Adequate Procedures - Written by Barry & Richard on Saturday, October 16, 2010 1:21 - 0 Comments
Ignore SFO warnings about “Adequate Procedures” at your peril
Richard Alderman (Director of the UK’s Serious Fraud Office (SFO)) made yet another speech this week and emphasised yet again the importance the SFO attaches to companies putting in place “Adequate Procedures” (under Section 7(2) of the Bribery Act) to prevent bribery.
This is more than just good practice. It is the only defence available under the Bribery Act. Without them an organisation will have no defence if a bribe is given by the organisation or, importantly, by its associates namely those who provide services for it (a broad concept). We recently interviewed Vivian Robinson QC (General Counsel of the SFO) who hammered home the same point.
The message is not a new one. Richard Alderman, Vivian Robinson QC and the SFO through its policy statements have been making the same point, that companies should put in place “Adequate Procedures”, for months. We make the same plea here.
The consequences if you ignore the warnings
There is no offence for an organisation not having “Adequate Procedures” but if a bribe is given then without “Adequate Procedures” the penalties are severe. Upto 14 years in prison for individuals (and the SFO are keen to point out that the new law takes liability directly to the Board Room), unlimited fines for companies and debarment from EU and other government contracts. Revenues (not just profits) from tainted deals are all at risk of confiscation under corresponding UK money laundering law.
Comfort for business
Two important consequences of a company having ‘adequate procedures’ in place to prevent bribery are emphasised and re-emphasised:
Firstly, the SFO accept that the fact that a corporate discovers that an employee, agent or joint venture partner has committed an offence does not necessarily mean that the company’s procedures are inadequate. The SFO have repeatedly stated that evaluation of “Adequate Procedures” is a detailed and nuanced exercise which cannot be answered by merely pointing at an offence and saying “you have failed”. We agree with the SFO analysis on this.
Secondly, the message from the SFO has been that in evaluating what action should be taken as a consequence of a self-reported breach of the Act the true level of commitment to the implementation of an effective, ethical, anti-corruption policy throughout the corporate’s business dealings is a vital factor. It has been repeatedly said that where an act has slipped through a good ethical policy there may be no action taken. Where the situation is of such seriousness that it cannot be left unmarked the SFO have emphasised that it will take account of the corporates commitment, evidenced by its actions notwithstanding the offence, in deciding whether to proceed Criminally (namely prosecute under the Bribery Act) or by way of a Civil order (namely a civil settlement in relation to the matter). For obvious reasons the latter is the preferred option.
Putting to bed the myth once and for all
Notwithstanding the above we have seen some press reports where experts are quoted as saying that if a bribe takes place then by definition the procedures to prevent bribery must have been inadequate and in turn the organisation is guilty of an offence. We strongly disagree for two reasons.
- It is legally wrong. Having “Adequate Procedures” under the statute is a defence under Section 7 of the Act which applies when a bribe has taken place.
- It makes no logical sense. The SFO say repeatedly that they wish to promote ethical business and punish unethical organisations. The severe punishment of ethical corporates with “Adequate Procedures” would give little or no incentive for anyone to have them in the first place!
The SFO is actively lobbying for an extension of their settlement powers to enable them to be in the same position as the US Department of Justice so as to be able to bring a criminal charge but agree to defer the prosecution whilst entering into a ‘corporate probation’ agreement which if kept would result in the prosecution being dropped, never to be revived on the same facts. The absence of this power is seen as a real deficiency in the options available. It is recognised that this will require new law.
For the time being the SFO have 3 options when evaluating what to do about an offence under the Act :
- Take no action
- Take Civil Proceedings under Part 5 of Proceeds Of Crime Act 2002
- Prosecute under the Bribery Act
The discretion of the SFO is aided by: The Code for Crown Prosecutors; Guidance for Corporate Prosecutions, Attorney General guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002, 2009. It is to be further supplemented by Guidance to the Act and directions from the Attorney General.
However many guidance documents are produced the position is clear as far as the SFO are concerned. If you want to avoid a very bad outcome you would be crazy not to do your best to have “Adequate Procedures” in your business to prevent corruption.
The SFO’s position has been consistent and simply stated. We have been told first hand that the reason for the repetition of this simple message is: they mean it!