All you need to know about self reporting, Court Cases, Money laundering - Written by on Thursday, October 7, 2010 10:35 - 0 Comments

General counsel, the Bribery Act, money laundering and prison

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“What is the legal position under the Bribery Act if someone reports or suspects bribery in relation to contracts to the General Counsel?”

The short answer is serious.

The GC will need to consider the position under the UK Bribery Act and also in related to additional anti-money laundering laws.

We recently interviewed Vivian Robinson QC (General Counsel to the Serious Fraud Office). He confirmed the Bribery Act was an “additional weapon” in the armoury of the Serious Fraud Office (SFO) and Crown Prosecution Service (CPS) in their fight against corruption.

Both the SFO General Counsel and its Director, Richard Alderman, point out that the UK’s anti-bribing laws have been (in Innospec), and will be, used with the confiscation provisions of the Proceeds of Crime Act 2002 (POCA).

Harsher penalties

We are surprised the use of POCA and its knock on consequences have not received more attention. They work in tandem with the Bribery Act and the penalty is potentially worse than under the Bribery Act.

Confiscation: a plague on all your houses

There is nothing new about the Criminal confiscation regime of POCA and the Civil Recovery Powers of the Director of the SFO which are now routinely used to confiscate “criminal property”. Broadly, criminal property relates to the value of any asset related to a crime. It is very broad.

Like a virus if criminal property is mixed up with untainted property the criminal property will infect that too. Making everything criminal property. Its impact cannot be overstated.

How the money laundering laws work in tandem

In the context of the UK Bribery laws, the relevant crime will be the bribe itself. Bribing is illegal under UK law.

Broadly speaking, any contract obtained directly or indirectly as a result of a bribe will qualify as criminal property.

Any property or value derived from that contract will likewise be criminal property. Importantly, this does not mean net profits it means all revenues, or put another way, the value of the contract.

Turning to POCA. It is broadly defined and interpreted and the courts consider it to be justifiably “draconian”.

POCA’s aim is simple: to remove any gain resulting from crime.

Returning to our General Counsel. He receives information about a contract which is suspected to have been entered into off the back of a bribe.

Our GC will take this seriously. He’ll probably undertake an investigation and bring the matter to the attention of the Board.

But that isn’t the end of the story.

Individuals in the firing line

Criminal responsibility under POCA will apply to the General Counsel, in-house lawyer and the members of the Board who have received the information about the contract as well as the organisation itself.

The prospect of General Counsel and Directors facing personal criminal liability tends to focus the mind in our experience.

This is doubly so when considering the penalties which range up to 14 years in prison with lawyers being shown no mercy by the courts.

In the context of our example a fresh stand alone offence (Section 328 of POCA) with a penalty of 14 years in prison would be committed if someone:
enters into or becomes concerned in an arrangement which they know or suspect facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another.

What is suspicion?

In Da Silva [2006] EWCA Crim1654 it was held that:

“the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice. But the statute does not require the suspicion to be ‘clear’ or ‘firmly grounded and targeted on specific facts’ or based on ‘reasonable grounds’.”

In other words it’s a subjective test of what the individuals think.

If your business is in the “regulated sector” then this extremely low threshold is reduced further. Under Section 330 no suspicion is required at all!

Instead, it is simply enough that there was sufficient material to provide reasonable grounds for having a suspicion even if no such suspicion was in fact held by the individual.

Telling the Police

If your business is in the regulated sector then you must tell the police failing which you will commit an offence of failing to report which carries a penalty of five years in prison.

If your business is in the unregulated sector then, while there is no obligation to tell the police, but the only defence to the underlying money laundering offence in Section 328 requires that you do so. Failing which, a brand new money laundering offence will be committed carrying with it a 14 year prison sentence.

Any evaluation of an organisations position will need to be done in tandem with an analysis of individuals own personal liability as each of the reporting obligations of the corporate and the different individuals is independant of the other (along with liability for the offences).

Don’t kid yourself

The Serious Fraud Office is alive to the danger and recently asked a room of advisers:

“Which of you would like to go and visit your CEO and CFO in a police station where they are being held following arrest on money laundering charges?”

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