900 Lawyers | 19 Offices | Recent trends in Transnational Internal Investigations ABA Criminal...

900 Lawyers | 19 Offices | www.mcguirewoods.com

Recent trends in Transnational Internal Investigations

ABA Criminal Justice Section

Wirtschaftsstrafrechtliche Vereinigung e.V.

The West in Grand Frankfurt, Germany

7 December 2012

Presented by Walter H. White Jr., Partner

McGuireWoods LLP | 2

• McGuireWoods LLP has extensive experience defending anticorruption investigations; conducting anticorruption risk assessments, audits and internal investigations; and designing and helping to implement overall and anticorruption-specific corporate compliance programs and training.

• The UK Anti-Bribery Act and guidelines issued by the Serious Fraud Office make it clear that the most valuable weapons a corporation and its officers and directors have against potential anticorruption issues are preparedness, responsiveness, and the deployment of a robust compliance program designed to identify, address and prevent issues before they become government investigations.

• Foreign Corrupt Practices Act

Our Expertise

Understanding the UK Bribery Act


What does the UK Bribery Act (the “Act”) do?• The relatively new Act revolutionizes the UK’s approach to

anticorruption enforcement and has the attention of lawyers, law enforcement and corporate executives throughout the world.

• The Act is modeled closely on the United States’ Foreign Corrupt Practices Act (FCPA), but exerts a broader scope in a number of notable respects.

• The Act replaces a patchwork of existing anticorruption laws and common law offences dating prior to World War I which had become outdated and underutilized.

• The Act has changed the landscape in the UK, and potentially beyond.



What is a Bribery?• Bribery is a form of corruption and is a criminal offence in the UK.

• It is an offence to offer, promise or give a financial or other advantage to another person with the intention of:

– Inducing a person to perform improperly a relevant function or activity; or

– Rewarding a person for the improper performance of a relevant function or activity

• It is also an offence to request, agree to accept or to accept a financial or other advantage in return for the improper performance of a relevant function or activity.

• Offences apply to both the private and public sectors.

• Offences can be committed either directly or indirectly (i.e. through a third party).

• The Bribery Act applies even if the relevant function or activity is performed outside the UK.

• The Act provides UK law enforcement a strong platform upon which to build a new anticorruption enforcement efforts by modernizing its enforcement regime under comprehensive, unified legislation.



• The new Act applies to an organization if it conducts any level of business in the UK.

• There is a new corporate strict liability offence for organizations where one of their employees, agents, subsidiaries or consultants commits an act of bribery or corruption.

• The only defence to this strict liability corporate offence is that you have “adequate procedures” in place i.e. a robust and comprehensive compliance programme.

• Punishment for failures under the Act include unlimited fines, ten years

imprisonment for individuals as well as debarment from public procurement contracts.The Act prohibits both corruption of public officials whether at home or abroad as well as business to business corruption.



There is no de minimis level

However Director of Serious Fraud Office David Green has stated in response to gratuitous corporate hospitality at the Olympics or Wimbledon:


We are not interested in that sort of case. We are interested in hearing that a large company has mysteriously come second in bidding for a larger contract. The sort of bribery we would be investigating would not be tickets to Wimbledon or bottles of champagne. We are not the serious champagne office.

This comment was in response to empty seats at the Olympic corporate hospitality sections. The SFO stated it is never been our intent to undermine the British Hospitality Industry. It is only when Corporate entertainment is manifestly disproportionate that eyebrows will be raised. Good compliance policies will therefore not seek to ban or unduly limit hospitality, but will ensure that there are processes in place for approving and monitoring it.


• No exemption for facilitation payments .

• Senior officers of the organization who themselves have a connection to the UK and are aware of the illegal acts, will bear personal liability in addition that of the organization itself.

• Offences committed by an organization or its individuals outside the UK in another country may also be punishable by the UK courts if they have a footprint in the UK.

• The UK prosecuting authorities are already closely cooperating with the US Department of Justice and other foreign prosecutors to develop joint international corruption prosecutions.



Bribing a Foreign Public Official (s.6)

It is an offence for a person to intend to influence an Foreign Public Official (FPO) by offering, promising or giving any financial or other advantage:

• to an FPO; or

• to another person at an FPO’s request or with an FPO’s assent or acquiescence, in order to obtain or retain business or an advantage in the conduct of business.

Bribery act 2010


Bribing Foreign Public Officials

It is a defense to section 6 if consideration or advantages are dispensed at the direction of the FPO only such action is expressly permitted under written local law.

Note that “facilitation” payments are not permitted. Small, one-off payments are actionable but unlikely to be prosecuted, however a series of small payments could result in liability.

Bribery act 2010


Strict liability offence: failure of commercial organizations to prevent briberyA relevant commercial organization is guilty of an offence if a person associated with the organization bribes another person with the intention of either

– Obtaining or retaining business for the organization, or

– Obtaining or retaining an advantage in the conduct of business for the organization

Bribery act 2010


Relevant commercial organization

A relevant commercial organization is defined as either:

• A body or partnership incorporated or formed in the UK and which carries on a business; or

• A body corporate or partnership incorporated or formed outside the UK which carries on a business, or part of a business, in any part of the UK.

Bribery act 2010


“Associated Person”

Someone who performs services for or on behalf of the organization e.g.:

– Employees

– Agents

– Subsidiary

– Consultant

– Joint Venture Partner

– Consortium Partners

– Intermediaries

– Contractors

– Distributors

– Advisers

Bribery act 2010


The defence to Section 7: adequate anti-corruption procedures in place

It is a defence if the relevant commercial organization can show that it has put in place adequate procedures designed to prevent persons associated with the organization from undertaking corrupt activities.

Bribery act 2010


Extraterritorial effect

Offences under sections ss.1, 2 and 6 are capable of prosecution in the U.K. if:

• any element of the offence has been committed in the UK; or

• no element of the offence has been committed in the UK, but the offender has a close connection with the UK e.g. British citizen, an individual ordinarily resident in the UK, a body incorporated under the laws of the UK.

Bribery act 2010


Extraterritorial effect – s.7

Offences under s.7 are capable of prosecution in the U.K. if:

• the organization is incorporated or formed in the UK; or

• the organization carries out some of its business in the UK; and

• The offence is committed by an associated person, irrespective of whether the relevant acts or omissions are committed in or outside the UK.

Bribery act 2010


Scenario – who could be liable?

• A U.S. citizen resident in London and is employed by a US entity.

• An entity has a representative office in London and does only modest business in the UK. It need have no subsidiary established in the UK.

Bribery act 2010


Comparing the FCPA and the UK Bribery Act

Although the Bribery Act is similar to the FCPA, it expands exposure in several respects. Notable differences include:

– Bribery Act– affects both private and public sector corruption

– No business nexus required for UK Bribery Act general offenses

– Wider application of the strict liability corporate offence.

– No allowance for facilitation or “grease” payments for normal as opposed to illegal activity

– No presumptive entitlement to an express bona fide business expenditures defence . Bona fide significance must be proven as an affirmative defense.

– Different treatment of local law

Bribery act 2010


What are adequate procedures?

Ministry of Justice Guidance, s.9 (issued

30 March 2011).

Six principles for bribery prevention:

1. Proportionate procedures

2. Top level commitment

3. Risk Assessment

4. Due Diligence

5. Communication including training

6. Monitoring and review

Bribery act 2010


Updating your compliance programme

• Analyse risks in both the public and private sectors

• Update policies and procedures to reflect wider scope of the Bribery Act. Consider the following:

– Do the policies apply to both personnel and third parties?

– Do gifts and hospitality polices apply to private sector interactions or do they focus on government officials only?

– Do they currently allow facilitation payments?

– Do the policies rely on a narrow definition of “government official”?

• Update existing training programmes and ensure all personnel receive appropriate training

Bribery act 2010


Focus on third parties• The greatest exposure to liability is likely to come from those parties

that perform services on behalf of the organization, but fall outside the organization’s direct control.

• Consider these questions:– How third parties selected?

– How robust is the due diligence process? Is the due diligence process independent and well documented? Are red flags pursued?

– If asked, could the organization produce on demand a list of all third parties used to obtain or retain business or a list of all third parties to whom payments are made?

– Are adequate robust financial controls in place?

– Are contracts with third parties required to be compliant with anti-corruption policies and procedures?

Bribery act 2010


Focus on third parties (cont)

Recommended reading:

UK Financial Services Authority report on Anti-Bribery and Corruption in Commercial Insurance Broking dated May 2010:

http://www.fsa.gov.uk/pubs/anti_bribery.pdf

Bribery act 2010


No more guidance

Previously the SFO would provide Guidance on how and when it would prosecute bribery under David Green’s leadership.

It has dropped that initiative.

Reassurance that companies that self report will avoid criminal prosecution in gone. No process for informal conversation.

This combined with inability to plea-bargain has raised substantially the compliance takes.

Hope to implement deferred prosecution agreements as early as 2014.

Bribery act 2010


Summary – Why Does the UK Bribery Act Matter to Non UK Businesses?

• If there is a footprint in the U.K. it will fall within the scope of the Act.

• There could be strictly liable for actions of third parties.

• Contracting parties/vendors may well ask for details of compliance programs and refuse to deal with businesses that are not demonstrably Bribery Act compliant.

• Adequate procedures are business insurance – would one would not own factories and offices without insuring them?

Bribery act 2010


Summary – Why Does the UK Bribery Act Matter to Non UK Businesses? (cont)• A criminal prosecution may be followed by a civil law suit

e.g. by competitors or by business partners for breach of warranties as to compliance.

• Doing nothing could result in a significant decline in the value and marketability of business brand and market cap.

Bribery act 2010


Other commercial considerations

• If the organization an “associated person”? Is it able to provide:

– Details of a demonstrable compliance program

– Certification of Bribery Act compliance

– Warranties and indemnities

• Mergers and acquisitions – has proper due diligence been performed? If a non compliant company is acquired so is the criminal exposure?

Bribery act 2010


• The Act offers both a carrot and a stick crediting the notion that companies taking steps to implement a robust compliance organization can avoid or mitigate the risk of prosecution under its provisions.

• According to the UK Government’s financial assessment of the Act, its implementation will result in a net annual increase of costs for the criminal justice system of £2.18 million.

• This is based on the assumption that only a small number of additional prosecutions will arise as a result of the Act.

• The Government is also of the view that the Act will not impose a significant additional administrative burden on businesses.

Impact of the Bribery act


Offences under the Bribery Act

• The Act creates four offences.

• Two of these are general bribery offences.

• The third offence is an offence specific to the bribery of foreign public officials and a corporate offence for failing to prevent bribery.

• The fourth offence is a strict liability offence allowing for stiff fines against commercial organizations that fail to prevent a bribe being paid for or on its behalf.

Bribery act 2010


• Although the Bribery Act’s general structure is familiar to anyone who has experience with the FCPA, the UK has taken that model several steps further.

• Notable differences in the two anticorruption regimes include:

1. Coverage of activities unrelated to governmental officials.

2. Lack of UK Business nexus.

3. Scope of the strict liability corporate offence.

4. No Facilitation or “grease” payments for otherwise legal activity.

5. Bona fide business expenditures.

6. The impact of local law.

7. Advisory opinions.

8. Civil enforcement.

9. Severity of penalties.

• Although the UK does not have a history of high corporate penalties in this area in recent years, a handful of UK cases since 2008 have involved multimillion pound settlements and fines of increasing size.

Departures from the FCPA


FCPA Actions Brought by the SEC

FY2008 FY2009 FY2010 FY2011 FY20120

5

10

15

20

25

1613

1620

15

Departures from the FCPA


Penalties

• The Act establishes severe penalties.

• A maximum of 10 years’ imprisonment for violations by individuals.

• Unlimited fines for entities under the strict liability commercial organization offence.

Bribery act 2010


About McGuireWoods London LLP

• McGuireWoods is a 900+ lawyer firm with 19 offices.

• The London office is City-based and operates as McGuireWoods London LLP, and distinguishes itself from its London competitors by offering an international focus.

• The London office deals with large and complex transactions, with a strong emphasis on in-depth quality; and in particular, a dedication to devising solutions to meet clients’ business objectives.

• Most lawyers in the London office have knowledge and experience of at least one jurisdiction outside the United Kingdom.

• In addition to qualifications as English solicitors, a number of our lawyers are qualified in China, Denmark, Finland, France, Georgia, Kazakhstan, Kyrgyzstan, New Zealand, Norway, the Russian Federation, Sweden, Ukraine, Uzbekistan, and various U.S. jurisdictions.


CONTACTS MCGUIREWOODS LONDON LLP

Walter White Partner [email protected]

Mr. White is head of the firm's emerging markets transactions practice. His work consists of multinational securities transactions, international business and finance law issues, and complex litigation and related arbitration. He has represented clients in multibillion-dollar business transactions in the United States, Canada, Europe, throughout the Commonwealth of Independent States (C.I.S.), Asia and Africa. He has acted as an advisor to Central Banks, and financial regulatory agencies in North America, Europe, Africa and Asia on economic development and regulatory issues. He has published books and articles on multinational business activity and lectured in North America, Europe, Central Asia and Africa, and is a regular commentator for the BBC on U.S. and international human rights and constitutional affairs.

11 Pilgrim Street, London EC4V 6RN +44 (0)20 7632 1600 (Reception) +44 (0)20 7632 1638 (Fax)

900 Lawyers | 19 Offices | www.mcguirewoods.com

ABA Criminal Justice Section

Frankfurt, Germany

7 December 2012

Presented by: Walter H. White Jr., Partner

900 Lawyers | 19 Offices | Recent trends in Transnational Internal Investigations ABA Criminal...

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