For the past decade, the UK has been able to boast that it has some of the strictest international bribery legislation. The Bribery Act 2010 came into force on 1 July 2011, and with it came a raft of new offences with strict penalties. The consequences of this new legislation have been significant and nearly a decade on, many major UK commercial organisations have felt the effects of this new legislation, paying large sums as punishment for breaches of the Bribery Act 2010. With extra-territorial reach, the ripple effect of the legislation is global, and it is hoped that in time, this legislation will prove a marked reduction in the rate of bribery and corruption both in the UK and around the world.
In this article we discuss:
- progress in the UK of implementing the Bribery Act 2010, including the use of Deferred Prosecution Agreements;
- the value to commercial organisations of proactivity and self-reporting;
- the effect on employees; specifically, where bribery was commonplace within industry and how “wilful blindness” could lead to an offence; and
- advice to commercial organisations and employees if they suspect corruption within their workplace.
Part 1: Commercial Organisations
Bribery Act 2010
The Bribery Act 2010 was brought in to replace and strengthen the UK law on bribery, foreign bribery and to better address the requirements of the 1997 OECD Anti-Bribery Convention. It was hoped to be of great significance for companies incorporated in or carrying on business in the UK, albeit adding heightened risks for companies, directors and individuals. It also requires companies to have strong, up-to-date and effective anti-bribery policies and systems.
The Bribery Act 2010 contains four main offences:
- promising or giving of an advantage (s1);
- requesting, agreeing to receive or accepting of an advantage (s2);
- bribery of a foreign public official (s6); and
- a new, strict liability offence of failure by a commercial organisation to prevent a bribe being paid to obtain or retain business or a business advantage (and it will be a defence for an organisation if they have adequate procedures in place to prevent bribery) (s7).
Notably, the legislation has extra-territorial reach for UK commercial organisations operating abroad and international companies with a presence in the UK. That is, the general bribery offences apply to acts of bribery committed anywhere in the world by companies incorporated in the UK as well as individuals who are British citizens or ordinarily resident in the UK. The conduct does not necessarily have to be connected with British operations, nor committed by the British company’s employees.
Failure to Prevent Bribery (s7)
Despite the wide-reaching scope and strict liability nature of s7, so far only two convictions have resulted under this section.
The first was the highly publicised prosecution of the Sweett Group (R v Sweett Group plc (unreported)) in 2016, for failing to prevent an act of bribery in relation to securing and retaining a contract with a company in the United Arab Emirates, Al Ain Ahlia Insurance Company (AAAI).
The Sweett Group was found to have ignored reports from KPMG in 2011 and 2014 which had indicated weaknesses in the company’s systems and controls in relation to corruption and bribery. In addition, they were found to have wilfully attempted to mislead the Serious Fraud Office (“SFO”) by requesting letters from the AAAI clarifying that past payments were finder’s fees rather than bribes. It is the latter conduct that is thought to be the reason that the matter was not concluded with a Deferred Prosecution Agreement (“DPA”). The case concluded in February 2016, resulting in a £1.4 million fine, confiscation of £851,152.23 and £95,031.97 in costs payable to the SFO.
The second conviction, secured by the CPS in 2018, was the case of R v Skansen Interiors Ltd (unreported), in which Skansen Interiors, a small refurbishment company in London paid a £39,000 bribe in exchange for contracts. The CPS elected to proceed with the prosecution instead of a DPA, in spite of the fact that Skansen both self-reported and cooperated with law enforcement. These factors were, in subsequent DPA cases, persuasive in non-prosecutorial resolutions. This was the first contested case brought under s7.
During the trial, Skansen unsuccessfully argued the ‘adequate procedures’ defence to the charge under s7, having only introduced a new anti-bribery policy after the offending was discovered.
At trial conclusion, Skansen avoided financial sanctions as it had ceased trading in 2014 with no funds available. It has been speculated that this lack of funds is the reason why Skansen were not offered a DPA, which are generally offered to companies that self-report. This connection between self-reporting and the offering of DPAs is discussed further below.
Deferred Prosecution Agreements
In 2014, the UK introduced further new legislation in relation to the criminal conduct of commercial organisations, this time in the form of DPAs, which gave prosecutors the power to enter in to DPAs with commercial organisations that they suspected of wrongdoing. The effect of a DPA is an agreement with the prosecutor to suspend prosecution in exchange for the company’s agreement to fulfil a number of conditions. The DPA must be done under the supervision of and approved by a Crown Court judge.
Introduced by virtue of Schedule 17 of the Crime and Courts Act 2013 (and the corresponding procedure of such at Part 12 of the Criminal Procedure (Amendment No. 2) Rules 2013), a DPA is:
“an agreement between a designated prosecutor and a person whom the prosecutor is considering prosecuting for an offence specified in Part 2” (namely conspiracy to defraud cheating the public revenue pursuant to Common Law, various offences under the Theft Act 1968, Customs and Excise Management Act 1979, Forgery and Counterfeiting Act 1981, Companies Act 1985, Value Added Tax Act 1994, Financial Services and Markets Act 2000, Proceeds of Crime Act 2002, Companies Act 2006, Fraud Act, Bribery Act 2010 and the Money Laundering Regulations 2007).
To date, the SFO has concluded eight DPAs, five of which included conduct resulting in offences under the Bribery Act 2010. The use of these agreements has garnered criticism and divided opinions during its short life, considered by some as soft consequence for offenders of bribery, fraud and other economic crime.
Details of the eight DPAs are as follows:
- Standard Bank (DPA signed 2015)
- Conduct: Failure to prevent bribery (s7) arising out of a bribe paid by Standard Bank in Tanzania to a local partner to induce members of the Government of Tanzania to show favour to Standard Bank.
- DPA terms included:
- US$25 million fine and disgorgement of profits
- $6 million compensation to the Government of Tanzania
- Cooperation with the SFO and other authorities with investigations into individual conduct.
- Requirement to commission an external consultant to report on its anti-bribery and corruption controls, policies and procedures, and to recommend improvements to strengthen its controls, with regular reporting to the SFO.
- No individuals were prosecuted.
- Sarclad Ltd (previously referred to as “XYZ”) (DPA signed 2016)
- Conduct: Conspiracy to corrupt (s1 Criminal Law Act 1977; conspiracy to bribe (s1 Criminal Law Act 1977), failure to prevent bribery (s7 Bribery Act 2010) arising out of contracts to supply its products to customers in a number of foreign jurisdictions.
- DPA terms included:
- £6.5 million and disgorgement of profits (the highest sum it was deemed able to pay without going bankrupt)
- Ongoing cooperation with the SFO and provide a report addressing all third party intermediary transactions
- Completion and effectiveness of its existing anti-bribery and corruption controls, policies and procedures
- Three individuals acquitted.
- Tesco Plc (DPA signed 2017)
- Conduct: False accounting (s17 Theft Act 1968) by dishonestly creating a false account of its financial position by overstating its profits.
- DPA terms included:
- £129 million fine.
- Undertake and implement an ongoing compliance programme
- Three individuals acquitted.
- Rolls Royce (DPA signed 2017)
- Conduct: Conspiracy to corrupt (s1 Criminal Law Act 1977), failure to prevent bribery (s7 Bribery Act 2010) and false accounting arising from systemic bribery and corruption over a period of 24 years in seven countries.
- DPA terms included:
- £497 million in fines and disgorgement of profits
- Cooperation with the SFO’s investigation
- Complete a corporate compliance programme at their own expense
- DPA in force until 2021.
- No individuals were prosecuted in the UK, although the SFO provided assistance to the DOJ in securing conviction.
- Serco Geografix Ltd (DPA signed 2019)
- Conduct: Fraud and false accounting arising from a scheme to dishonestly mislead the Ministry of Justice as to the true extent of profits.
- DPA terms included:
- £19.2 million fine (in addition to £12.8 million compensation paid to the Ministry of Justice as part of a £70 million civil settlement in 2013).
- DPA in force until 2022.
- Two individuals charged.
- Gueralp Systems Ltd (DPA signed 2019)
- Conduct: Conspiracy to corrupt (s1 Criminal Law Act 1977), failure to prevent bribery (s7 Bribery Act 2010) arising out of payments made to a South Korean public official between 2002 and 2015.
- DPA terms included:
- £2 million for disgorgement of profits
- Cooperation with the SFO and to review and maintain its existing internal controls, policies and procedures regarding compliance with the Bribery Act 2010.
- DPA in force until 2024.
- Three individuals acquitted.
- Airbus SE (DPA signed 2020)
- Conduct: Failure to prevent bribery (s7 Bribery Act 2010) arising out of bribes in favour of aircraft orders globally.
- DPA terms included:
- €991 million fine and disgorgement of profits (in total €3.6 billion globally)
- Cooperation with the SFO
- Substantial remediation and ongoing improvements to Airbus’ ethics and compliance policies and procedures
- DPA in force until 2023.
- Investigation into individuals continues.
- G4S Care & Justice Services (UK) Ltd (DPA signed 2020)
- Conduct: Fraud offences (s2 Fraud Act 2006) against the Ministry of Justice arising from a scheme to deceive the Ministry of Justice as to the true extent of its profits from its contracts for the provision of electronic monitoring services.
- DPA terms included:
- £38.5 million fine (compensation to the Ministry of Justice having already been paid as part of a £121.3 million civil settlement in 2014).
- Compliance obligations and improvements including periodic review, assessment and reporting of its internal controls, policies and procedures by a 3rd party reviewer.
- DPA in force until 2023.
- Investigation into individuals continues.
Internal Investigations and the Value of Self Reporting
In six of the eight DPAs, the cases came to the attention of the SFO by the organisation itself self-reporting and providing genuine and frank cooperation throughout the ensuing investigation. The exceptions to this were:
- Rolls Royce, which came to light because of an anonymous whistle-blower. In that case, the conduct was spread widely through its business over several decades, over multiple jurisdictions. Their cooperation with the SFO once the offending was discovered was monumental and included offering unfiltered access to their records (some 30 million documents), identifying new areas of focus for the SFO and making available statements provided during the internal investigation. The resulting fine that was paid was also significant: £497 million (which at that time was the highest amount paid under the DPA regime, and of the eight DPAs listed above, second only to the Airbus DPA); and
- G4S Care and Justice Services which came to light because concerns were raised by Ministry of Justice which led to the commencement of the SFO investigation.
Guidance on Corporate Prosecutions produced by the SFO makes it clear that “a genuinely proactive approach adopted by the corporate management team when offending is brought to their notice, involving self-reporting and remedial actions”. In reporting conduct to the SFO, commercial organisations are encouraged to do the following:
- Initial contact, and all subsequent communication, must be made through the SFO’s Intelligence Unit, through the secure reporting form. The Intelligence Unit is the only business area within the SFO authorised to handle self-reports.
- Hard copy reports setting out the nature and scope of any internal investigation must be provided to the SFO’s Intelligence Unit as part of the self-reporting process.
- All supporting evidence including, but not limited to emails, banking evidence and witness accounts, must be provided to the SFO’s Intelligence Unit as part of the self-reporting process.
- Further supporting evidence may be provided during the course of any ongoing internal investigation.
Notwithstanding the criticism that a DPA is a “rubber stamp”, the courts continue to emphasise that DPA approval will only be given where there is the clearest possible demonstration of integrity on the part of the company concerned once the criminal activity has become apparent. Attention is placed on early self-reporting to the authorities, full cooperation with the investigation, a willingness to learn lessons, and an acceptance of an appropriate penalty.
Part 2 Employees
The “everyone knew” culture
A damaging aspect of large company culture during the course of these investigations was how widely “known” the corruption was throughout the business at the middle to upper level. This was particularly so where businesses are operating in countries where bribery is a way of life. The more corruption is ingrained in the culture, the harder it may be to convince the prosecutor that a remedy is available in that corrupt jurisdiction.
Part 2 of the Serious Crime Act 2007 creates three inchoate offences: Intentionally encouraging or assisting an offence; encouraging or assisting an offence believing it will be committed and encouraging or assisting offences believing one or more will be committed (sections 44 – 46).
Where things become murky for employees is how “belief” is considered in this context. “Belief” has been found to be a state of mind which is “more than suspicious”, the word being of ordinary usage. If elaboration of the meaning of the word is required, a direction as approved in R v Moys[1] should be given:
“The question is a subjective one and it must be proved that the defendant was aware of the theft or that he believed the goods to be stolen. Suspicion that they were stolen, even coupled with the fact that he shut his eyes to the circumstances, is not enough, although those matters may be taken into account by a jury when deciding whether or not the necessary knowledge or belief existed.”
More often, the conduct of employees is being brought into question in terms of the assistance they may have provided to the offending (i.e. an inchoate offence). Often, as part of the larger investigation, mid-level employees have been questioned on suspicion of criminal offending where they were neither the briber nor the bribee but rather they played some middle role and, in that role, were deemed to have known what was happening. This could be as minimal as the driver transporting the offenders to commit the offence, or knowingly facilitating a contract that came about because of corruption.
Wilful blindness: “I shut my eyes to it” – could this be an offence?
In some cases, even shutting your eyes to the offending could be considered committing an offence.
It is open to the tribunal of fact, when knowledge on the part of the defendant is required to be proved, to base a finding of knowledge that the employee had deliberately shut his/her eyes to the obvious or refrained from inquiry because he/she suspected the truth and did not want to have his/her suspicion confirmed[2]. Over the years the courts have maintained a consistent stance on this possibility:
- “With regard to the position of the person who is shown deliberately to have shut his eyes to the existence of the relevant circumstances of an offence, and claims that he did not actually know of their existence, we consider that a jury or court would generally infer, and so find as a fact, that he had no substantial doubt that those circumstances existed.” [Emphasis added][3]
- “…wilfully shutting eyes to the obvious may constitute evidence connoting knowledge or belief; and it need not necessarily be assumed in all cases that suspicion is all that can safely be inferred from the relevant facts.”[4] [Emphasis added]
For this reason, educating employees of these risks is paramount. There is often a tension with especially younger or newer employees, when it comes to balancing their desire to progress in the business and their obligations in upholding the law, so there need to be mechanisms in place where employees can do this without fear of retribution or of damaging their careers. Education and exemplary behaviour have to come from the top. Indeed, the Bribery Act 2010 enables an organisation to rely on adequate procedures as a defence to s7.
“Adequate procedures”
The Ministry of Justice has published guidance on what it expects in terms of “adequate procedures” which includes:
- Considering proportionality (i.e. the procedures must be proportionate and appropriate for the business)
- Evidence of top-level commitment
- A written risk assessment
- A written policy, property communicated
- Monitoring and review
- Training
- “Speak up” procedure (i.e. establish a clear, written, independent reporting process in order to enable staff to communicate concerns and ensure appropriate protections are put in place for staff that speak up about wrongdoing)
- A “Write it down” procedure
Part 3: Advice to Commercial Organisations and Employees
Even in 2020, and in spite of the introduction of more prescriptive legislation around the world, the majority of countries seem to be making little to no improvement in tackling corruption[5]. Corruption continues to be more pervasive, especially in countries where big money flows freely into electoral campaigns and where governments are driven by the wealthy and well-connected.
Effective compliance is essential for any business in protecting themselves against fraud and corruption. However, despite best efforts, many businesses still find themselves in a position where they are the victims of fraud and corruption, as the fraud has been committed either internally or externally, or in combination.
It is clear from the DPAs and prosecutions undertaken by the SFO since the Bribery Act 2010 came into force that corporate proactivity in recognising, internally investigating and reporting offending will increase the chances of a lesser penalty. In some cases, that may mean a DPA is entered.
It is important for businesses not to become complacent. If you or your business suspects it may be caught up in corruption or criminal offending of any kind, seek advice immediately.
Edmonds Marshall McMahon is a specialist private prosecutor and investigations firm, staffed by a large number of former SFO senior and lead prosecutors and investigators. We have a depth of experience at every stage of some of the largest bribery and corruption investigations and prosecutions globally from both sides (including, as mentioned above, Rolls Royce and Airbus). Edmonds Marshall McMahon is able to offer strategic advice, assist in internal investigations and if necessary, manage the reporting process to the appropriate authorities.
Jane Guthrie is a Senior Associate at Edmonds Marshall McMahon and specialises in leading investigations and prosecutions of fraud, bribery and corruption, and other related dishonesty offences.
Yasmin Hassan is a Paralegal at Edmonds Marshall McMahon.
Jane Guthrie
Yasmin Hassan
[1] (1984) 79 Cr. App. R 72
[2] Westminster City Council v Croyalgrange Ltd & Anor (1986) 83 Cr App R 155, 164 per Lord Bride.
[3] UK Law Commission – Criminal Law Report on the Mental Element in Crime
[4] R v Stephen Wheeler [2014] EWCA Crim 2706
[5] Transparency International Corruption Perceptions Index 2019
