The global bribery crackdown

Bribery may be a fact of life for many business operating internationally. But the regulators are closing in, writes Alex Rene, a partner at law firm Fulbright & Jaworski.

An estimated US$1 trillion is paid annually in bribes, according to World Bank figures from 2007. The consequences of being caught include crippling fines, disruptive investigations, damaging PR, and even imprisonment for convicted individuals.

Both UK and overseas regulators are stepping up their efforts to prosecute companies and individuals. In September last year, the Overseas Anti-Corruption Unit (OACU) of the City of London Police announced that an employee of UK security consulting firm CBRN Team and an official of Uganda had both pleaded guilty to bribery charges. CBRN had paid the Ugandan official in order to receive a contract to advise the Ugandan Presidential Guard. While the CBRN employee received a suspended sentence, the official was sentenced to 12 months’ imprisonment.

In October, the Serious Fraud Office (SFO) announced that it had reached a £2.25 million settlement with major construction firm Balfour Beatty for alleged unlawful accounting in connection with certain ‘payment irregularities’. While the SFO acknowledged that there were no grounds for criminal prosecution, this marks the first time a company has reached this type of civil settlement as part of a foreign bribery investigation.

Last month, the Financial Services Authority (FSA) announced that it had issued a fine of £5.25 million to insurance broking giant Aon in connection with the firm’s failure to maintain effective systems and controls to counter the risk associated with overseas payments. Here the FSA took enforcement action in a field traditionally reserved for the SFO, making a clear statement of intent to businesses in the financial services sector.

Finally, the Law Commission recently announced proposals to amend the English law on bribery and corruption. These included a recommended new offence of bribing a foreign public official and an offence, applicable to corporate bodies, of negligently failing to prevent bribery by an employee or agent.

International developments

UK regulators are not alone in their intentions. The US has led the way in prosecuting foreign bribery cases under the US Foreign Corrupt Practices Act (FCPA) of 1977. This covers non-US companies issuing securities in the US, and their subsidiaries and affiliate companies, providing the US Department of Justice with a potentially “long reach”. The US authorities will be boosted by recent proposals to provide a further US$110 million to improve financial fraud enforcement.

‘Bribery remains a real and global issue’

Businesses also need to be increasingly aware of the consequences of engaging in bribery and corruption across the globe (for example, in November 2008 Japanese authorities brought their first major anticorruption prosecution) and the increasing international co-operation between regulators (the FSA worked closely with the US in the Aon case, for example).

As the World Bank figures demonstrate, bribery and corruption remains a real and global issue, particularly in relation to doing business in the developing world. In the Aon case, for example, the FSA cited suspicious payments to overseas third parties based in Bahrain, Bangladesh, Bulgaria, Burma, Indonesia and Vietnam. Needless to say, however, the prevalence of the practice will be no defence for those unfortunate enough to be caught in the act.

To prevent disaster, proactivity is the key. A compliance audit provides an opportunity for a company to assess the incidence and risk of corruption within the organisation. For example, businesses should review arrangements with overseas agents, including payments and marketing “freebies”. They should also look at any government links established by agents, and closely monitor the services provided by such agents. Where problems are discovered, businesses and their advisers should consider whether disclosure to the authorities is appropriate. Those ignoring the warning signs could face a nasty and expensive shock if the regulators catch up with them.

See also: Anti-bribery legislation and the corruption crackdown

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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