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UK Bribery Act: a reminder of the importance of having adequate procedures in place

12.06.2018 Maritime, Anti-bribery

Florence Preux

Florence Preux Managing Associate

2018 has seen the first contested prosecution for the corporate offence of “failure to prevent bribery” under section 7 of the UK Bribery Act 2010.

The background facts

Skansen Interiors Limited (“SIL”) was a contractor in the construction industry, with a small office and a workforce of around 30 individuals. In 2013, SIL’s then managing director paid £10,000 in bribes and offered a further £29,000 (which was not paid) to a project manager within a property company in order to secure contracts in connection with office refurbishment works worth £6 million.

In early 2014, a new CEO was appointed, who became concerned about the nature of the payments. He initiated an internal investigation that led to the summary dismissal of the managing director and commercial director. SIL also reported the matter to the City of London Police.

The prosecution

Despite self-reporting the suspicious activity to the police and cooperating with the investigation, SIL was charged with the corporate section 7 offence of failure to prevent bribery. The individuals concerned were charged with offences of bribing another person under sections 1 and 2 of the Bribery Act.

SIL defended the prosecution, claiming that they had adequate procedures in place designed to prevent persons associated with the company from undertaking the bribery conduct.

The adequate procedures defence was pleaded on the basis that:

>  Adequate procedures depends on the business. A small business, operating out of a small, open-plan office, in respect of business in a very localised area, is not required to implement substantial and sophisticated controls;

>  Financial controls were in place with a procedure for settling invoices that required multiple approvals, thereby limiting the risk of unlawful payments.

>  Staff should be aware that bribery is a crime and common sense that bribes should not be paid avoided the need for a policy expressly stating this.

>  SIL promoted an ethos of honesty and integrity and it was reasonable to expect that the senior management would follow such ethos. In addition, at the time of the incident, there existed a number of policies that set out the need for employees to deal with third parties in an ethical and honest manner, so that a specific anti-bribery policy was not needed.

>  The managing director was aware of the obligation to avoid bribery and the contracts in question included anti-bribery clauses.

>  A specific anti-bribery policy would not have prevented the managing director from engaging in the criminal activity.

The above arguments were not sufficient to persuade the jury that there were sufficient measures in place to amount to “adequate procedures” under section 7 of the Bribery Act and a guilty verdict was given. As SIL had been dormant since May 2014 and had no assets, the court imposed an absolute discharge rather than a financial penalty on the company.

The need for adequate procedures

The facts of this case question why SIL was prosecuted when it self-reported and co-operated fully with the investigation. The CPS justified the prosecution on the basis it would send a message about the importance of having adequate anti–bribery procedures in place. Even for small companies, the CPS highlighted that an individual should be appointed as a compliance officer to undertake the necessary tasks to prevent bribery.

What constitutes adequate procedures will be determined on a case-by-case basis, but having clear procedures and a relevant anti-bribery policy in place together with ongoing monitoring and adequate training will be essential. Non-specific policies and normal accounting controls are not sufficient to show that adequate procedures are in place. Using the small company excuse for not taking robust steps to prevent bribery will not avoid a conviction.

The risk of Bribery Act prosecutions for any size of company is highlighted by this case. For larger companies and companies operating internationally, the risk of bribes is likely to be greater and the standards expected will be higher. Continuously assessing the adequacy of the anti-bribery compliance programme is a necessity. 

So what about self-reporting and deferred prosecution agreements?

Self-reporting has been strongly encouraged by the SFO as a powerful tool in the fight against economic crime. Whether this case may discourage companies from self-reporting, as SIL did, is a risk that the CPS appears to have been willing to take. A deferred prosecution agreement (DPA) may have been used had SIL not been a dormant company.

DPAs will continue to be available and self-reporting is encouraged. In a speech given on 15 March 2018, Camilla de Silva, Joint Head of Bribery and Corruption at the SFO, confirmed that the SFO is “open for business” when it comes to DPAs. DPAs must however be in the interests of justice in that particular case and the co-operation of the defendant company must satisfy a number of criteria. These include the timing of the first contact and a full internal investigation: suspicions of inappropriate conduct must, therefore, be carefully addressed. Camilla de Silva’s warning is clear: “a DPA will not be appropriate in every case and the alternative… will be, where there is evidence of criminal conduct, a prosecution”

The facts of this case come as a strong reminder that having adequate procedures in place to prevent bribery, and implementing them, is a necessity for all companies operating in the UK.

Article authors:

Florence Preux