How the UK Bribery Act may be extended

As a piece of legislation that is now three years old, Melanie Wadsworth, partner at Faegre Baker Daniels, explains how the Bribery Act may have its remit increased.

It is over three years since the Bribery Act 2010 came into force. Although we are still waiting for a significant corporate prosecution under the Act, the Serious Fraud Office (SFO) assures us that a raft of investigations are underway and it is only a matter of time until the full impact of the Act is felt.

Most large companies – particularly those operating internationally – have at least responded to the Act by reviewing anti-corruption policies and procedures. Since the Act arrived, there is certainly greater emphasis on training employees to recognise bribery and an increased focus on corporate hospitality expenditure.

However, the impact such enhanced awareness has had on the day-to-day behaviour of employees operating in jurisdictions where bribery is tolerated, if not expected, is hard to quantify.

Undeterred by the relatively limited impact of the Act so far, David Green, director of the SFO, has made it known that he is pressing the government to extend its remit. Under Section 7 of the Act, a commercial organisation is liable to prosecution if a person associated with it (broadly, employees and anyone performing services on behalf of the organisation) bribes a third party with the intention of obtaining a business advantage for that organisation.

The only defence is to show that the organisation had in place ‘adequate procedures’ to prevent such bribery. Green would like to expand the Section 7 offence to include a failure to prevent all acts of financial crime.

More on the Bribery Act:

One of the reasons why the Act came into being was that the UK historically had a very low rate of prosecution for corruption offences. This caught the eye – and the ire – of the Organisation for Economic Co-Operation and Development, which issued a damning report on the UK’s record in this area.

Undoubtedly, the UK was hampered by its relatively high thresholds for corporate criminal liability. If an offence involves a ‘fault’ element, then intention, knowledge or recklessness must generally be proved. To attribute guilt for such an offence to a company, it must be shown that the ‘directing mind and will’ of the company (usually the board or very senior management) has satisfied the fault requirement of the relevant offence.

In practice, this is difficult as the offending conduct will often have been carried out at a much lower level in the organisation. This contrasts with the position under US law, a jurisdiction with a strong record of corporate convictions, where a company can be found criminally liable for the acts of even a junior employee if the offence committed was within the scope of his authority and was of some benefit to the organisation.

The Act sought to address this challenge in the context of bribery by creating a strict liability offence under Section 7, for which there was no need to prove intent. By extending Section 7 to a wider range of offences, Green could make it easier to prosecute corporate entities for a range of economic crimes, some of which can be difficult to prove under existing law.

Given that the SFO is currently investigating the alleged manipulation of Libor, one might assume that he has the banks in his sights and, speaking to The Telegraph, Green made it clear that he was frustrated by a system that allows such organisations to simply pay a fine and throw a few bad apples overboard, while leaving systemic issues unaddressed.

So what practical impact might one expect such a change in the law to have? To the extent that the Act has had an impact on corporate behaviour, it appears to have been primarily at ‘head office’ level, with senior management going on the prescribed courses and HR directors amending their ethics policies accordingly.

There is perhaps still a sense that large companies can distance themselves from acts of bribery committed overseas, expressing regret, while implying that it is the inevitable consequence of operating in certain countries and therefore beyond their control.

With other financial crime, which is more likely to speak of systemic issues throughout the company, maybe the stigma – and so the incentive to take action to ensure it cannot occur – would be greater? If so, Green may yet be able to persuade the government that his proposed extension of the Act could do more than just add an additional box to the compliance checklist.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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