British lawmakers are poised to approve the most sweeping reforms of anti-bribery law in the United Kingdom in more than a century, creating a new anti-corruption regime that many believe will be sterner than even the United States’ dreaded Foreign Corrupt Practices Act.
The Bribery Bill, as it formally known in Parliament, is a close cousin to the FCPA and strives to achieve the same broad goal: prohibiting companies from paying bribes to win business. But in several important ways the Bribery Bill is even more restrictive than the FCPA and will almost certainly impose new internal control and corporate compliance work on companies that do business in Britain or employ British nationals.
The British government has been trying to modernize bribery laws for years, and this latest bill has now cleared
almost all the legislative hurdles. It has strong support among both parties, and is likely to become law within weeks. The government does need to call a new election this spring and there is a slim chance that the bill might not receive formal assent in time, but most observers say that is unlikely and its passage is imminent.
Once approved, the Bribery Bill will create a general offense of offering or promising a bribe, a specific offense of bribing a foreign official, and a new crime of failure by a company to prevent a bribe being paid on its behalf. The penalties include unlimited fines and imprisonment for as long as 10 years.
The “failure to prevent” offense is what has corporations worried. The bill does allow a company to defend itself by demonstrating that it has “adequate procedures” in place to prevent bribery, but it does not define what those procedures should be or how a company can prove that it has them.
The bill will also sweep most large U.S. companies into its net: It will apply to any act of bribery anywhere in the world if it involves a British citizen, a company doing business in Britain, or a company listed on British stock exchanges. And while FCPA compliance will help companies meet most of the Bribery Bill’s internal control requirements, it won’t necessarily satisfy all of them.
“I would question where you are making facilitation payments, why, and whether now is an appropriate time to squeeze them out of the system if you can.”
—John Higgins,
Partner,
PricewaterhouseCoopers
Corsi
The government is required to publish compliance guidance for companies before the law takes effect. Anyone waiting for a handy checklist, however, is likely to be disappointed; lawyers who have seen drafts of the guidance say it won’t give much detail. Anthony Corsi, a partner in the London office of law firm Fulbright & Jaworski, says the guidance must be general enough to apply to all companies, while not conflicting with any existing industry-specific rules. “It’s a bit of a potential quagmire,” he says.
Britain does have a poor record of prosecuting overseas bribery cases, largely because its prosecutors didn’t take the issue seriously. That has changed over the last couple of years. A new Bribery Act will strengthen their hand considerably. The Government says the “adequate procedures” defense is there to help companies that genuinely try to stamp out bribery; prosecutors will come down hard on companies that don’t put such procedures in place.
Building on FCPA Compliance
U.S. companies with internal control systems good enough to comply with the FCPA might assume they can rest easy, but Brent McDaniel, a forensic director at KPMG, warns that the Bribery Bill has two important differences that will still need attention.
BRIBERY BILL PROS & CONS
Below is an excerpt of a summary of the Bribery Bill currently before the British Parliament.
ADVANTAGES OF THE DRAFT BILL
1. The proposals provide for long overdue modernization and consolidation of the law on bribery and corruption, although they do not include the sale of honors or election offenses.
2. I welcome the removal of the distinction between private and public functions in the Public Bodies (Corrupt Practices) Act 1889 and the Prevention of Corruption Act 1906. I also welcome the replacement of the need to show a relationship of “agency“ in respect of bribery in a private context.
3. The definition of “functions of a public nature“ is consistent with the meaning of a public body in the Human Rights Act 1998. Removal of the presumption of corruption in the Prevention of Corruption Act 1916 in respect of payments to a person in a public body or by a person seeking to obtain a contract from a public body also deals with a potential problem of ECHR compatibility.
4. The new offenses in Clause 4 (bribery of a foreign public official) and Clause 5 (corporate liability for failing to prevent bribery) would help meet the UK’s international obligations under the OECD and UN Conventions;
5. I welcome the removal of the need for AG consent for the proposed new offenses, although I note that under current proposals for constitutional reform the Attorney General would retain a general power to halt proceedings in the interests of national security.
6. The scope of the revised “general offenses” in Clauses 1 and 2 is very broad. These offenses will capture all the offending that could be prosecuted under the existing law. In fact they are likely to capture behavior that could not be successfully prosecuted now because of the need to show that an advantage was given or received “corruptly.” This may require a greater use of prosecutorial discretion not to prosecute in the public interest.
THE DISADVANTAGES OF THE DRAFT BILL
7. The drafting is much more complex than the current law, despite the somewhat archaic language of the Prevention of Corruption Acts. This is in contrast to the simplicity and effectiveness of the Fraud Act 2006 as a prosecutorial tool. However, the removal of the “prime motivator” concept and the emphasis on breaches of legal and equitable duties in the earlier draft bill provide a less complex basis for the offenses than would otherwise have been the case.
8. The requirement that the prosecutor must prove that a payment to a foreign public official was not “legitimately due” places a heavy evidential burden on the prosecutor. The prosecutor will, in effect, need to lead evidence that the advantage is not legitimately due, or be able to rebut the defendant’s assertion that it is.
9. The provision for vicarious liability for corporations, hinged as it is on prosecution of an individual, points out the weaknesses in the current law of corporate liability. The bribe will have been made on behalf of the corporation, yet the “identification” doctrine makes successful direct prosecutions of corporations almost impossible. In order successfully to prosecute a corporation under these proposals there must be a successful prosecution of an individual to prove that a bribe has occurred.
10. The offense of “consent or connivance” to the general offenses or of bribing a foreign public official will be unused until there is a likelihood of prosecutions of corporations for the underlying offenses. There would appear to have been no prosecutions by the CPS under the equivalent provisions in section 18 Theft Act 1968 and section 12 Fraud Act 2006.
11. Actions which would not currently be proved to have been done “corruptly” may well pass the evidential test for the proposed general offenses. Examples would be where money was effectively extorted from individuals under duress (short of a threat to life) or where a person “bribes” in order to expose corrupt practices.
12. It is also possible that an individual may not be aware that a demand for payment is not legitimate. Nevertheless the relevant expectation on which improper performance is based is not that of the individual concerned (a subjective test) but that of the “reasonable person” (an objective test). The individual may not therefore know that the performance of the function is improper, but is still guilty of the offense.
13. Removal of the defense of reasonable belief (contained within the Law Commission draft Bill at Clause 5) in relation to bribery of a foreign public official increases the reliance on prosecutorial discretion in such cases.
Source
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align="left">U.K. Parliament Joint Committee Draft Bribery Bill.
Ward
First, unlike the FCPA, the Bribery Bill does not allow companies to pay “facilitation payments”—payments to a foreign official ostensibly intended to accelerate an action or decision that is going to be made anyway. British regulators have made clear that, in the words of Justice Minister Claire Ward, they consider facilitation payments as the “thin end of the wedge” and “not something we consider acceptable.”
John Higgins, a PricewaterhouseCoopers partner who advises clients on regulatory compliance, says companies shouldn’t be terribly alarmed by this provision. British prosecutors (principally the Serious Fraud Office) will have discretion on whether or not to charge a company for making facilitation payments, and they are unlikely to take action over isolated cases, he says.
What’s more, U.S. compliance executives have never liked facilitation payments anyway, and won’t mind seeing them end. The payments often can be precursors to outright bribes, and to avoid trouble, companies must produce records of the facilitation payments they make. “In practice, it’s difficult to jump the hurdles needed to qualify,” McDaniel says. “If you bribe someone at the airport, they are not likely to give you a receipt.”
Still, a U.S. company that does allow facilitation payments should use the enactment of the Bribery Bill as a prompt to reconsider, Higgins says. Such payments might not be cause for prosecution on their own, but they could be taken as evidence that management doesn’t care much about the risk of bribery. “I would question where you are making facilitation payments, why, and whether now is an appropriate time to squeeze them out of the system if you can,” he says.
The Bribery Bill has one other significant difference from the FCPA: It also bans bribes to private businesses, as well as foreign officials. The FCPA does not.
At a high policy level, that distinction may not seem too important; many companies ban bribery in all forms just to keep things simple. But it can be significant at the internal-control level, Higgins says. The FCPA encourages companies to rate the risks of various business partners, he explains, and to impose tighter controls on transactions where public officials are involved. But that approach could be non-compliant in Britain, if a company builds an internal control system that automatically assumes public officials present a higher bribery risk than the private sector.
Carrington
“You should be looking at your whole customer base, not just government officials,” says Nic Carrington, a Deloitte forensic partner who advises companies on their control frameworks. He says the solution is to base anti-bribery controls and the level of due diligence you perform on a proper risk assessment.
John Smart, head of fraud investigations with Ernst & Young, advises companies to ask themselves two questions. First, do you have a good enough understanding of what outside agents (resellers, suppliers, and the like) are doing on your behalf? Second, how can you extend your business partner due diligence?
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