Serious Fraud Office Publishes New Guidance on the Presence of Lawyers at Section 2 Criminal Interviews

The Serious Fraud Office (SFO) has published new guidance on the presence of lawyers at section 2 interviews in criminal investigations conducted under section 2 of the Criminal Justice Act 1987, typically with potential witnesses.

The SFO guidance follows the decision of R (Lord and Others) v SFO[1], in which it was ruled that the SFO had been entitled to exclude lawyers, acting for a company under investigation, from also representing employees of that company who were not suspects at their section 2 witness interviews.  There is very clearly a fine line between balancing the interests of the employee with those of a company.

The SFO guidance, however, goes a great deal further than this decision.  Under the new guidance, a lawyer is only permitted to attend a section 2 interview if they meet certain ‘ground rules’; that is if the SFO case controller believes that they:

  1. will assist the purpose of the interview and/or investigation; or
  2. provide essential assistance to the interview by way of legal advice or pastoral support.

The right to have a lawyer present in a criminal interview has been a long standing right and is fundamental to a just and fair judicial system.  The SFO guidance goes some way to fetter this right as the discretion is on the part of the SFO to determine what the purpose of the interview and/or investigation is.

What does “essential assistance” mean?  This term is undefined.  The only clarification of “essential assistance” in the SFO guidance is that it does not equate to anything that “undermines the free flow of information” unless for the purposes of “protecting or maintaining the interviewee’s legal professional privilege”, which suggests it will be interpreted restrictively.

Should a lawyer seek to attend a section 2 interview with an interviewee, they must serve on the SFO, in advance of the interview, their reasons why they should be present; written acknowledgment of the SFO guidance ground rules; and a series of written undertakings by the lawyer’s firm, one of which is that the lawyer does not discuss the contents of the interview with any third party, including the company, without the SFO’s prior written consent.

These requirements are overtly prescriptive in light of the fact lawyers are already subject to Rules of Conduct by the Solicitors Regulation Authority and, ultimately, they may mean that lawyers are excluded from attending section 2 interviews, which would give rise to numerous challenges.  Without lawyers being able to interject or intervene at an interview regarding the interview process, or to advise the witness of their legal rights, witnesses are at risk of giving inconsistent and unclear information which does not assist the investigation and, potentially, being lead into criminal liability.  A witness’ lack of valid legal representation (either because their lawyer is excluded from attending or has an almost entirely passive role in exchange for the privilege of attending) could also mean that witnesses are less inclined to cooperate in an interview and/or investigation.

The new guidance seems to create an antagonistic and unhelpful approach with regards to witnesses and their lawyers and is seemingly in conflict with the SFO’s statement at the start of the new guidance that “interviews under section 2 must be conducted with great care to ensure that they are carried out fairly.”

The SFO has shown its teeth recently and made some good improvements, but it could be said that this new guidance is overstepping the mark.  It will be interesting to see the extent to which the guidance is relied on by the SFO in practice or whether the guidance is challenged.

[1] [2005] EWHC 865 (Admin)

The Act on Fighting Corruption in the Healthcare Sector

On 29 July 2015, the German government introduced a legislative initiative with the aim of fighting corruption in the healthcare sector. On 4 June 2016, the German Act on Fighting Corruption in the Healthcare Sector (Gesetz zur Bekämpfung der Korruption im Gesundheitswesen – Act) entered into effect under which the criminal offences of taking and giving bribes in the healthcare sector were incorporated into the German Criminal Code (StGB) as sections 299a and 299b. These new regulations could have a substantial impact on companies, as giving bribes to self-employed healthcare professionals is now considered a criminal corruption offence.

To read the full alert, click here.

Monthly China Anti-Bribery Update Report — June 2016

1. New laws or regulations

State level: No developments.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

2. Upcoming laws or regulations

No developments.

3. Government Action

(1) In early June, Zhang Longjun (“Zhang”), the former Dean of Shangyu Traditional Chinese Medicine Hospital (the “Hospital”), together with Chen An (“Chen”) and Zhao Zhigang (“Zhao”), the former Vice Dean of the Hospital, were respectively sentenced to ten years’, two years’ and eight months’ imprisonment respectively for taking bribes by the People’s Court of Shangyu District, Shaoxing City, Zhejiang Province. Additionally, Zhang, Chen, and Zhao were fined RMB 1.8 million (USD 270,148), RMB 300,000 (USD 45,024) and RMB 350,000 (USD 52,528) respectively.

Zhang was found to have manipulated medical supplies, job promotion arrangements, and medical resource allocations in return for illegal proceeds including RMB 3.83 million (USD 574,816), HKD 123,000 (USD 105,629), and USD 1,000 in cash, while Chen and Zhao were found to have accepted bribes of RMB 646,300 (USD 96,998) and RMB 700,000 (USD 105,057) respectively.

(2) On June 15, 2016, Ding Fengyun (“Ding”), the former Party Committee Secretary of Linyi University, was tried for embezzlement and bribe-taking by Intermediate People’s Court of Heze City, Shandong Province.

The prosecutor asserted that during her term of office from August 2010 to December 2012, Ding took advantage of her positions as the Member of Linyi Municipal Standing Committee, as the Director of the Propaganda Department of Linyi City, and as Party Committee Secretary of Linyi University to, independently or in collusion with others, embezzle public funds totaling more than RMB 7.58 million (USD 1.13 million). Ding was also found guilty of seeking illegal benefits for other individuals or entities in bidding processes, promotions or adjustments of job titles, and company restructurings by taking advantage of her multiple positions in exchange for bribes in the form of cash and shopping or debit cards amounting to RMB 1.26 million (USD 189,104).

The court determined that it would announce its judgement on another given day.

(3) On June 16, 2016, Bai Enpei (“Bai”), the former Vice Chairman of the Environmental and Resources Protection Committee of the National People’s Congress, was tried by the Intermediate People’s Court of Anyang City, Henan Province for taking bribes and holding a large amount of property from unidentified sources.

Allegedly, during his term of office from 2000 to 2013, Bai took advantage of his positions as the Secretary of Qinghai Province Party Committee, the Secretary of Yunnan Province Party Committee, and the vice chairman of the Environmental and Resources Protection Committee of National People’s Congress by furnishing assistance to 17 companies and individuals in engineering construction, real estate development, access to mineral rights, and title promotions. Bai, directly or indirectly through his wife, obtained illegal properties from the above companies and individuals exceeding RMB 246 million (USD 36.9 million) in total. Further, the amount of Bai’s family property and expenditure significantly exceeded his legitimate income, and Bai failed to explain the source of such property.

Bai pleaded guilty during the trial. The court said that it would announce its judgement on another day.

(4) On June 29, 2016, Wang Hanshen (“Wang”), the former Party Member of Yiwu Municipal People’s Government of Zhejiang Province was sentenced by the Jindong District People’s Court of Yiwu City to 10 years’ and 6 months’ imprisonment for taking bribes, plus the fines of RMB 1 million (USD 150,082).

Wang was accused of taking advantage of his position from 2007 to 2009 in seeking illegal benefits for others in exchange for bribes amounting to RMB 5.52 million (USD 828,455). Wang was given a lighter sentence due to his confession and his return of the illegal gains.
4. Other

No developments.

Monthly China Anti-Bribery Update Report —May 2016

1. New laws or regulations

State level: No developments.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

2. Upcoming laws or regulations

No developments.

3. Government Action

(1) It was reported on May 6, 2016 that Wang Tianchao (“Wang”), the former President of Yunnan First People’s Hospital, was prosecuted by Pu’er Municipal People’s Procuratorate of Yunnan Province for bribery. Yunnan Commission for Discipline Inspection reported this case as “a typical case of corruption with an adverse impact for the health sector”. The total amount involved in this case is up to RMB 129 million (USD 19.62 million).

The prosecutor asserted that from 2004 to 2014, Wang obtained improper benefits including RMB 45 million (USD 6.84 million) in cash, 100 units of real estate together with 100 parking spaces valued in the aggregate at RMB 84 million (USD 12.78 million) in exchange for abusing his position to seek illegal benefits for bribe-givers in connection with construction projects, medical equipment, medicine procurement, and the appointment of personnel.

(2) On May 17, 2016, Xu Liming (“Xu”), the former Director of Guangxi Zhuang Autonomous Region People’s Government Guangzhou Office was sentenced by the Intermediate People’s Court of Hechi City, Guangxi to 10 years’ imprisonment for accepting bribes, as well as confiscation of illegal proceeds of RMB 3.53 million (USD 537,151) and penalties of RMB 500,000 (USD 76,083).

During Xu’s term in office from 2004 to 2008, he abused his positions to seek illegal benefits for various entities and individuals in contracting projects, project payment settlement, investment attraction and job promotions. In return Xu received bribes up to RMB 3.78 million (USD 576,715). In light of Xu’s voluntary confession and return of the proceeds of his crimes, he was given a more lenient sentence.

(3) On May 23, 2016, Li Yunzhong (“Li”), the life sentence of the former Vice Secretary of Qujing Municipal Party Committee, Yunnan Province was affirmed by the Higher People’s Court of Yunan Province. Li had been found guilty of accepting bribes of more than RMB 40 million (USD 6.08 million). This case had received prominent attention from the Central Commission for Discipline Inspection because it involved abuse over a long span of time, very substantial sums of money, and a large number of people.

Li was accused of taking bribes of RMB 40.17 million (USD 6.11 million) in cash and 150 cartons of cigarettes valued at RMB 96,000 (USD 14,608) from dozens of individuals. In return he sought illegal benefits for them in contract projects and in the allocation of project funds. The ill-gotten gains were used by Li to purchase real estate and vehicles as well as for loan-sharking.

(4) It was reported on May 24, 2016 that Hong Jiaxiang (“Hong”), a former Member of the Standing Committee of Ningbo City Committee of the Communist Party and the former Head of the Publicity Department had been sentenced by the Intermediate People’s Court of Shaoxing City, Zhejiang Province to 11 years’ in prison and fined RMB 600,000 (USD 91,300) for bribe-taking.

The court found that during Hong’s term in office from 2006 to 2013, he took advantage of his various positions to seek benefits in the promotion of real estate projects, project planning approvals, and enterprise operation for selected entities and individuals. In return, Hong illegally received cash and properties from such persons through pre-declaration of dividends, distributions of profits, and the sale of properties at a relatively high price. These aggregated to RMB 8.34 million (USD 1.26 million). Hong was given a more lenient sentence due to his voluntary confession and his return of the proceeds in whole.

(5) On May 30, 2016, Huang Deyi (“Huang”), the former Deputy Mayor of Baise City, Guangxi Zhuang Autonomous Region, was sentenced by the Intermediate People’s Court of Hechi City, Guangxi to ten years and six months in prison for accepting bribes and abuse of power, plus fines of RMB 500,000 (USD 76,083).

Huang was found guilty of providing illegal assistance to others during his term of office from 2007 to September 2013 in exchange for bribes including RMB 3.9 million (USD 593,453), HKD 400,000 (USD 338,496) and 3 kilograms of gold.

4. Other

No developments.

5. China-related FCPA Action

No developments.

Monthly China Anti-Bribery Update Report — April 2016

1. New laws or regulations

State level:

(1) On April 18, 2016, the Supreme People’s Court and Supreme People’s Procuratorate promulgated Interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate on Certain Issues Concerning the Application of Law in Handling Criminal Cases Involving Embezzlement and Bribery (the “Interpretations”). Key highlights of the Interpretations include the following (i) expanding the definition of bribes to include certain intangible benefits, (ii) clarifying that bribes may be given even after the benefits have been received by the bribe-makers, (iii) establishing monetary thresholds and standards for bribery prosecutions, including raising the thresholds for bribes involving government officials and non-government officials, and (iv) providing additional details on the requirements and benefits of voluntary disclosure.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments

2. Upcoming laws or regulations

No developments.

3. Government Action

(1) On April 6, 2016, Zhou Yuehai (“Zhou”), the former Member of Standing Committee of Communist Party and Vice Manager of China Southern Airlines, was tried by the Intermediate People’s Court of Shenzhen, Guangdong Province on charges of taking bribes, including cash amounting to RMB 480,000 (USD 73,629), HKD 100,000 (USD 12,883), USD 5,000, and one Cartier Platinum necklace.

The prosecutor accused Zhou, as a state functionary, of taking advantage of his position for the benefits of others and illegally misappropriating properties in a very large amount. Zhou pleaded guilty, but the case is still on trial. The former General Accountant of China Southern Airlines, Xu Jiebo, was on trial with Zhou.

(2) On April 14, 2016, Jiang Shan (“Jiang”), the former Secretary of Municipal Party Committee of Chuzhou, Anhui Province, was tried by the Intermediate People’s Court of Wuhu City, Anhui Province for taking bribes. The prosecutor alleged that, from 1999 to 2013, Jiang took advantage of his position and illegally accepted properties valued at RMB 4,339,000 (USD 665,577) for the benefit of bribe-givers. Jiang was further charged with abusing his authority by reducing or exempting land grant fees illegally, causing economic loss to the State amounting to RMB 160 million (USD 24.54 million). Given the complexities of this case, the court has not yet made the judgment on another given day.

(3) On April 18, 2016, Feng Runshen (“Feng”), the former Vice President of Chinese People’s Political Consultative Conference of Kaiping City, Guangdong Province, was sentenced to two years’ imprisonment with three years’ probation by the Intermediate People’s Court of Jiangmen City, Guangdong Province for accepting bribes totaling RMB 80,000 (USD 12,271), plus confiscation of his personal properties valuing RMB 50,000 (USD 7,669). This case was one of the seven cases of the Special Action of International Pursuit against Duty Criminal announced by Supreme People’s Procuratorate.

The court found that during his term in office, Feng took advantage of his position in promoting products of a concrete-manufacturing company and helping it to pass relevant product quality inspections. In return, Feng received cash amounting to RMB 80,000 (USD 12,271) from the legal representative and several shareholders of said company. Feng was given probation due to his voluntary confession, return of all illegal gains, and his voluntary payment of fines.

(4) On April 20, 2016, Su ChangCheng (“Su”), the former employee of the New Rural Cooperative Medical Management center in Huoshan County, Hanhui Province, was sentenced to 6-months’ imprisonment by Huoshan People’s Court for corruption, plus confiscation of his personal property valued at RMB 100,000 (USD 15,339). This is the first case after the promulgation of the new Interpretations noted above. Relevant experts said that Su would have received a sentence of more than 5 years’ imprisonment before the promulgation of the new Interpretations.

The court found that during his two years of service, Su took advantage of his position and bought fake invoices for reimbursements aggregating to RMB 790,000 (USD 121,181). Su was given a lighter sentence due to his voluntary confession and the return of illegal gains before prosecution.
4. Other

No developments.

Monthly China Anti-Bribery Update Report — March 2016

1. New laws or regulations

State level: No developments.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

2. Upcoming laws or regulations

No developments.

3. Government Action
(1) It was reported on March 4, 2016 that Haikou Intermediate People’s Court had affirmed the sentence of Liao Yongyu (“Liao”), the former Office Director of Education Department of Xiuying District, Haikou City, at 10 years in prison for taking bribes.
The court found that from December 2009, Liao had been responsible for the construction of elementary schools in Xiuying District and that during his term in office Liao had sought illegal benefits for various construction companies in project management, payment collection, and construction inspection and acceptance, and had taken bribes totaling RMB 132,000 (USD 20,403) in exchange.

(2) On March 7, 2016, Yang Chenglin (“Yang”), the former Chairman of Bank of Inner Mongolia, was tried for suspected bribe-taking, embezzlement, and misappropriation of public funds by the Intermediate People’s Court of Baotou City, Inner Mongolia Autonomous Region. Yang’s son and mistress were also tried with him.

Yang was charged with seeking illegal benefits from bribe-givers by abusing the powers of his office, together with his son and mistress, in exchange of bribes amounting to RMB 307 million (USD 47.43 million). Yang was also found guilty of embezzling RMB 6. 28 million (USD 970,318) from Bank of Inner Mongolia, and misappropriating RMB 292 million (USD 45.11 million) from Hohhot City Commercial Bank and Bank of Inner Mongolia for profitable activities. Yang will be sentenced at a later date.

(3) It was reported on March 10, 2016 that Li Zhong (“Li”), the former Director of Government Office of Fangshan District, Beijing, was sentenced by the Intermediate People’s Court of Hengshui City, Hebei Province to 11 years’ imprisonment for taking bribes. His personal property in the amount of RMB 110,000 (USD 16,984), as well as previously detained property in the amount of RMB 1.5 million (USD 231,742), was confiscated.

The court found that from 2009 to 2012, by taking advantage of his position as the Secretary of Party Committee, Li had provided illegally settled payment obligations of one real estate development company and one construction company and accepted and solicited bribes aggregating to RMB 6 million (USD 926,970) in return.

(4) On March 30, 2016, Ji Wenlin (“Ji”), the former Deputy Governor of Hainan Province, was sentenced by the No. 1 Intermediate People’s Court of Tianjin to 12 years’ imprisonment for taking bribes, and personal property valued at RMB 1 million (USD 154,527) was confiscated.

Ji was found guilty of taking advantage of his position from 2000 to January 2013, providing assistance in connection with a national enterprise technology center, arranging job opportunities, and other benefits for several companies and individuals. In exchange, Ji was found to have accepted bribes exceeding RMB 20.46 million (USD 3.16 million). Ji was given a lighter sentence due to his confession.
4. Other

No developments.

Bribery in Scotland – Civil Settlement Under Bribery Act and the Scottish Crown Office

On September 25 2015, Brand-Rex Limited, a Scottish network cabling company, entered into a civil settlement with the Scottish Crown Office, admitting that the company had failed to prevent bribery and had received an improper benefit in violation of Section 7 of the Bribery Act 2010, which applies to the whole of the United Kingdom.

This was the first settlement for a Section 7 infringement of the Bribery Act and the third corporate self-report and civil settlement in Scotland.

The Scottish Crown office implements its own self-reporting regime, separate from that operated by the Serious Fraud Office (SFO) in England and Wales. The Scottish initiative was introduced on 1 July 2011, at which time guidance was issued by the Crown Office and Procurator Fiscal Service on how it would operate. Civil settlements in Scotland were to be operated by the Serious and Organised Crime Division of the Scottish Crown Office in co-operation with Scottish Civil Recovery Unit.

An incentive initiative known as “Brand Breaks” was undertaken by Brand-Rex from 2008 to 2012. The initiative was aimed at distributors and installers connected to the cabling company and upon meeting or surpassing sales targets, installers and distributors qualified for a range of rewards, including holiday travel tickets.

Although the Brand Breaks initiative was not in itself unlawful, an agent of Brand-Rex was found to have exceeded the terms of the scheme between 2012 and 2013. In this instance, the agent was an independent installer of Brand-Rex products that gave travel tickets acquired through the scheme to an employee of one of the agent’s customers. The customer who indirectly received the tickets was a user of Brand-Rex products. Furthermore, the customer, an individual, was in a position to influence purchasing decisions related to cable supplies.

An extensive investigation was launched following Brand-Rex’s discovery of this issue following an internal review. In June 2015, the solicitors acting for Brand-Rex self-reported the violation to the Scottish Crown Office and accepted that Brand-Rex had failed to prevent the infringing activity when the company was in a position to do so, accepting accountability for a contravention of Section 7 of the Bribery Act 2010.

Because Brand-Rex self-reported, the case was considered suitable for a civil recovery settlement rather than a criminal prosecution.  In making the decision to forego prosecution, the Crown Office guidance explains that the Crown considers a number of factors, including:

  • The nature and seriousness of the offence and the extent of harm caused
  • The extent of wrongdoing within the company, including whether or not senior management consented or connived
  • Early action taken by senior management upon discovery of the offence
  • The company’s previous record for bribery conduct
  • The disciplinary action, if any, taken against the wrongdoers
  • Whether the company has engaged fully and meaningfully with the Crown
  • Whether the company has anti-bribery systems in place
  • The impact of prosecution on the company’s employees and stakeholders

Essentially, the civil settlement model operated by the Scottish Crown Office is similar to the model adopted by the SFO prior to the SFO’s introduction of formal Deferred Prosecution Agreements, the first of which was agreed only a month later, in November 2015 with Standard Bank plc.

On 25 September 2015, the civil settlement with Brand-Rex Limited was announced by the Scottish Crown Office. Under the settlement order, Brand-Rex agreed to pay £212,800—the amount of Brand-Rex’s gross profit from the unlawful activity.

Despite the initial commotion and interest surrounding the Bribery Act 2010, little enforcement or prosecution activity took place following the Act’s introduction, despite the powers designated under the Act. During the last six months, however, there has been a marked increase in enforcement activity (as set out in our previous blogs), and the Scottish system is now also clearly demonstrating that it has the necessary bite to encourage self-reporting by companies and that settlements are being progressed in a reasonable timescale.

Fighting Corruption and Fraud- the ICU and SFO

The United Kingdom’s regime against bribery, corruption and fraud is operating in a new landscape following the introduction in August 2015 of the International Corruption Unit (ICU), a new governmental agency created under the auspices of the Department for International Development (DFID).

The latest step in the clampdown on nefarious business practices came as the Serious Fraud Office (SFO) gained more impact with a series of successes. In this climate, businesses need to beware of the tightening of anti-corruption enforcement in the United Kingdom.

A stronger SFO, bolstered by the new ICU and with the backing of wide-ranging legislation such as the Bribery Act 2010, together create very serious potential pitfalls for companies which fail in their anti-corruption diligence.

The Role of the ICU

The ICU was established last year by the DFID to investigate cases of international corruption in developing countries. The ICU unified other existing investigation units in the United Kingdom and was launched in line with the UK Anti-corruption Plan.  The ICU is intended to serve as the central point for investigating international corruption (replacing the Metropolitan Police Service Proceeds of Crime Unit and the City of London Police Overseas Anti-corruption Unit). The DFID pledged £21 million in funding to the ICU until 2020.

Upon launching the new unit, UK International Development Secretary Justine Greening said, “Corruption is not only picking the pockets of the poor, it is an enemy of prosperity and a brake on a country’s development. Through the International Corruption Unit, the best of British law enforcement will step up our aid work combating corruption head on across the developing world.”

In practice, the ICU will target corruption by:

  • tracing and recovering the proceeds of international corruption;
  • supporting foreign law enforcement agencies with international anti-corruption investigations;
  • engaging with government and business to reduce the UK’s exposure to the proceeds of corruption; and
  • working with business to support increased compliance with the Bribery Act 2010.

The ICU began to exercise its powers in 2015 by making arrests of five unnamed individuals in October, as part of an investigation that had commenced in 2013 into “suspected bribery and money laundering offences.”

Increased Enforcement

Despite speculation about plans to abolish the SFO, the SFO has chalked up some notable successes recently. For example, it secured the first Deferred Prosecution Agreement (DPA) with ICBC Standard Bank (formerly Standard Bank Plc) in December 2015 and the first successful conviction of a company for a Section 7 offence under the Bribery Act 2010 in November 2015.

The DPA with ICBC Standard Bank was granted in return for full self-reporting and compliance by the bank, which had paid US$6 million in bribes to government officials in Tanzania via an agent. Through the introduction of DPAs, companies are encouraged to self-report and these agreements effectively introduce another, less adversarial level of enforcement within the UK’s anti-corruption regime. The DPA is designed to increase the impact of the SFO on UK companies, particularly those operating overseas.

The prosecution of Sweett Group PLC for violation of Section 7 of the Bribery Act 2010 also demonstrates success for the SFO. The company, the UK’s only listed quantity surveyor, was fined £2.25 million for failing to prevent the company’s associates from attempting to organise bribes to officials in the Middle East. Section 7 introduced a potentially onerous burden on companies in that they can be held liable for the activities of associated parties, even if they do not knowingly commit acts of corruption. Failure to prevent the corruption made on behalf of a company is enough to constitute the offence.

While companies can protect themselves against Bribery Act prosecutions by ensuring they have “adequate procedures” in place to prevent bribery, the SFO’s first prosecution is likely to be the start of a series of prosecutions. So although Theresa May mooted abolishing the SFO in 2014, events since then indicate that the agency is gaining momentum.

Differences between the SFO and ICU

The mandates of these two agencies overlap in many respects.  Both target bribery, corruption and fraud, and both emphasise the importance of enforcing the Bribery Act 2010. Their powers are also similar; both enforce anti-corruption legislation and can prosecute UK companies for their activities overseas.

However, there are significant differences between the SFO and ICU, particularly when it comes to their purposes. While the SFO aims to primarily tackle domestic and overseas fraud, the ICU is predominantly international in focus and expects to do much of its work in the world’s poorer countries. Jon Benton, Joint Head of the ICU, has said, “The message to individuals and companies who see developing countries as fair game is that the UK has zero tolerance for overseas bribery and corruption.”

The ICU was created to strengthen an apparent weakness in the UK’s enforcement of anti-corruption measures on an international level. An example of an apparent weakness was the SFO’s decision in 2014 to drop its case against Victor Dahdaleh, the British-Canadian billionaire accused of paying more than £35 million in bribes to a sheikh in Bahrain in return for aluminium contracts worth $3 billion. Between 2006 and 2015, more than 150 cases of overseas bribery and corruption were investigated, with just 27 individuals and one company prosecuted.

The ICU aims to deliver a significant increase in the prosecution of overseas money laundering and bribery cases, with a particular focus on tackling corruption in DFID-priority countries (currently 28 countries identified by DFID as being most in need of economic development across Africa, Asia and the Middle East). At present it is unclear how the creation of the ICU will impact the SFO and the SFO’s caseload in those areas where the agencies’ mandates overlap. However the SFO and ICU interact in practice, it is highly likely that the enforcement of anti-corruption measures will now increase in the UK.

We recommend that all anti-corruption practitioners and businesses with an interest in anti-corruption keep an eye on the development of the ICU and on the increasing activity of the SFO. In the current enforcement climate, it is vital for companies to ensure they are vigilant in implementing robust anti-bribery and anti-corruption compliance programmes.

DOJ’s Criminal Division Launches new FCPA Pilot Program

In an effort to enhance its ability to investigate and prosecute Foreign Corrupt Practices Act (FCPA) cases, the Department of Justice’s (DOJ) Criminal Division has launched a new one-year FCPA pilot program effective April 5, 2016.

The program has three main goals:

  • Motivate companies to voluntarily self-disclose FCPA-related misconduct
  • Motivate companies to fully cooperate with the Fraud Section, and
  • Remediate flaws in companies’ controls and compliance programs, where appropriate.

DOJ appears willing to exchange reduced sanctions during the next year in order to obtain improved opportunity to prosecute individuals.

If successful, the Fraud Unit’s Chief Andrew Weissmann says, “the pilot program will serve to further deter individuals and companies from engaging in FCPA violations in the first place, encourage companies to implement strong anti-corruption compliance programs to prevent and detect FCPA violations, and, consistent with the memorandum of the Deputy Attorney General dated September 9, 2015, increase the Fraud Section’s ability to prosecute individual wrongdoers whose conduct might otherwise have gone undiscovered or been impossible to prove.”

Advantages to a company of the new FCPA Enforcement Plan and Guidance Memo include  eligibility for the full range of potential mitigation credit.  For example, if criminal resolution is warranted, the Fraud Section may grant a reduction of up to 50 percent below the low end of the applicable U.S. Sentencing Guidelines fine range, and generally will not require appointment of a monitor. In addition, where those same conditions are met, the Fraud Section’s FCPA Unit will consider a declination of prosecution. On the other hand, if a company chooses not to voluntarily disclose its FCPA misconduct, it may receive limited credit if it later fully cooperates and timely and appropriately remediates – but any such credit will be markedly less than that afforded to companies that do self-disclose wrongdoing.

The pilot program applies only to FCPA matters brought by the Criminal Division’s Fraud Section and no other agency or part of the DOJ. At the end of the one-year pilot period, the Fraud Section will determine whether to extend or modify the program. Additional information about the DOJ’s Criminal Division, Fraud Section and its enforcement efforts, can be found at www.justice.gov/criminal/fraud.

Proposed New Corporate Offence Dropped: Failure to Prevent Economic Crime

The UK Anti Corruption Plan, which was published in December 2014 under the 2010 to 2015 Conservative and Liberal Democrat coalition government  brings together, for the first time, all of the United Kingdom’s activity against corruption in one place.  It sets out the actions that government will take to: make it harder for criminals in the UK to use corruption to carry out their crimes; strengthen the integrity of institutions across the public and private sectors; stamp out bribery and corruption and raise global standards.  Within the Plan, the Ministry of Justice examined whether a new crime of “corporate failure to prevent economic crime” might be warranted.  In connection therewith, the Ministry also stated that it would undertake a review of the rules on establishing corporate criminal liability more widely.  The plan was considered “ground breaking” by international anti-corruption bodies, and the United Kingdom was commended for recognising the threat corruption poses to the UK’s economy and society and that corruption is not an issue that occurs only overseas.

However, on the 28 September 2015 (prior to the Ministry’s entry into a Deferred Prosecution Agreement with Standard Bank plc and the successful conviction of the Sweet Group plc), UK Justice Minister Andrew Selous announced that “the UK has corporate criminal liability and commercial organisations can be, and are, prosecuted for wrongdoing…. Ministers have decided not to carry out further work at this stage as there have been no prosecutions under the model Bribery Act offence and there is little evidence of corporate economic wrongdoing going unpunished.”

Prosecutors have always had difficulties attributing guilt to corporate bodies under UK law.  The application of the “identification principle” in establishing corporate liability in the United Kingdom means that a company can be convicted of any criminal offences only if the prosecution can show that the wrongdoer was also the “controlling mind” of the company.  This is a significant hurdle with large companies and is not a requirement in other countries, such as the United States.  However, the recent conviction of the Sweett Group for a section 7 offence bears out the Justice Minister’s assertion that companies can be and are prosecuted.

The proposed new offence would arm regulators with a specific offence for which they could prosecute companies that fail to implement adequate procedures that would prevent economic crime and fraud from being carried out by their employees and agents.   Attorney-General Jeremy Wright QC confirmed that “the evolving nature of economic crime means we need to continue to find and develop new ways to expose and combat it.”  The Ministry of Justice said that it wanted to assess whether more pressure should be put on businesses to go further in implementing changes to their policies and procedures to target offences other than bribery.  The new offence would complement the existing offence under section 7 of the Bribery Act 2010 of failing to prevent bribery.

Economic crime has been at the centre of increased governmental and judicial focus in the United Kingdom in recent years.  In October 2014, the sentencing guidelines for corporate bodies found guilty of offences of fraud, bribery and money laundering came into force.  The guidelines provide courts with the opportunity to impose much higher fines than had been previously levied in the United Kingdom.  In 2014, Deferred Prosecution Agreements (DPAs) also became available to certain prosecutors, thereby encouraging companies to self-report crimes under the Bribery Act 2010 and avoid a criminal conviction.  The first successful DPA was entered into with Standard Bank plc in November 2015.   The first successful prosecution for a section 7 offence occurred in December 2015, with the Sweet Group plc entering a guilty plea for the company’s failure to prevent bribery.  The sentencing took place in February 2016, and the Sweet Group plc was ordered to pay £2.2m in fines.

In light of the way in which prosecutions are moving under the Bribery Act 2010, the recent DPA and successful prosecution under section 7, it is unclear whether further consideration will be given to the potential offence of failure to prevent economic crime. David Green, Director of the Serious Fraud Office (SFO), has said that he believes further work is required.  He said in January 2016 that “existing legislation makes it difficult to prove criminal liability at the top of big companies… and the lack of corporate charges since the financial crash of 2008 is undermining public confidence.”  In the meantime, it appears that the SFO and the National Crime Agency will continue to exercise their powers under the Proceeds of Crime Act and the Bribery Act, although given the increasing number of corporate scandals, it may be that the Ministry of Justice that will revisit these proposals at some point in the future.

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