July 12, 2020

Anti-bribery & corruption laws either side of the Atlantic

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BriberyBy Andrew Keltie – Baker & McKenzie | CFO UK |

A comparison of enforcement under the UK Bribery Act and the US FCPA

The UK Bribery Act 2010 (the “Bribery Act”) came into force on 1 July 2011, whereas the US Foreign Corrupt Practices Act (the “FCPA”) has been around for over 30 years.

In the first few years after the FCPA came into effect, enforcement was focused on single-actor type cases, until 1982 when an action was brought against five corporate and twelve individual defendants. As the FCPA reaches its 35th anniversary, the US government collected more than $260 million in financial penalties from corporations in 2012, and enforcement peaked in 2010 with collections of over $1 billion.

Almost two years have passed since the Bribery Act came into force which repealed existing anti-corruption legislation in the UK and there is yet to be a significant prosecution. However, given that investigations on average take two years to complete, we may expect to see the results in the near future, especially with a new director at the helm of the Serious Fraud Office (the “SFO”).

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Both Acts have broad extra-territorial application and consequently many international companies will fall within the scope of both. In order to protect themselves, it is important for affected companies to be aware of the differences. This article aims to provide an overview of the differences between the two Acts and of the trends in enforcement on both sides of the Atlantic in recent years.

Differences between the Bribery Act and FCPA

Whilst the FCPA is renowned for aggressive criminal and civil enforcement by the US Department of Justice (“DOJ”) and the US Securities and Exchange Commission (“SEC”) respectively, businesses must appreciate that an FCPA compliance policy will not necessarily satisfy the requirements of the Bribery Act.

Public vs. private

Most importantly, the UK regime applies to the bribery of both public and private persons whereas the FCPA generally only applies to foreign public officials. The UK rules also cover both the payment and receipt of bribes, whereas the FCPA only covers payment. However, note that other US laws (state and federal) may be used to punish commercial bribery.

Corporate offence: strict liability vs. burden of proof

The corporate offence under the Bribery Act, where a person associated with a company bribes another person, is one of strict liability and so does not require corrupt intent on the part of the company or its officials. By contrast, under the FCPA, some level of knowledge or intent in relation to the corrupt payment must be demonstrated. It is thus arguably easier to establish liability against a corporate entity under the Bribery Act.

Jurisdictional reach

Both Acts have a wide jurisdictional reach. As well as including US nationals and domestic entities, the FCPA applies to non-US companies who are listed in the US and to non-US companies and citizens who commit bribery in the jurisdiction. US enforcement authorities view this expansively; for example, sending an email through a server in the US could establish jurisdiction over a company that has no US operations. Furthermore, in recent years the SEC has held parent companies liable under the FCPA for corrupt payments made by their foreign subsidiaries.

The Bribery Act will apply if any part of the offence takes place in the UK or if an offence outside the UK is committed by a person with a close connection with the UK, or where a person associated with a UK company, or a company that does business in the UK, commits an offence anywhere in the world. In theory, therefore, acts of bribery which have been committed outside of the UK by non-UK entities or persons could be caught.

Failing to prevent bribery

Under the Bribery Act, a company can be directly liable for failing to prevent bribery committed on its behalf by a person associated with it. Although there is no specific offence in the US, this could be caught if a company has ignored signs of corruption and corporate officers can be held responsible if they supervise senior management or are responsible for policies on the company’s international operations.

Adequate procedures defence

The Bribery Act provides a defence for organisations when a person associated with the company commits an offence, if the company has adequate procedures in place designed to prevent persons associated with it from committing bribery. Generally, companies will be judged on the competency of their procedures and whether they have adequately targeted the risks that they face.

In contrast, having adequate procedures is not a defence in the US, but having a robust compliance system is indicative of an organisation’s good faith which is a factor that will be taken into account when assessing whether a violation has occurred (as indicated in the recent joint guidance promulgated by the DOJ and SEC[1]. It is important to note that an FCPA policy may not satisfy the adequate procedures guidance published by the UK authorities[2].

Facilitation payments

Facilitation payments, which are small payments made to foreign officials to expedite or secure routine governmental actions (e.g. issuing a visa), are technically exempt from the FCPA but prohibited under the Bribery Act.

However, relying on the FCPA exemption can be problematic given the difficulty in some cases of proving that such payments are truly made to expedite or secure a routine governmental action, and also because such payments may be illegal in the jurisdiction in which they are made. Furthermore, if not properly accounted for, facilitation payments can serve as a basis for a FCPA books and records violation.

Accounting practices

In the US, the FCPA’s accounting provisions provide for a secondary offence of failing to keep accurate books and records or to maintain a reasonable system of internal accounting controls. Violations can be solely concerning a commercial bribe and, therefore, fall outside of the definition of ‘foreign officials’ otherwise needed for liability.

US enforcement agencies have not been shy in alleging this secondary offence, even in the absence of strong and compelling evidence that a bribe was paid. While UK companies are required to keep fair and accurate accounting records under the Companies Act, there is no accounts-specific secondary offence under the Bribery Act.

Recent trends

Worldwide, countries are pledging to fight against corruption and bribery. This is demonstrated by the recent passing of the Bribery Act and enforcement officials in the US avowing a “new era” of anti-bribery and corruption.

Last year, Hillary Clinton, then US Secretary of State, declared that the Obama Administration was “unequivocally opposed to the weakening” of the FCPA. Meanwhile, in the UK, David Green QC succeeded as director of the SFO, stating that it would adopt a “tougher stance” and pledging to focus the SFO’s work as a crime fighting agency and prosecuting body.

In 2012, the DOJ initiated 13 prosecutions and the SEC commenced 12 enforcement actions. Although the pace of enforcement actions dropped last year, enforcement efforts remain robust and there are on-going investigations into at least 21 companies.

Range of enforcement tools used

In both jurisdictions, new tools are being used when negotiating settlement agreements in enforcement actions. In the US there is an increased variation in the use, scope and duration of compliance monitors imposed on companies as part of settlement agreements; although the onerous burden of a court-appointed monitor is in decline, companies continue to be obliged to self-report and self-monitor for the term of the settlement agreement.

In the UK, the SFO has discretion to prosecute an individual under the Bribery Act. It must exercise these powers in accordance with the Code for Crown Prosecutors, and only prosecute where there is sufficient evidence to provide a realistic prospect of conviction and when prosecution is in the public interest.

From early 2014, Deferred Prosecution Agreements (“DPAs”) are likely to be available[3] and are intended to be a powerful negotiating tool in reaching financial settlements with companies. Under a DPA, criminal charges will be brought but not proceeded with, provided that the company complies with agreed terms and conditions.

DPAs have been successfully used in the US, perhaps because of the significant discounts in fines.  Given that this discount is likely to be less significant in the UK, it remains to be seen what effect DPAs will have, but avoiding a criminal conviction is always likely to be attractive.

Carrot or the stick?

Last year, in recognition of cooperation, the DOJ awarded substantial sentencing discounts. For example, Smith & Nephew received a 30 percent discount for cooperation, thorough self-investigation and compliance improvements.

However, at the same time, there has been an increase in prosecutions of individuals, generally several years after corporate settlement, as seen in 2011 with Siemens executives and 2012 with various Noble executives.

Furthermore, 2012 saw the first monetary reward to a whistleblower in the US who provided significant information related to an on-going multi-million dollar fraud and received 30 percent of the amount collected by the SEC.

In the UK, a change in leadership has signalled a change in approach, including a statement that self-reporting is no guarantee that criminal prosecution will not follow. There also continues to be no express provisions regarding incentives for whistleblowers. Whether prosecutions will increase is yet to be seen, especially in an environment where businesses may not see a tangible benefit in approaching the SFO to self-report and given the budgetary constraints on the SFO.

Conclusion

In recent years, the SFO and the DOJ have co-operated in both US and UK investigations. Worldwide, tackling bribery and corruption is firmly on the agenda as a priority area and there is ever increasing co-operation and information sharing among investigatory and prosecution bodies in many countries.

All companies operating internationally should be aware of the law in this area as they plan for 2013 and beyond, and will need to be mindful of what policies to have in place, as well as to keep in mind whether to come forward when faced with evidence of corruption within their organisations that may be caught by either the Bribery Act or the FCPA.

Andrew Keltie heads the Business Crime Unit at international law firm Baker & McKenzie’s London office, where he concentrates on high value and complex commercial litigation. He is ranked as a leading lawyer in his field by Chambers UK and Legal 500. Keltie contributed to and co-edited the textbook, International Tracing of Assets, and has also written for various publications on topics relating to his areas of practice.

The author acknowledges the assistance of Baker & McKenzie colleagues Carinne Maisel and Emily Tilden-Smith in the compilation of this article.

For more on this story go to:

http://www.cfoworld.co.uk/in-depth/governance/3445109/anti-bribery–corruption-laws-either-side-of-the-atlantic/

 

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