On 9 October 2012, the U.K.’s Serious Fraud Office (SFO) published revised policies under the Bribery Act 2010 (Act) on facilitation payments, business expenditure and corporate self-reporting. The SFO’s prior guidance, issued in 2011, set out a conciliatory approach to enforcement of the facilitation payments and corporate hospitality payments provisions. It further suggested that the SFO would favour civil settlements when firms self-reported misconduct, demonstrated the ‘right’ culture and implemented 'adequate procedures' for assessment of anti-bribery controls.

The 2012 guidance fundamentally changes this position. Such a policy shift was foreshadowed by current SFO director Mr. David Green in an interview shortly after taking the role, where he stated that the SFO would look to ‘rebalance the relationship between prosecution and civil settlement.’ Consistent with this shift, the SFO notes that it is ‘primarily an investigator and prosecutor of serious and/or complex fraud, including corruption. It is not the role of the SFO to provide corporate bodies with advice on their future conduct.’ The SFO has confirmed that it will prosecute where the normal prosecution tests and requirements are met: self-reporting of wrongdoing will be just one of the factors taken into account. In its accompanying Questions & Answers on the revisions, the SFO explains that the ‘revised policies make it clear that there will be no presumption in favour of civil settlements in any circumstances’. The timing of the SFO’s revised guidance coincides with Ministry of Justice deadlines in relation to the implementation of US-style deferred prosecuted agreements.

Self-Reporting of Misconduct

The Ministry of Justice’s (MoJ) guidance on implementing adequate procedures and the Joint Guidance issued by the Director of the SFO and the Director of Public Prosecutions on prosecuting offences under the Act are essentially unaffected by these changes.  However, the SFO’s previously conciliatory policy and guidance in relation to corporate self-reporting has been replaced by a presumption in favour of prosecution: 'If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest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. Self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.'

Therefore, it appears that firms may no longer rely on a presumption in favour of civil liability for self-reporting of misconduct. Like the Joint Guidance on Corporate Prosecutions already provides, self-reporting will now be one of a myriad of factors under prosecutorial discretion. The revised policies note ‘the SFO encourages corporate self-reporting, and will always listen to what a corporate body has to say about its past conduct; but the SFO offers no guarantee that a prosecution will not follow any such report.’ Therefore, the explicit incentive to self-report contained in the old guidance is not longer available.

This revised approach is most likely in response to judicial comment criticising the SFO for its negotiation with firms, particularly in the Regina v. Innospec Limited sentencing where Lord Justice Thomas noted that ‘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.’ Similarly, the new approach to facilitation payments and corporate hospitality appears to respond to the OECD’s concerns raised in its Phase 3 Report ‘Implementing the OECD Anti-Bribery Convention in the United Kingdom.’ 

Corporate Hospitality & Facilitation Payments

The SFO’s approach to hospitality, which is consistent with the MoJ Guidance and the Joint Prosecutor Guidance, is that ‘bona fide hospitality or promotional or other legitimate business expenditure is recognised as an established and important part of doing business’, although bribes disguised as business expenditure will be prosecuted if (a) the case is a serious or complex one that falls within the SFO’s remit; and (b) the SFO concludes, applying the Full Code Test, that there is an alleged offender that should be prosecuted. 

With respect to facilitation payments, the SFO has removed its previous acknowledgement that due to their endemic nature in some countries, facilitation payments would take time to eradicate, and that this would be taken into account by the SFO when appropriate.  The revised guidance states that ‘a facilitation payment is a type of bribe and should be seen as such’, is further suggestive of a tougher approach.

While the 2012 guidance still provide the SFO with significant latitude to elect civil recovery if prosecution is not deemed to be in the public interest, the policies are a serious departure from the previous guidance and approaches identified by the SFO while under the directorship of Richard Alderman, suggesting a much tougher prosecutorial approach to enforcement of the Act.

Lessons for Australian Companies

Australian firms should be cognisant these changes due to the expansive jurisdictional reach of the Act. Section 12 applies sections 1 (‘Offenses of bribing other persons’), 2 (‘Offenses relating to being bribed’), and 6 (‘Bribery of foreign public officials’) of the Act to all UK citizens and corporations irrespective of where in the world the proscribed acts take place.  In terms of non-UK nationals and corporations, the SFO has jurisdiction whenever the provider of the bribe is deemed to have a ‘close connection’ with the UK. In respect of the strict liability corporate offense of failing to prevent bribery contained in section 7 of the Act, the SFO has jurisdiction over corporations committing the proscribed omission, irrespective of where in the world the act takes place, provided they have some business presence in the UK.

A pertinent example (discussed in a prior opinion) is the foreign bribery scandal currently plaguing Securency International (Securency) and its sister company Note Printing Australia, each subsidiaries of the Reserve Bank of Australia. On 8 September 2011, the SFO charged Mr. Bill Lowther, the former deputy chairman of Securency, with violating pre-Bribery Act legislation by allegedly conspiring to secure a place at Durham University for the son of the then governor of Vietnam’s state-owned bank, and pay his fees and accommodation costs. Prosecutors claim he put together the package as an ‘inducement to’ or ‘reward for’ awarding bank note printing firm Securency a lucrative deal to print the south east Asian country’s currency in 2003. His trial is set for 26 November 2012. 

As this case demonstrates, the expansion and toughening of bribery and corruption laws (including harsher, and in the case of the UK unlimited, financial penalties), the extraterritorial reach of many of those laws and the global cooperation with which these laws are being enforced presents very real risks to Australia companies.