Proposed new criminal offence likely to impose new burdens on companies
The Bribery Act
Section 7 of the Bribery Act currently states that a commercial organisation is guilty of an offence if a person associated with that organisation bribes another person with the intention of obtaining or retaining business, or, obtaining or retaining an advantage in the conduct of business. To avoid liability the commercial organisation had to establish that it had put in place “adequate procedures” that were "designed to prevent" bribery. The offence could be committed not only by a company failing to prevent bribery, but also by others who were “associated” with it, for example, employees, subsidiaries or agents.
The UK Ministry of Justice has published official guidance setting out six key principles that a company should have in mind when designing and implementing an appropriate compliance programme for the purposes of section 7: (1) a detailed risk assessment; (2) policies/ procedures that are proportionate to the risks; (3) demonstrable board level commitment; (4) the need for due diligence in relation to third parties; (5) training; and (6) monitoring and review. These principles are illustrative, not prescriptive. Indeed, the guidance emphasises that the approach taken should fit the company's individual circumstances. We would expect a similar approach to be adopted in relation to the proposed new offence relating to Economic Crimes (see below).
This is not legislation to ignore. In February 2016, the SFO found that Sweett Group plc had failed to prevent its subsidiary from bribing a director of a UAE insurance company to win a construction services contract. Sweett’s subsidiary paid the bribes in question under a ‘sham’ consulting contract with a company. The director was the beneficial owner of that same company. As a result, Sweett were fined £2.25m. The Sweett fine followed a case involving ICBC Standard Bank case of over $25m where a bribe was paid to a third party company.
New law to cover “Economic Crimes”
It would appear likely that the government will put legislation in place the effect of which will be that a company commits a crime if it fails to take steps to prevent economic crime, including where those are committed by “associated persons”.
Presently, a company can be found liable for fraud and other economic crimes if it can be shown that the "directing mind" of the company (i.e. executives or board members in reality) were complicit in the criminality. Whilst this is often hard to prove, particularly in large corporations, companies have been successfully prosecuted on a number of occasions by Regulators, resulting in very large fines.
The scope of the new legislation which is likely to be introduced is not yet clear. However, we predict that the sorts of offences which may well be covered include false accounting, fraud and money laundering. We anticipate that, to avoid liability, a similar defence will be available, namely that the organisation had adequate procedures in place to avoid the offence being committed.
The proposed new offence relating to economic crime is likely be enacted into law in one form or another. As a result, automotive companies should identify its economic crime risks and take the appropriate steps, that is, to identify the risks and put adequate procedures in place. Companies should have already taken steps to comply with the existing legislation and would be well advised to review those procedures in light of the forthcoming changes.
This article is provided free of charge for information purposes only and is accurate as at 29 November 2016. It does not constitute legal advice and no responsibility for the accuracy of the information and commentary set out in the article is assumed by Field Seymour Parkes LLP.
Written by Tom Maple, Partner at FSP Law