UK to clamp down on bribery and corporate fraud

With strict new measures to crack down on the use of bribes, kickbacks, gifts and other forms of financial advantage set to be introduced in the UK, Birmingham advisers are warning companies to be prepared or risk tough penalties, including unlimited fines and a maximum ten year custodial sentence.

The new Bribery Bill, which is likely to come into effect before the general election, includes a new corporate offence of failure, by a commercial organisation, to prevent a bribe being promised or paid, for or on its behalf.  Under the Bill, the corporate offence applies to the worldwide conduct of corporate bodies in England, Wales and Northern Ireland and applies to the conduct of others providing services on their behalf, such as agents.

New regulatory landscape

The UK and parts of Europe have been accused of lagging behind the US in the fight against corruption, but, according to experts at business advisory firm Deloitte and international law firm Pinsent Masons, the imminent Bribery law will signify the dawn of a new regulatory landscape at a time when the Serious Fraud Office (SFO) is becoming more aggressive, bringing new US-style approaches to civil recovery in a bid to bring the UK in line with other countries.

Only last week, it was reported that BAE Systems had agreed to settle a charge of conspiring to make false statements to the US government, through the payment of a substantial fine of $400m (£250m).  It simultaneously reached agreement with the SFO to plead guilty to one charge of breaching its duty to keep accurate accounting records in respect of payments made in Tanzania, resulting in a penalty of £30m.

Adam Smith, the partner leading Deloitte’s Forensic and Dispute Services practice in the Midlands, said: “Prosecutors and regulators across the globe are increasingly fining and penalising companies in respect of their illegal business conduct.  Significant fines are no longer limited to the US and can be for millions, if not billions.  The BAE Systems case highlights the doggedness and pragmatism of prosecutors and illustrates the significant financial penalties they can levy.”

The highest anti-bribery fine to date is $1.6bn, paid by Siemens AG to US and German authorities under US FCPA enforcement.

Mr Smith added: “The UK has been under pressure to keep up with the rest of the world in enforcement actions and the new Bribery Bill will help make this happen.

“The changing regulatory landscape coincides with a period of economic conditions that have created increased commercial incentives for individuals and businesses to engage in fraudulent or corrupt practices.  A recent National Fraud Authority survey estimates that fraud costs the UK economy in excess of £30bn per annum.”

Implications

Deloitte and Pinsent Masons recently held a joint seminar for local businesses to provide an insight into the implications and likely impact of the new Bribery Bill and to outline the steps that organisations can take to reduce the risk of them becoming the victim of fraud or incurring unwanted regulator scrutiny.

Birmingham based senior associate Claire Shaw in the Dispute Resolution and Litigation group at Pinsent Masons said: “Companies need to undertake an annual risk assessment and introduce compliance programmes, to prevent bribes being paid on their behalf, no matter by whom or where.  Liability will only be avoided if they can show that adequate procedures were in place and that they were enforced.”

Mark Surguy, legal director in the Dispute Resolution and Litigation group at Pinsent Masons in Birmingham, said: “The law enforcement environment has changed irreversibly.  New management could find themselves in the firing line if they don’t get to grips with historical issues within the business.”

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