class: center, middle, inverse, title-slide # BIS4630 Corporate Compliance & Fraud Analytics ## Week 9 Bribery & Corruption (Supplementary Materials) ### Hayson Tse, PhD (HK) ### 3 January 2018 --- # Help * Pink means `I am a link; please click me.` * Click a slide and press `H` for help ??? This is notes. --- # Contact info * Personal email + [H.Tse](H.Tse@mdx.ac.uk) + [hayson.tse](hayson.tse@teacher.hkuspace.hku.hk) * Course twitter + [@bis4630](https://twitter.com/bis4630) --- # Copyright [This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International Licence.](http://creativecommons.org/licenses/by-nc-sa/4.0/legalcode)  --- # Objectives At the end of this presentation, you should understand: * Summarise the Bribery Act 2010 * Explain the problems, history and issues for businesses * Explain the various offences * Explain the regulatory bodies --- # Table of contents * Course administration * MDX Video * Reference * Paradise papers investigation * Overview of the Bribery Act 2010 * Offences * Regulatory bodies --- name: course-admin class: inverse, center, middle # Course administration --- # Classroom Conduct * [HKU SPACE Handbook](http://bit.ly/2ds6czb) + Unauthorised reservation of seats is not permitted. + Eating or drinking is not allowed. + All mobile phones and pagers are to be turned off. + Smoking is prohibited at all HKU SPACE learning centres and the University campus. + No video / audio recording is allowed, except with the permission of the Programme Director / Manager, and is subject to any conditions stipulated when such permission is granted. + Personal belongings should not be left unattended. --- # MSc Electronic Security and Digital Forensics Degree > "This course will focus on IT law, professional and ethical issues, criminal law, theories of crime as well as looking at the legal system more generally. You'll also focus on security regulations, contingency planning and risk management as well as intellectual property law, privacy and data protection law." - [Course homepage](http://bit.ly/2e18OVE) --- # Compulsory modules that you are exempted * BIS 4620 Digital Investigation and Evidence Management (30 Credits) * BIS 4610 Information Security Management (30 Credits) --- # Compulsory modules for you * BIS 4600 Legal and Professional Aspects of Digital Forensics (30 Credits) * BIS4630 Corporate Compliance and Financial Crime Prevention (30 Credits) * BIS 4992 Postgraduate Computing Project (60 Credits) --- # Study hours outside class contact > “The study hours for each credit point is 10 hours. For a 30-credit module this equates to 300 hours. Therefore, if a module has time-tabled activities i.e. lecture/seminar/lab, of 3 hours per week for a 24-week period (total of 72 hours), then the out-of-class study commitment expected of students is 228 hours in total.” - Course Handbook. * Practical meaning: 300 hours = **2.5 hours per day** x *5 days* x 24 learning weeks (Note: only 18 learning weeks for Hong Kong) --- # Master's degree in UK > “[A] master's [degree] is hard work and requires a lot of commitment. It has to be something you actively want to do . . . Postgraduate study is *much more independent* than undergraduate study, so, on a practical level, it is important to be aware that you may be *working by yourself for much of the time*.” - [Taking the plunge into the master's world (The Guardian, 2009)](http://bit.ly/2fBScEa) --- # Teaching Plan IMPORTANT * The Hong Kong teaching schedule is set out below. It supersedes the UK model explained in the Module Handbook. * The Hong Kong schedule consists of a 18-week schedule decided by HKUSPACE. The UK course consists of a 24-week schedule. * The 2 dates for coursework remain the same: 7 March 2018 and 14 March 2018 (both London time) --- # Week 9 - 11: 3, 10 & 17.i.2018 * Bribery & Corruption + Understanding of how bribery and corruption initiatives work + Understanding UK and US regimes + Systems and Controls + Politically exposed persons + FATF recommendations + Transparency International + Corruption perception index + The effect of corruption on economies + Regulated sector responsibilities + GRECO (The Group of States against Corruption) --- # Week 17: 28.ii.2018 * Revision, Practise Presentations + 7 March 2018 is the deadline to send Coursework A, B and C to Middlesex via Middlesex Turnitin. There is no lecture on 7 March 2018. + Revision + Practise presentations + Examination preparation and practice --- # Week 18: 14.iii.2018 * Group Presentations & Examination preparation + Summative group presentation + Revision + Examination paper practice * Assessment Formative assessment + Monitor student learning to improve their learning + Provide ongoing feedback to teachers to improve teaching * Summative assessment + Evaluate student learning at the end of an instructional unit by comparing it against some standard or benchmark --- # Important dates * 11 October 2017 - 6 December 2017, both dates inclusive + You are recommended to research for Coursework Section A to C. * 24 January 2018 + You are recommended to complete a first draft copy of Coursework Section A. * 31 January 2018 + You are recommended to complete a second draft of Coursework Section A and continue to review, edit and amend until you have a ‘camera-ready' piece of soft copy before 7 March 2018. --- # Important dates * 7 February 2018 + You are recommended to complete a first draft of Coursework Section B. * 14 February 2018 + You are recommended to complete a second draft of Coursework Section B and continue to review, edit and amend until you have a ‘camera-ready' piece of soft copy before 7 March 2018. * 21 February 2018 + You are recommended to complete a first draft of Coursework Section C. --- # Important dates * 28 February 2018 + You are recommended to complete a second draft of Coursework Section C and continue to review, edit and amend until you have a ‘camera-ready' piece of soft copy before 7 March 2018. --- # Important dates * 7 March 2018 + Deadline for Summative Submission of Coursework Section A, B and C, each with its covering page via the supplied Turnitin link in the Middlesex University UniHub module page to Middlesex. + Any other means of submission, even to me or to HKUSPACE, means no submission. --- # Important dates * 14 March 2018 + Group presentation for Coursework Section C. --- name: video class: inverse, center, middle # MDX Video --- # The video recommend by MDX * Title: [An introduction to Anti-Bribery / Anti-Corruption](http://bit.ly/2j0zzZK) * The slides (notes) are a reproduction and adaptation of the video for the purpose of education --- # Contents of the video * Bribery Act 2010 * Types of Bribery * How to recognise legal and illegal activities * Types of corruption * Consequence of non-compliance * Recognising a bribe --- # [Bribery Act 2010](http://bit.ly/2EqiFhK) * [Explanatory notes](http://bit.ly/2CwMmNW) * upholds principles of free and fair competition * prevents organisations and employees from behaving improperly * ensures organisations work honestly, ethically and appropriately * outlines consequences of non-compliance for UK organisations and employees, whether based in UK or overseas --- # Offences * giving or offering a bribe * receiving a bribe * bribery of a public official * corporation failure to prevent bribery --- # Offences * giving or offering a bribe + "Regardless of whether or not it is accepted. It is an offence to give or promise to give any advantage, including cash, or gifts, to induce a person to perform their role improperly." --- # Offences * receiving a bribe + "It is an offence for a person or party to seek, take or agree to take any advantage in return for their improper conduct or influence." --- # Offences * bribery of a public official + "It is an offence to attempt to influence a public official with the promise of cash, gifts, or hospitality in order to obtain an advantage in business." --- # Offences * corporation failure to prevent bribery + "If a company falls to prevent a bribe being paid on its behalf, the company will have committed this corporate offence, regardless of whether or not it was aware of it. The bribe could come from an employee or an individual associated with the company." --- # Guidance * The Ministry of Justice provides [guidance](http://bit.ly/1U6pHxi) for companies on adequate procedures to prevent bribery. This is based on 6 principles: + Proportionate procedures + Top-level commitment + Risk assessment + Due diligence + Communication + Monitoring and review --- # Guidance * Proportionate procedures + "Company procedures should be proportionate to the risk of bribery. This will depend on the scale and complexity of the company's business activities. The procedure should be easily accessible, clear, practical and possible to implement and enforce effectively." --- # Guidance * Top-level commitment + "At the highest level, the management of a company should adopt a zero tolerance policy to bribery and corruption. Management should commit to preventing bribery occurring by anyone associated with the company." --- # Guidance * Risk assessment + "Organisations should assess the nature and extent of their exposure to risk of bribery." --- # Guidance * Due diligence + "To mitigate identified bribery risks, organisations should apply due diligence procedures with respect to all persons performing services for them or on their behalf." --- # Guidance * Communication + "Communication is key to preventing bribery. Companies and organisations should embed their bribery prevention policies and ensure they are clearly understood throughout the organisation." --- # Guidance * Monitoring and review + "Organisations should monitor and review their bribery prevention procedures, and involve all associates of the company. Improvements should then be made where necessary." --- # How to recognise legal and illegal activity > "Bribery is the act of offering anything beneficial or of value while intending to influence a person to perform their role improperly, or accepting anything beneficial or of value to perform your role improperly." > "The Bribery Act states that the person or persons involved in the bribe must have a guilty mind; that is, they intend or know their act will result in improper conduct. If a gift is offered with no impropriety intended, then it is not a bribe." --- # Typical bribes * Bribes in business are typically used for: + obtaining or retaining business + gaining an advantage over competitors + influencing an official in his performance or official function --- # Types of bribes * Bribery takes many guises: + gifts: "This includes products, services cash and vouchers" + excessive hospitality: "lavish gifts, hospitality or entertainment" + charitable donations: "These can be political or otherwise, and may include pro bono services." + facilitation payments: "Sometimes called grease payments, these are above and beyond any legitimate payment due." --- # SFO list of corruption indicators * decision making * financial * behaviour --- # SFO list of corruption indicators * Decision making + "illogical decisions when accepting contracts or projects" + "abuse of the decision process or delegated powers" + "unexplained preference for certain contractors during tendering" + "bypassing normal procedures" + "raising barriers around specific roles or departments that are key in the tendering or contract process" + "missing documents or records regarding meetings or decisions" --- # SFO list of corruption indicators * Financial + "abnormal cash payments" + "pressure for payments to be made urgently or ahead of schedule" + "payments made through a third party country. For example, goods supplied to country A, but payment made to a shell company in country B." + "abnormally high commission percentage paid to a particular agency. This may be split into several accounts for the same agent, often in different jurisdictions." --- # SFO list of corruption indicators * Behaviour + "private meetings with public contractors or companies hoping to tender for contracts." + "an individual that never takes vacation or time off, even if ill, or insists on dealing with specific contractors themselves." + "the unusually smooth process of cases in which an individual does not have the expected level of knowledge or expertise" --- name: refer class: inverse, center, middle # Reference --- # Reference * Harrison and Ryder, The Law Relating to Financial Crime in the United Kingdom, 2nd edition, Chapter 7 (HR) * Ministry of Justice, The Bribery Act 2010 Quick Start Guide. (QS) * Ministry of Justice, The Bribery Act 2010 Guidance. (G) * British Bankers Association, [Anti-Bribery Corruption Guidance](http://bit.ly/2in93ZS), May 2014. (BBA) * London Centre of International Law Practice, [A Guide to the UK's Bribery Act](http://bit.ly/1HMgYKS). (LCILP) --- # Reference * Peter Alldridge, [Reforming the British Law of Bribery](http://bit.ly/2Cx3HGf), Queen Mary University of London. * Peter Alldridge, [The UK Bribery Act: the Caffeinated Younger Sibling of the FCPA](http://bit.ly/2iT9tdR). * Jonathan Mukwiri, (2015) British Law on Corporate Liability, Journal of Financial Crime, Vol.22 Iss 1, pages 16 - 27 (JM) * Ministry of Justice, [Bribery Act 2010 Circular 2011/05 (MJCir)](http://bit.ly/2iXJySs) --- name: Paradise class: inverse, center, middle # Paradise Papers Investigation --- # [Video: How to hide your cash offshore](http://www.bbc.com/news/world-41880153#) * How to hide your cash offshore 1. Create a company in name only or shell company 1. Base it somewhere + offshore + with low or zero-tax + high levels of secrecy + such as the Cayman Islands, the Bristish Virgin Islands, Burmada, the Isle of Man, Guernsey, the Channel Island of Jersey 1. Pay some nominees to "run" the business to avoid your name appearing on documents 1. Open a bank account in another offshore location for extra anonymity. THe shell company makes payments into this account. 2. Spend the money on "company assets" or loans you will never pay back * One estimate of the amount held in offshore financial centres is $10 trillion (citing Boston Consulting Group). That's similar to the combined economic output of Japan, the UK and France. --- # [Where do the Paradise Papers come from?](http://www.bbc.com/news/world-41880153) > "There are more than 1,400GB of data, containing about 13.4 million documents. Some 6.8 million come from the offshore legal service provider *Appleby* and corporate services provider *Estera*. The two operated together under the Appleby name until Estera became independent in 2016. Another six million documents come from corporate registries in some 19 jurisdictions, mostly in the Caribbean. A smaller amount comes from the Singapore-based international trust and corporate services provider, Asiaciti Trust. The leaked data covers seven decades, from 1950 to 2016." --- # [Who leaked the Paradise Papers?](http://www.bbc.com/news/world-41880153) > "As with 2016's Panama Papers, *German newspaper Süddeutsche Zeitung* obtained the original material and was the stepping off point for this investigation. In the case of the Panama Papers, the originator of the leaks, named only as John Doe, issued a manifesto a month after the publication date. A simple statement this time says: "For their protection, Süddeutsche Zeitung does as a general policy not comment on its sources!"" --- # [Who is working on the leaks?](http://www.bbc.com/news/world-41880153) > "As with the Panama Papers, the *International Consortium of Investigative Journalists*, a global network of investigative journalists, was called in to work on the project. Along with the BBC's flagship Panorama programme, there are nearly 100 media partners involved in 67 countries, including the Guardian and the New York Times." --- # [The International Consortium of Investigative Journalists](https://www.icij.org/about/) > "The International Consortium of Investigative Journalists is a global network of more than 200 investigative journalists in 70 countries who collaborate on in-depth investigative stories. > Founded in 1997 by the respected American journalist Chuck Lewis, ICIJ was launched as a project of the Center for Public Integrity, focusing on issues that do not stop at national frontiers: cross-border crime, corruption, and the accountability of power." > "The ICIJ is a non-profit organization. We give our work away for free." --- # [Paradise Papers](http://www.bbc.com/news/world-41880153) > "As with last year's Panama Papers leak, the documents were obtained by the German newspaper Süddeutsche Zeitung, which called in the International Consortium of Investigative Journalists (ICIJ) to oversee the investigation. BBC Panorama and the Guardian are among the nearly 100 media groups investigating the papers. > The Paradise Papers name was chosen because of the idyllic profiles of many of the offshore jurisdictions whose workings are unveiled, including Bermuda, the HQ of the main company involved, Appleby. It also dovetails nicely with the French term for a tax haven - paradis fiscal. Then again, the Isle of Man plays a big part." --- # [The paradise papers investigation](https://www.icij.org/investigations/paradise-papers/about/) > "The Paradise Papers is a global investigation into the offshore activities of some of the world’s most powerful people and companies. > The International Consortium of Investigative Journalists and 95 media partners explored 13.4 million leaked files from a combination of offshore service providers and the company registries of some of the world’s most secretive countries. > The files were obtained by the German newspaper Süddeutsche Zeitung. > The Paradise Papers documents include nearly 7 million loan agreements, financial statements, emails, trust deeds and other paperwork from nearly 50 years at Appleby, a leading offshore law firm with offices in Bermuda and beyond. --- # [The paradise papers investigation](https://www.icij.org/investigations/paradise-papers/about/) > The documents also include files from a smaller, family-owned trust company, Asiaciti, and from company registries in 19 secrecy jurisdictions. The records range from complex, 100-page corporate transaction sheets and dollar-by-dollar payment ledgers to simple corporate registries of countries, such as Antigua & Barbuda, that do not publicly list names of company shareholders or directors." --- # Database search & download * [Offshore leaks database by The International Consortium of Investigative Journalists](https://offshoreleaks.icij.org/) --- # Global corruption is a major problem * Secrecy provided by offshore companies may be facilitating corruption right around the world * [International Monetary Fund](http://bit.ly/2lw9swJ) has said that bribery alone costs as much as two per cent of global GDP * [The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It](http://bit.ly/2lzrBcb): "70 per cent of the grand corruption cases reviewed relied on secret company ownership." * [Global Financial Integrity](http://bit.ly/1kAw5tM): illicit financial flows, which include the proceeds of corruption, are costing developing countries over US$1 trillion every year. --- # [Corruption perception index 2016](http://www.transparency.org/cpi2016) * rank 1: Denmark * rank 2: New Zealand * rank 7: Singapore * rank 9: Canada * rank 10: Germany, Luxembourg, United Kingdom * rank 15: Belgium, Hong Kong * rank 18: United States * rank 175: South Sudan * rank 176: Somalia --- name: overview class: inverse, center, middle # Overview --- # Introduction * Bribery (HR quoting OECD) > "The offering, promising or giving *of* something in order to influence a public official in the execution of his / her official duties." * Bribery (HR quoting SFO) > "Giving or receiving *of* something of value to influence a transaction." * Bribe can include: (HR quoting Sanyal and Samanta) > "money, other pecuniary advantages, such as a scholarship for a child's college education, or non-pecuniary benefits, such a favourable publicity. In the international context, bribery involves a business firm from country A offering financial or non-financial inducements to officials of country B to obtain a commercial benefit." --- # [Bribery Act 2010](http://bit.ly/1FIc0c7) * [Original document (as enacted)](http://bit.ly/1gPbKyV) * [Explanatory notes](http://bit.ly/2jcMQSl) * Effective: 1 July 2011 * Bribery general meaning: > "Giving someone a financial or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so." (QS) --- # Background * UK is a signatory to: + UN Convention against Corruption + OECD Convention on Combating Bribery of Foreign Public Officials (1997) + Council of Europe Criminal Law Convention on Corruption (1998) and additional Protocol (2005) --- # Background * Common law offences of bribery and embracery (bribery of jurors) * Public Bodies Corrupt Practices Act 1889 + Bribery of public officials and defendant to have acted corruptly. * Prevention of Corruption Act 1906 + Bribery of agents regardless of sector in which they are employed and defendant to have acted corruptly. * Prevention of Corruption Act 1916 (also abolishing common law offences) * Honours (Prevention of Abuses) Act 1925 * [Law Reform Commission Report on UK Bribery Law in 1998 (LC248)](http://bit.ly/2in9seY) --- # Background * On 24 March 2003, Home Office published the draft Corruption Bill. + The Joint Committee on the Draft Corruption Bill heavily criticised the Bill and recommended that the scheme of offences be restructured. The Government held a consultation process in 2005 to find a new consensus. + The consultation revealed no consensus. Government asked Law Commission to take forward the findings in the consultation. * [Law Reform Commission Report: Reforming Bribery in 2008 (LC313)](http://bit.ly/2in4yi6) * Criticism by Organisation for Economic Co-operation and Development --- # Background * In March 2009, Government published draft Bribery Bill + Summary of changes from draft Corruption Bill to draft [Bribery Bill 2009](http://bit.ly/2iMVMge) * Bribery Act 2010 (came into force on 2 July 2011) --- # Effect of BA 2010 * "provides a more effective legal framework for law enforcement and prosecutors to combat bribery in the public or private sectors;" (LCILP) * "replaces the fragmented and complex offences at common law and in the Prevention of Corruption Acts 1889-1916" (LCILP) * "creates two general offences covering the offering, promising or giving of an advantage, and requesting, agreeing to receive or accepting of an advantage; " (LCILP) * "creates a discrete offence of bribery of a foreign public official;" (LCILP) --- # Effect of BA 2010 * "creates a new offence of failure by a commercial organisation to prevent a bribe being paid for or on its behalf. It will, however, be a defence if the organisation has adequate procedures in place to prevent bribery;" (LCILP) * "supports good business practice by making clear the responsibilities to do business in an open and honest way." (LCILP) --- # Particular issues for businesses * "The new corporate offence of failing to prevent bribery;" (LCILP) * "Self-reporting/voluntary disclosure;" (LCILP) * "Enhanced risk of personal criminal liability for individual staff, particularly at senior level;" (LCILP) * "Wide jurisdictional provisions and enhanced international co-operation by prosecutors / law enforcement;" (LCILP) * "Both US and UK prosecuting authorities looking to prosecute individuals as well as their companies;" (LCILP) * "Civil recovery powers." (LCILP) --- # When can an organisation be liable * "*If* a very senior person in the organisation (for example, a managing director) commits a bribery offence. This person's activities would then be attributed to the organisation." (QS) * "*If* someone who performs services for the organisation, e.g as an employee or agent, pays a bribe specifically to get business, keep business, or gain a business advantage for your organisation." (QS) (There is a defence: show organisation had adequate procedures in place to prevent bribery.) --- # Outline of Bribery Act 2010 * General Bribery offences (sections 1 to 5) * Bribery of foreign public officials (section 6) * Failure of commercial organisations to prevent bribery (sections 7 to 9) * Meaning of ‘associated persons' (section 8) * Consent and connivance of senior officers (section 14) * Liability of parent companies (sections 7 to 9) * Penalties (section 11) * Debarment risk (Public Contract Regulations) * Jurisdiction (section 12) * Facilitation payments (considerations for prosecution) * Guidance by Secretary of State (section 9) --- # Bribery Offences * General Offences + Bribing another person (section 1) (also known as active bribery) + Being bribed (section 2) (also known as passive bribery) * Bribing a foreign public official (section 6) (also known as active bribery) * Corporate liability for failing to prevent bribery on behalf of a commercial organisation (section 7) (also known as corporate offence) --- # Bribery Offences * Penalties + Individual: unlimited fines and up to 10 years imprisonment + Corporation: unlimited fines and potential debarment from government contracts within the EU --- # DPP, SFO and Revenue & Customs * [Guidance on Corporate Prosecutions](http://bit.ly/2iOno4Q) * Additional public interest factors against prosecution + "A prosecutor should take into account the commercial consequences of a relevant conviction under European law, particularly for self-referring companies, in ensuring that any outcome is proportionate. " + "A genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice, involving self-reporting and remedial actions, including the compensation of victims: In applying this factor the prosecutor needs to establish whether sufficient information about the operation of the company in its entirety has been supplied in order to assess whether the company has been proactively compliant. This will include making witnesses available and disclosure of the details of any internal investigation;" --- # *Regina v. Innospect Limited* * [(2010) EW Misc 7 (EWCC) (18 March 2010)](http://bit.ly/2jact2f) * sentencing judgment (not appellate) * Judge criticised SFO > "The court was faced with an agreement made between the DOJ, the SEC, the OFAC and SFO as to the division of the sum these bodies had considered Innospec was able to pay. This was not a matter that received judicial determination in either the UK or the US (save that inherent in the Federal District Court's approval of the plea agreement). As it is the position in both the US and the UK that it is for the court ultimately to determine the sanction to be imposed for the criminal conduct, an agreement between prosecutors as to the division, even if . . . " --- # *Regina v. Innospect Limited* * Judge criticised SFO > ". . . an agreement between prosecutors as to the division, even if it had been within the power of the Director of the SFO (which as I have explained it was not), cannot be in accordance with basic constitutional principles. Nor in my view was the division agreed one which on the facts of the case accorded with principle. The gravamen of the criminality was centred in the UK, the criminality of the corruption in Indonesia was no less serious than that in Iraq and there was no reason to prefer compensation to Iraq over compensation to both Iraq and Indonesia." --- # *Regina v. Innospect Limited* * Judge further criticised SFO > "However there is a more important general principle. Those who commit such serious crimes as corruption of senior foreign government officials must not be viewed or treated in any different way to other criminals. It will therefore rarely be appropriate for criminal conduct by a company to be dealt with by means of a civil recovery order; the criminal courts can take account of co operation and the provision of evidence against others by reducing the fine otherwise payable. . . . " --- # *Regina v. Innospect Limited* * Judge further criticised SFO > ". . . It is of the greatest public interest that the serious criminality of any, including companies, who engage in the corruption of foreign governments, is made patent for all to see by the imposition of criminal and not civil sanctions. It would be inconsistent with basic principles of justice for the criminality of corporations to be glossed over by a civil as opposed to a criminal sanction. There may, of course, be a place for a civil order, for example, as a means of compensation in addition to a fine. It is therefore plainly desirable that the Lord Chief Justice should consider directions that ensure any civil penalties are heard in conjunction with criminal proceedings." --- # *Regina v. Innospect Limited* * First case of a global settlement in respect of criminal proceedings in both the UK and US. * The agreement: paragraphs 15 - 21 > "Innospec Ltd is an English company and a subsidiary of Innospec Inc, a US company. Investigations of the Innospec entities by the US and UK indicated that Innospec Ltd had paid bribes totalling an estimated US$8m to government officials in Indonesia and that Innospec Inc had bribed government officials in Iraq. Discussions between the SFO in the UK and the SEC, OFAC and the DOJ in the US, and the Innospec entities resulted in an agreement that the Innospec entities should plead guilty to charges relating to corruption and pay predetermined penalties. . . ." --- # *Regina v. Innospect Limited* * The agreement: paragraphs 15 - 21 > ". . . It was agreed that Innopsec Ltd would pay a third of the total amount, ie US$12.7m. Although a higher amount could have been sought, the US and UK authorities agreed to accept the reduced penalties in light of the group's co-operation and the fact a larger penalty would bankrupt the companies." * Duties of UK Prosecutor: paragraphs 22 - 29 --- # Questions * Serious nature of corruption offences means that criminal sanctions are the only appropriate sanctions. But SFO indicated that self-reporting may result in non-prosecution. * But SFO indicated that section 7 should not trigger debarment from public contract. --- # [Joint Prosecution Guidance of SFO and DPP (30 March 2011)](http://bit.ly/2hWDytA) * Factors tending against prosecution (section 1) > "There has been a genuinely proactive approach involving self-reporting and remedial action (additional factor (a) in the Guidance on Corporate Prosecutions)" * Factors tending against prosecution (section 6) > "The payment(s) came to light as a result of a genuinely proactive approach involving self-reporting and remedial action (additional factor (a) in the Guidance on Corporate Prosecutions)" --- # [SFO Corporate Self-reporting Policy (October 2012)](http://bit.ly/2iKoRqI) * Supersedes any statement of policy or practice on self-reporting previously made by or on behalf of SFO --- # SFO Corporate Self-reporting Policy (October 2012) > "Whether or not the SFO will prosecute a corporate body in a given case will be governed by the Full Code Test in the [Code for Crown Prosecutors](http://bit.ly/1lb0oEo), the joint prosecution [Guidance on Corporate Prosecutions](http://bit.ly/2iOno4Q) and, where relevant, the [Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010](http://bit.ly/2hWDytA)." --- # SFO Corporate Self-reporting Policy (October 2012) * Consideration of self-reporting > "If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so. The fact that a corporate body has reported itself will be a relevant consideration to the extent set out in the Guidance on Corporate Prosecutions. That Guidance explains that, for a self-report to be taken into consideration as a public interest factor tending against prosecution, it must form part of a "genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice". Self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts." --- name: off class: inverse, center, middle # Offences --- # Section 1 * Bribing another person > "It is an offence to offer, promise or give a financial or other advantage to induce another person where ( Case 1) the briber (P) intends the advantage to bring about an improper performance by another person of a relevant function or activity, or to reward improper performance of such a function or (Case 2) the briber (P) knows or believes that the acceptance of the advantage offered, promised or given in itself constitutes the improper performance of a relevant function or activity. The offence is not committed if it is permitted (or required) by the applicable written law. The advantage can be offered, promised or given by the briber directly or through someone else." (BBA) --- # Section 1 * Bribing another person + financial or other advantage + perform improperly or improper performance of + relevant function or activity --- # Section 2 * Being Bribed > It is an offence for a person (R) to request, agree to receive or accept a financial or other advantage, if (Case 3) with the intention that, as a consequence, a relevant function or activity should be performed improperly; or if (Case 4) the request, agreement or acceptance constitutes the improper performance by R of a relevant function or activity; or if (Case 5) the advantage is a reward for the improper performance (whether by R or another person) of a relevant function or activity; or if (Case 6) . . . --- # Section 2 * It does not matter if the bribe is received directly or through someone else. * It is immaterial whether or not the recipient - or the person acting as a conduit to receive the bribe - knows or believes the performance of the function or activity is improper. * The offence is not committed if it is permitted (or required) by the applicable written law. --- # Section 2 * Being Bribed + financial or other advantage + perform improperly or improper performance of + relevant function or activity --- # Common between sections 1 & 2 * Improper performance by a person of a relevant function or activity + Relevant function or activity to which the bribe relates + Improper performance to which a bribe relates --- # Function and activity * Function or activity (that can be improperly performed) for the purposes of Sections 1 and 2 offences include (section 3) : + all functions of a public nature + all activities connected with a business, trade or profession + all activities performed either in the course of employment or on behalf of any body of persons. + (Therefore, public and private sector.) + can be carried out either in UK or abroad, and need have no connection with UK. --- # Improperly performance * Improperly performed (of function and activity) if only the person carrying out the function (section 4): + is expected to perform it in good faith (Condition A): Section 3(3) + is expected to perform it impartially (Condition B): Section 3(4) + is in a position of trust by virtue of performing the function (Condition C): [Section 3(5) --- # Expectation test * Improper performance is one that breaches a relevant expectation (section 5) + What is expected is decided by the "expectation test" + A test of what a reasonable person in UK would expect in relation to the performance of the type of function or activity concerned --- # Section 6 * Bribing a foreign public official > "It is an offence if a person (P) offers, promises or gives any advantage to a foreign public official (F) with the requisite intention to influence F in his or her official capacity and to obtain or retain business or an advantage in the conduct of business. An offence is not committed where F is permitted or required by the applicable written law to be influenced by the advantage." (BBA) --- # Section 6 * Bribing a foreign public official + must intend to obtain or retain a business or an advantage in the conduct of business --- # Section 7 * Failure of a relevant commercial organisation to prevent bribery > "It is a strict liability offence if a commercial organisation fails to prevent someone associated with it from bribing another person with the intention to obtain or retain business or an advantage in the conduct of business for the organisation. The commercial organisation will only have a full defence to this offence if it can show that, despite a particular case of bribery, it nevertheless had adequate procedures in place to prevent persons associated with it from bribing." (BBA) --- # Section 7 * Failure of a relevant commercial organisation to prevent bribery + "Under section 7 of the Act, a commercial organisation can also be found guilty of an offence if a person associated with the organisation bribes another, intending to obtain or retain business or a business advantage for that organisation." (HR) + "It creates an additional direct rather than alternative vicarious liability, when the commission of a section 1 or section 6 bribery offence has taken place on behalf of an organisation." (HR) --- # Relevant commercial organisation * Failure of a relevant commercial organisation to prevent bribery (section 7): relevant commercial organisation (section 7(5)) + "a body which is incorporated under the law of any part of the United Kingdom and which carries on a business (whether there or elsewhere)" + "any other body corporate (wherever incorporated) which carries on a business, or part of a business, in any part of the United Kingdom." + "a partnership which is formed under the law of any part of the United Kingdom and which carries on a business (whether there or elsewhere)" + "any other partnership (wherever formed) which carries on a business, or part of a business, in any part of the United Kingdom" --- # Associated person * Failure of a relevant commercial organisation to prevent bribery (section 7): associated person (section 8) + "For the purposes of section 7, a person ("A") is associated with C if (disregarding any bribe under consideration) A is a person who performs services for or on behalf of C." + "The capacity in which A performs services for or on behalf of C does not matter." + "Accordingly A may (for example) be C's employee, agent or *subsidiary*." + "Whether or not A is a person who performs services for or on behalf of C is to be determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between A and C." + "But if A is an employee of C, it is to be presumed unless the contrary is shown that A is a person who performs services for or on behalf of C" --- # Jurisdiction * Failure of a relevant commercial organisation to prevent bribery (section 7) + "It is also worth noting that for the offence to be made out there is no requirement to prove that the activity was committed in the UK or elsewhere. Indeed, there is no need to even show a close connection to the UK as is needed for the other bribery offences under the Act." (HR) --- # Attributing crimes to companies * Summary: Three questions for section 7 + Has bribery occured by a person? + Is the person an employee of the company? + Has the company failed to prevent that person from committing bribery? --- # Attributing crimes to companies * Failure of a relevant commercial organisation to prevent bribery (section 7) + "Moreover, the existence of section 7 does not affect the common law principle that governs the liability of corporate bodies for criminal offences." (HR) --- # Attributing crimes to companies * Nature of companies + "The company having a legal personality separate from its shareholders and managers, yet being an artificial person, has often caused difficulties in finding the company directly liable for criminal acts." (JM) + "English law treats a company as a legal person or entity in its own right and not as an aggregate of shareholders. Incorporation gives the company legal personality, separate from its members, with the result that a company may own property, sue and be sued in its own corporate name." (JM) --- # Attributing crimes to companies * Nature of companies + "In the context of crimes, the premise of separate legal personality is that the entity cannot, ordinarily, be liable for crimes of its members and equally the converse." (JM) + "Moreover, ordinarily, common law and statutory criminal offences require proof of a criminal mind, yet it is difficult to show a criminal mind of a company, for the artificial person has no mind of its own as does the natural person." (JM) --- # Attributing crimes to companies * Doctrine of identification or attribution + "To apply attribution rules to bribes, the personnel with whom the company is identified would only include those at the centre of corporate power ? the board of directors, the managing director and perhaps other senior personnel who carry out the functions of management and speak and act as the company." (JM) + "As bribery generally happens in the lower hierarchy of corporations or institutions, relying on attribution for corporate crimes poses considerable difficulties. The BA goes beyond attribution rules to avoid their limitations." (JM) --- # Bribery by company * Section 7 (associated person of company committing section 1 or section 6) * Sections 1 and 6: Doctrine of identification or attribution (directing mind committing section 1 or section 6) + "This common law principle, sometimes referred to as the "identification principle", will therefore continue to operate so that where there is evidence to prove that a person who is properly regarded as representing the "directing mind" of the body in question possessed the necessary fault element required for the offence charged the corporate body may be proceeded against." (MoJCir) --- # Section 7 Defences * It is a defence if the company can prove that it had in place "adequate procedures" designed to prevent persons associated with the company from bribing another person. * The standard of proof is the balance of probabilities (G) * Ministry of Justice published guidance to explain "adequate procedures" + [Guidance on good practice procedures for corporate anti-bribery programmes](http://bit.ly/2CwnoOs). + [Guidance on good practice procedures for corporate anti-bribery programmes: Checklist](http://bit.ly/2ltuV9C) * (defences in details to be explained in another session.) --- # General defences to sections 1, 2 and 7 and their inchoate offences * Section 13 (1): + It is a defence for a person charged with a relevant bribery offence to prove that the person's conduct was necessary for: + (a) the proper exercise of any function of an intelligence service, or + (b) the proper exercise of any function of the armed forces when engaged on active service. * Section 13(6): + defines relevant bribery offences, etc. * Purpose: + enable the intelligence services, or the armed forces to undertake legitimate functions that may require the use of a financial or other advantage to accomplish the relevant function --- name: regbody class: inverse, center, middle # Regulatory bodies --- # Financial institutions and regulatory bodies * Serious Fraud Office * Financial Conduct Authority * National Crime Agency * City of London Police * Metropolitan Police --- # Financial institutions and regulatory bodies * Serious Fraud Office + The Criminal Justice Act 1987 created the SFO + Criminal law enforcement agency that *both* investigates and prosecutes its cases + 5 operational divisions: three handling Fraud and two handling Bribery & Corruption cases + independent of government, like the Crown Prosecution Service (CPS) + Attorney General supervises Director of SFO and Director of Public Prosecutions of CPS --- # Financial institutions and regulatory bodies * FCA + FCA does not actually enforce BA 2010 but take action against companies for breach guidelines + Financial Conduct Authority (FSA) + Section 6(3) of the Financial Service Markets Act 2000 + Statutory duty to reduce financial crime under FSMA + Further, bribery is relevant to maintaining market confidence + FCA Handbook: first 3 of 11 Principles for Business --- # FCA Handbook * Principles for Business + A firm is to conduct its business with integrity + A firm must conduct its business with due skill, care and diligence + A firm must take reasonable care to organise and control its affairs responsibility and effectively, with adequate risk management system. --- # Financial institutions and regulatory bodies * FCA Handbook: SYSC 3.2.6R + A firm must take reasonable care to establish and maintain effective systems and controls for compliance with applicable requirements and standards under the regulatory system and for countering the risk that the firm might be used to further financial crime. --- # Financial institutions and regulatory bodies * National Crime Agency * Formed under section1(1) of the Crime and Courts Act 2013 * Functions and duties are defined in section 1(3) to (11). * On 29 May 2015, the tasks of Proceeds of Corruption Unit and OCAU were transferred to the new NCA unit called ICU --- # Financial institutions and regulatory bodies * International Corruption Unit (ICU) of NCA + Formed under section1(1) of the [Crime and Courts Act 2013](http://bit.ly/2q75D5I) + Functions and duties are defined in section 1(3) to (11). --- # Financial institutions and regulatory bodies * International Corruption Unit (ICU) of NCA + Investigates international corruption cases and related money laundering + Investigates offences committed under the UK Bribery Act 2010 involving UK ?based companies/nationals or international bribery with a UK nexus + Traces and recovers the proceeds of international corruption + Supports foreign law enforcement agencies with international anti-corruption investigations + Engages with government and business to reduce the UK's exposure to the proceeds of corruption + Works with business to support increased compliance with the UK Bribery Act 2010 + Works with Her Majesty's Treasury in relation to the enforcement of financial sanctions --- # Financial institutions and regulatory bodies * City of London Police + Overseas Anti-corruption Unit (OACU) + The City of London police have commissioned 4 short crime prevention videos designed to be used by companies as part of ongoing internal training for their staff. + [A short video reminding business of the importance of making themselves aware of the Act and ensuring that they have "adequate procedures" under the Bribery Act. Run time 02:42.](http://bit.ly/2lttesN) + [An infographic film bringing to life the key elements of the Act in a simple and light style. This would be an ideal film for bringing the Bribery Act to the attention of people who are new to the Act or have a limited knowledge of it. Run time 02:08.](http://bit.ly/2CngDkB) --- # Financial institutions and regulatory bodies * City of London Police + [The perfect storm of rationalising bribe. Run time 07:36.](http://bit.ly/2DDSovu) + [This video is designed to be used by companies as part of ongoing internal training for their staff. It graphically demonstrates the impact and ramifications that a corruption investigation could have on companies and individuals. Run time 06:20](http://bit.ly/2zWiHup) * Metropolitan Police + Proceeds of Corruption Unit --- # Financial institutions and regulatory bodies * On the 29th May 2015, the remit of the Metropolitan Police, Proceeds of Corruption Unit and the City of London Police (CoLP), Overseas Anti-Corruption Unit (OACU) transferred to the new NCA unit, named the International Corruption Unit (ICU). --- name: summ class: inverse, center, middle # Summary --- # Summary * Summarise the Bribery Act 2010 * Explain the problems, history and issues for businesses * Explain the various offences * Explain the regulatory bodies