World Bribery and Compliance Forum 2013

15 Hydref, 2013 | Areithiau

Alun Milford, General Counsel, at World Bribery and Compliance Forum 2013.

One of the first things I learned when I joined the SFO just over a year ago was that invitations to speak at events come through very thick and fast indeed. With the best will in the world, it is not possible to accommodate them all. But when the invitation to speak at this conference came through, its premise – that somehow the Bribery Act was being watered down – attracted my interest. I am grateful for the opportunity of a platform to address and indeed to refute that suggestion. And whilst I was here, I thought I might touch on a few other issues of interest: DPAs; self-referrals and the SFO generally.

Let’s start with an overview of the Bribery Act 2010. It came into force on 1 July 2011. It replaced the old common law on bribery, and repealed the old statutes such as the Prevention of Corruption Acts 1906 and 1916. It created simple offences of bribing another person, being bribed and the bribery of foreign public officials. These are all offences which can be committed by human beings and, in the normal way where the identification principle applies, by corporations. True, maximum penalties were increased to 10 years imprisonment as opposed to the 7 years under the old law and there was some extension of the already extended extra-territorial reach of the old law. None of this was really controversial.

What generated a lot of heat – and apparently still does – was the introduction into the criminal law of the offence of the failure of a commercial organisation to prevent bribery. A commercial organisation commits a crime if a person associated with it bribes another person intending to obtain or retain business or a commercial advantage for the commercial organisation. It is a defence to prove that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct. This is an offence aimed at corporate culture, therefore.

In order to ensure that commercial organisations were assisted in putting such adequate measures in place, the Act placed the Secretary of State under a duty to publish guidance about procedures that commercial organisations can put in place to prevent persons associated with them from bribing. It empowered him, from time to time, to publish revisions to the guidance. The guidance, on which the Secretary of State consulted widely, recommends a risk-based and proportionate approach to determining what procedures should be put in place. It was published on the same day as the DSFO and the DPP published their joint prosecution guidance on the Bribery Act. It was a few months after these resources were produced that the Act came into force.

As is well known, earlier this year it was reported that a review of the Bribery Act was likely to be announced in July. These reports were wrong. What has been announced and all that was ever intended was a review of the guidance, and in particular the way in which it was being understood to apply to small firms. Being blunt, a concern had grown up that certain parts of what we on this side of the fence call the Bribery Act industry had created sufficient concern about compliance amongst SMEs in particular that it was necessary to re-iterate the point – which is consistent with the existing guidance and, to be fair, the literature produced by some of the sensible commentators on the Act – that commercial organisations understand the requirements under the Act and only put in place proportionate measures to comply. So no change and no watering down in the law or the guidance.

Nor has there been any watering down by prosecutors in the way we approach the decision whether or not to prosecute. Quite the reverse in fact.

On becoming Director of the SFO last year, David Green was at pains to make clear that he saw the role of the SFO simply as an investigator and prosecutor of serious or complex fraud, bribery and corruption. He considered such a restatement necessary because he felt the SFO’s role had become blurred, giving rise to the perception that it did not have the stomach for prosecution and preferred risk-free settlements in civil recovery cases. And with that re-statement, he moved emphatically away from any notion that we are also somehow also a regulator or an educator or an adviser.

With his re-statement of our role, David Green also reviewed and re-issued our take on criteria in order to ensure that the cases he adopts for criminal investigation really do concern top-end fraud or corruption. When considering whether to accept a case for investigation, he will ask himself whether the case demands the particular expertise, capability, multi-disciplinary approach and legislative powers that are available to the SFO. Factors will ordinarily include: the scale of the loss occasioned or threatened; the impact or potential impact upon the UK economy; the effect of the alleged conduct upon the UK’s reputation as a safe place to do business; and the degree of factual or legal difficulty to which the case may give rise.

He then turned to our statements of prosecution policy. Some context here may be helpful. Our law has always been that there is a public interest element in the decision whether to prosecute. So, in a debate in Parliament in 1951, Sir Hartley Shawcross, our Attorney General immediately after the Second World War (who also served as a prosecutor in the Nuremburg war trials), said this, “it has never been the rule in this country – I hope it never will be – that suspected criminal offences must automatically be the subject of prosecution” before adding that a suspected offence should be prosecuted if it was in the public interest to do so. The modern statement of that principle is to be found in the Code for Crown Prosecutors, a statement of policy issued as a matter of statutory duty by the Director of Public Prosecutions and binding on all public prosecutors. It makes clear that a prosecution can only be commenced where (i) there is sufficient evidence to provide a realistic prospect of conviction and (ii) it is in the public interest to prosecute. The Code makes clear also that if the evidential sufficiency test is met a prosecution will usually take place unless the prosecutor is satisfied that there are public interest factors tending against a prosecution which outweigh those tending in favour. It then provides a non-exhaustive list of public interest factors for and against a prosecution. The contents of the Code can be supplemented by more detailed guidance on specific areas. So, the Directors of Public Prosecutions and of the Serious Fraud Office have together issued and published guidance, consistent with the Code for Crown Prosecutors, on the proper exercise of discretion in cases involving corporate suspects. The previous Director of the SFO had then issued specific guidance on the SFO’s approach to corporate suspects where they had reported themselves to the SFO. Our new Director withdrew that guidance. He did so for two reasons. First, because in his opinion the question of how to deal with self-referrals was adequately covered in the joint guidance on corporate prosecutions and it seemed to him wrong in principle for there to exist particular rules which applied simply because a suspect chose to report to the SFO instead of to the police. Secondly, the policy itself implied that if a corporate entity self-reported to the SFO, then the SFO would be very likely indeed to resolve the matter by civil settlement and not by prosecution. He considered that such an implied promise was wrong because it meant, in essence, that in a self-referral case the prosecutor would no longer be considering the case in the round and the question of whether there was a self-referral would be determinative in the application of the public interest test.

So what is the result? We now apply the Code for Crown Prosecutors, the joint guidance on corporate prosecutions and the joint prosecution guidance on the Bribery Act. We and other public prosecutors approach the consideration of the public interest in a consistent manner. In the case of a genuine self-report, where, say, a new board had discovered misconduct under previous management, has investigated it and reported it to SFO instead of waiting for an enquiry from us and put in place measures to avoid repetition, then obviously that conduct would weigh heavily in the public interest against prosecution. But it would not be determinative of the issue.

Similarly, our Director withdrew the guidance previously issued on facilitation payments. Our law is clear: such payments are and always have been illegal and it is a matter of indifference to the SFO as a prosecutor in this jurisdiction that the law of another country (say that of the United States as contained in Foreign and Corrupt Practices Act) may be different. The old SFO guidance, which did not apply to other public prosecutors, promised no prosecution if the company was “moving towards a zero tolerance policy” on facilitation payments, but did not clarify what precisely that phrase meant. Indeed, the elastic quality of those words caused the OECD some consternation. With the withdrawal of that policy we have, once again, returned to a position of consistency with other public prosecutors. We will apply the full code test to the evidence and the surrounding circumstances of the case in deciding whether to prosecute.

So, no watering down in prosecution policy then. But what of the SFO’s ability to take cases on and successfully to prosecute them? Commentators have raised a number of objections.

Point 1. Resources.

It is said that we have not been given the resources to do the job. It is no secret that, like the police and the CPS, we have seen our core budget cut over the course of this Parliament. But that is not the end of the story. This year, we were one of the few government departments to receive an increased budget.

We also have an agreement with the Treasury that where any case costs more than a certain percentage of our budget in any one year, we can have access to the reserve for a sum covering that cost, ring fenced for that case. The LIBOR case is an example of this, on which we have about 60 people working full-time and on which we are back in court next week. Simply put, we have a “core” SFO capable of handling its core caseload with a surge capacity when that is needed to address exceptionally large, complex cases.

More generally, the Director is on record that if and when he feels that our core funding is insufficient to cover our general caseload, he will raise it with the Attorney General, who in turn has made it clear he would then raise the matter with the Treasury.

Let there be no ambiguity. The SFO will never refuse to take on a case simply on grounds of cost. To do so would be deeply damaging to public confidence and provide a perverse incentive to criminals to commit high value complex fraud.

Point 2. Now you have changed your policy, no one will self-report and you will not get any cases.

I have already set out the principled reasons for the changes in policy. I should also make clear that, in the same way as we have re-calibrated our take on criteria and re-focussed ourselves as a prosecutor, so we are beefing up our intelligence capability. One feature of that is that we are building up our links not just with other law enforcement bodies but with the security and intelligence agencies too.

Separately, whistle-blowers remain for us a constant source of useful, actionable intelligence. In short, we are far from dependent on self-reports in generating cases and we do not see that position changing.

It is not just the risk of being caught that should incentivise a company to self-report. Existing policy is to regard a genuine and prompt self-report as a factor – not conclusive, but a factor – against prosecution. As from (we expect) early February 2014, we will also have access to deferred prosecution agreements.

Deferred prosecution agreements will work in the following way. Organisations which have committed certain economic crimes will admit their wrongdoing and resolve to make things right by agreeing to comply with stringent conditions, which include the payment of a penalty. In a process scrutinised by a Crown Court judge, criminal proceedings will be commenced against the organisation and immediately suspended without a conviction being recorded against the organisation, pending the organisation’s compliance with the terms of the agreement. Conditions may include the payment of substantial penalties, making reparation to victims, undertaking reform to prevent such conduct occurring again, and submitting to regular reviews and monitoring. The threat of a renewed prosecution will remain hanging over an organisation should it fail to comply fully with the agreement.

Negotiations leading to the DPA will take place in private, and the initial judicial scrutiny will also be in private. This is essential to prevent prejudicial publicity which could undermine any future criminal trial for the same or connected offences, should the negotiations fail. It is also required because, as with any other negotiation, a degree of confidentiality is necessary at an early stage. Importantly, although the negotiations might be private, any agreement will not.

The introduction of deferred prosecution agreements might well be regarded as affording prosecutors and the courts a sensible option for dealing with a situation where a company accepts wrongdoing, and is committed to put things right, whilst avoiding a lengthy and expensive prosecution with the prolonged uncertainty it brings for the victims, blameless employees and others dependent on the fortunes of the company. I should emphasise, however, that like civil recovery, DPAs are no more than an option for us to pursue. We will look at all cases in the round taking full account of the evidence and considering the public interest factors in the case in accordance with our existing criteria.

On the issue of criteria, you may be interested to know that following the consultation exercise on the draft joint guidance to be issued by DSFO and DPP, we aim to be in a position to settle and publish that document by January next year.

Point 3. It’s all very well saying how tough you intend to be, but where are the cases?

About half of our operational resource is engaged in corruption-related casework. Bribery Act cases are being worked up in our intelligence section and, in some cases, being worked on by our investigation teams. Our suspects include individuals and companies. We also now have our first charges under the Act.

It is also worth recording that a lot of our bribery caseload concerns pre-Bribery Act cases. That is simply a function of the complexity and multi-jurisdictional nature of the cases we take on and the way in which they are litigated.

Point 4. It’s all very well being tough, what about my ability to market my business through corporate hospitality?

Let me quote from the joint prosecution guidance on the Bribery Act. “Hospitality or promotional expenditure which is reasonable, proportionate and made in good faith is an established and important part of doing business. The Act does not seek to penalise such activity.”

Equally, it is clear that expenditure on people whom you wish to persuade to adopt a particular course of action is capable of amounting to a crime under the Bribery Act. It all depends on the circumstances of the case. The more lavish the hospitality in the particular circumstances it was bestowed, the greater the adverse inference that can be drawn. We will look at the motive, the timing, the circumstances in which it is given, the extent of the expenditure, the potential reward, everything.

In fact, so far as we are concerned, nothing here has changed from the old law. The Prevention of Corruption Act 1906 applied to the giving or offering of any gift or consideration. Unreasonably lavish hospitality was just as capable of amounting to a bribe under that law as under the Bribery Act. The anxiety around this issue has been forced up the agenda because corporates in particular have had to address their culture and their compliance capabilities.

Point 5. It’s all very well being tough, but the Bribery Act is stopping me doing business.

I just don’t buy that. If you need to commit crime to do business, then you need to change your line of work. In fact, the Bribery Act has led to a significant amount of work in developing stronger, more ethical corporate cultures. These are changes for the better which did not bring business to a halt. We were in recession when the Act came into force and there is now a recovery under way. So, the Bribery Act is here to stay and I would argue that this is a good thing. It is worth reminding ourselves of quite how harmful corruption is. The Transparency International website gives an example of the impact of corruption on the life of ordinary Afghans. TI note that Afghans have to pay bribes at twice the level of two years ago and add that “they often have to pay bribes for services they are already entitled to such as access to medical care, education and justice in court. The current level of $158 per bribe is equivalent to 37% of the average annual Afghan income. In poll after poll, Afghan citizens don’t rank the Taliban, terrorism or the economy as their highest worry. Corruption is their top concern and tackling it their highest priority”. Afghanistan has one of the world’s highest corruption indices and one of the world’s lowest standards of living. That correlation between corruption and standard of living is replicated throughout the world. That is because corruption corrodes the fabric of society and public institutions. It is often at the root of conflict and instability. It is bad for development, bad for poor people and bad for business. It causes huge damage to developing countries, diverting and wasting precious resources. Poor people feel the effects more harshly than the better off. The uncertainties of bribery stifle business development and inward investment. Perhaps we can agree on this if on nothing else: it is surely worth taking a stand against something this bad.