev

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WHAT IS US / UK ANTI-BRIBERY REGIME?- easy and complex at the same time

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US FCPA summary

§78m(а). Reports by issuer of security; contents:- issuers, registered pursuant to 78l- keep information and documents reasonably current- annual and quarterly reports

§78dd-1 [Section 30A of the Securities & Exchange Act of 1934]Prohibited foreign trade practices by issuers

US Code / Title 15. Commerce and Trade / Chapter 2B – Securities Exchanges

Bribery of Foreign Officials

§78m(b). Books, records, and internal accounting- issuers registered (78l), and filing reports (78o(d)) - in reasonable detail / accurately and fairly reflect- system of internal accounting controls

§78m. Periodical and other reports

§78dd-2: Prohibited foreign trade practices by domestic concerns

§78dd-3: Prohibited foreign trade practices by persons other than issuers

§78dd-1(a): general jurisdiction- issuers (78l/78j(d))- use of the mails or any means or instrumentality of interstate commerce

§78ff. Penalties

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§78dd-1(g): alternative jurisdiction- U.S. domestic issuers - use of mails or any means or instrumentalities is unnecessary

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UK BA summary

Section 1: Bribing another person

Section 6: Bribery of foreign public officials

Section 7: Failure of commercial organizations

to prevent bribery

Section 14: Offenses 1, 2 and 6 by bodies corporate

• Separate offense for bribery of foreign officials (drafted to resemble Anti-bribery Convention)• Does not require the showing of improper performance

U.K. Bribery Act 2010

• Offering, promising or giving something before / after the fact• It does not matter if something is not given in return• what matters is improper performance of a relevant function or activity (reasonable expectation test)

• A relevant commercial entity is guilty of an offense in this section if an associated person is guilty of an offense under Section 1 or 6 or would be guilty had the jurisdiction applied

• liability for management if offense has been committed with their consent or connivance

• Books and records under UK Companies Act

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WHAT EXACTLY ARE THE THINGS THAT I MUST NOT DO?

- must not bribe public officials

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What is a bribe?

- Anything of value

Gifts

Entertainment and hospitality

“Facilitation payments”?

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Who are public officials?

Foreign official is any officer or employee of a foreign government or any department, agency, or instrumentality thereof”

What is “instrumentality”?

The term is loosely applied by US DoJ

Recently considered by federal district courts ownership / financial control actual control privileges and obligations financing perception is reality

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CAN I “STRUCTURE” MYSELF OUT?- most likely not

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UK BA JurisdictionSection 1: Bribing

another personSection 6: Bribery of

foreign public officialsSection 7: Failure of

commercial organizations to prevent bribery

Section 14: Offenses 1, 2 and 6 by bodies

corporate

Section 12: territorial application• act or omission which form part of the offense is committed in the UK• if outside the UK – there must be “close connection”

Section 7: Carrying business or partof business in the UK

Non-executive director with knowledge

Executive director acting illegally

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UK BA Jurisdiction: uncertainty

Ministry of justice: common sense approach on a case-by-case basis “having demonstrable business presence” listing +?

Courts: no binding precedent / instructive only “part of a business” under Financial Services and Markets Act 2000

SFO: likely take an expansive view value + competitive disadvantage for UK business

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US FCPA Jurisdiction

Issuers (foreign domestic) / director, employee or agent

Domestic concerns / director, employee or agent

While in the territory of the US

- Use of means and instrumentalities of interstate commerce- Expansive interpretation of prong 3- Aiding and abetting / conspiracy

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WILL THEY EVER KNOW WHAT I DID IN GEORGIA?- they may

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How will they know about a violation?

Requests for legal assistance

Competitors

SARs to UK Serious Organized Crime Agency (SOCA)

Whistleblowers (US SEC & UK SFO)

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CAN I CHOOSE TO STAY QUIET?- choose wisely

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Disclosure Obligations

US: FCPA violations are categorized as a type of fraud and trigger SOX violations The application of SOX can affect a decision regarding disclosure Sec. 302 of SOX (certification of financial statements by CEOs and CFOs)

mandates auditors and the board of directors to disclose any fraud (material or immaterial) involving persons with a significant role in corporate internal control

Sec. 404 of SOX (internal control procedures) requires reporting on internal controls with respect to all consolidated subsidiaries, including minority-owned subsidiaries

The UK: UK Proceeds of Crime Act (POCA)

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WILL THEY LET BYGONES BE BYGONES?- most likely not

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Statute of LimitationsFCPA

- Tolling agreements- MLATS

BA- no Statute of Limitations

Giving of a bribe – crime is complete[Pendergast v. United States, 317 U.S. 412, 418 (1943)] No criminal prosecution, UNLESS

5 years

5 years

No criminal prosecution

Criminal conspiracy: [United States v. Milstein, 401 F.3d 53, 71 (2d Cir. 2005)]

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CAN I PLAY IT SAFE?- you should try

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Compliance Program

UK BA: Adequate procedures (UK BA, Official Guidance) Full defense under Section 7

FCPA: Compliance and internal controls (Sentencing

Guidelines, DPAs, NPAs) Mitigating factor

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Compliance: information flow

Are there rules and procedures in place?

Have the rules been properly conveyed?

Has the target audience had a chance to ask questions?

What are the consequences for breaking the rules?

Have the rules been updated?

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Compliance: liability pitfalls

Sec 802 of SOX – obstruction of justice

Punishable by a fine and imprisonment of up to 20 years

CCI case:

flushing down stuff during internal investigation

US v Ray: obstruction before any federal investigation

Investigating company counsel are “deputized”

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FINAL THOUGHTS

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- The laws are relevant for companies that do NOT fall within the jurisdictional reach

- Transition from “compliance-curious” to “compliance-focused”

- Compliance implementation requires effort

- Compliance implementation must take into account local law specifics

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QUESTIONS?

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Contact information

Dmitry DementyevCorporate GroupTel.: +7 495 633 70 17Fax: +7 495 644 05 99Email : DDementyev@salans.com