News & what's on - Written by on Sunday, November 6, 2011 13:31 - 0 Comments

Exclusive: Smash & Grab – Key takeaways from Pinsent Masons & UKCG Bribery Act breakfast

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By Neil Mcinnes, Senior Associate, Pinsent Masons LLP

On Friday 4 November, Richard Alderman joined the UK Contractors Group for its Bribery Act Breakfast at Pinsent Masons LLP. The audience included senior management and legal compliance representatives from almost all of the UK’s major contractors.

While Transparency International’s Bribe Payers Index may, many would argue unfairly, have put the sector bottom of the class this week, it was the Director of the SFO in detention – answering audience questions for well over an hour and providing his view on what will be happening tomorrow at SFO HQ.

If you missed the event, whether you work in the construction sector or not, here’s the smash and grab summary – we’ll be following up over coming days with more detailed anaylsis (as you can see from the image there is still some gold left over).

Realpolitik versus compliance utopia

The SFO recognise that while regulators may be able to lend a hand to companies faced with compliance conundrums, commercial solutions against the threats of facilitation payments or other demands for bribes are best developed by the companies themselves. This is consistent with the SFO’s overall objective that the private sector should, for the most part, police itself.

Richard Alderman cited the example of overseas government employees in developing economies who are expected to finance their own wages through bribes. In recent cases, he referred to how UK companies have avoided demands for bribes by recognising, and quantifying, the economic reality for the would be recipients. One example was where a company had structured a tariff charge it would pay to the relevant overseas government so that its employees received appropriate remuneration transparently.

While this arrangement will not be possible in all cases, the general message is clear: companies who strive to find solutions along commercial lines are likely to be best placed to avoid UK enforcement action for overseas bribery.

Who’s gonna get it?

Four months in and the book on when, and against whom, the SFO will bring its first Bribery Act prosecution had the look of a Euromillions rollover. In response to the bookies, Richard Alderman said enforcement efforts will concentrate on:

1. Companies who have some business in the UK but who have failed to take steps to comply with the new law – a clear signal that non-UK corporates remain within the SFO’s sights, where their acts undermine ethical UK businesses. UK non-executive directors of these companies should take particular note.

2. Senior individuals who have consented or connived in bribery by their organisations.

Richard Alderman added that if the SFO wanted to go for low hanging fruit, it could find itself with six new prosecutions within a week. Instead, his objective is to look to enforce in the most difficult cases.

In particular in some cases a company might simply receive a telephone call from the SFO requesting a meeting to pass on suspicions that the company might have a problem which merits investigation.  In other cases, the SFO might dust down the battering ram and pay a personal visit using their own specialty of smash and grab.

Cases against individuals were most likely where they were senior managers who received some personal benefit. Bribery involving lower level employees, where there is no personal benefit to them, is unlikely to result in a criminal prosecution against those individuals personally. Another clear signal that the SFO will use immunity notices for these individuals to aid in the case against the corporate.

Let’s be civil

Richard Alderman reiterated the SFO’s encouragement to companies to self-report incidents of corruption that they uncover. He stated in the majority of cases this will earn the company a civil outcome, although the system provided no unconditional guarantees.

Call us or we might call in on you…

Last week, the SFO launched its new and improved whistleblower hotline last week, “SFO Confidential”.  We’ll be publishing a separate post on this shortly. If it was not clear already, there can be no doubt that this is an important plank to the SFO’s strategy to encourage corporate self-reporting, as well as, in Richard Alderman’s words, “an important source of potential cases”. To corporates weighing up the pros and cons of reporting themselves, the SFO message is blunt: do you want to take the risk that someone else talks to us first?

Mergers and Acquisitions Latest

The SFO have for some time offered a fast-track service to advise companies who in the midst of a takeover discover that their target has corruption problems. It can provide guidance on the steps it will expect the acquiring party to put in place post-acquisition, to prevent later enforcement. Richard Alderman reiterated the SFO’s message on this: the regulator will be available at short notice to discuss and provide clearances as far as appropriate.

Adequate Procedures – Top tips from the Director

Richard Alderman gave his views on how effective compliance should look. The SFO will have particular regard to the size and resources of a commercial organisation in assessing what adequate procedures to prevent bribery they should have – arguably going further to provide comfort to smaller organisations than is apparent from the Government Guidance.

Here are some other takeaways from his remarks:

·       Training should be focussed on those at most risk in an organisation

·       A small business may only need to have a board level conversation that they are committed to not paying bribes

·       Top level commitment needs to be real: “employees know when top level management are paying lip service”

·       Due diligence on overseas parties should concentrate on understanding who the individuals are, what their history is, and what the money that will be paid to them is to be used for

·       And in another welcome message, to SMEs doing business overseas,  he added due diligence for small organisation may only need to be a google search – tread carefully with this one, as the benefit of hindsight is a wonderful thing.  We have a sneaky feeling the google search is only likely to be an Adequate Procedure in relation to a saint not a sinner…

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