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Compliance and cooperation

20 Mai, 2015 | Areithiau

Ben Morgan, Joint Head of Bribery and Corruption, at the Global Anti-Corruption and Compliance in Mining Conference 2015.

Good morning. May I first express my thanks for being invited to speak at what is obviously such a high profile event for the mining sector. I am a firm believer in the value of the Serious Fraud Office having a constructive dialogue with corporates, and I hope that those of you in the audience will find it useful to hear something about the SFO – what we are up to and how that might affect you.

Good compliance is a multi-faceted thing, and looking through the programme for the next two days I can see you are going to be spending time looking at the whole range of issues. In many ways, the most important parts of what you will cover have nothing directly to do with the SFO – it’s about the upfront work that many of you in this room do – designing policy, training, working with your supply chain and partners, conducting your risk analyses. I know how seriously many of you grapple with these issues and I do hope you can make some real progress. I’m sure you don’t need me to say it, but it seems to me that the challenge you must find a way to overcome is effective implementation – if the will is there, how can you really drive that through into practice?

Despite those efforts, corruption-free mining is not a reality and to really get to grips with compliance you do have to think about what happens down the line if something goes wrong. The sector needs effective enforcement of those who break the rules, and that’s where the SFO comes in, along with our sister agencies internationally. It’s important you understand the role the SFO has, so I will explain that now.

First, some basics. Although I am billed in a section entitled “regulator update”, actually the SFO is not a regulator, and I’m not going to tell you how to “remain compliant in an evolving regulatory environment”. The SFO is a prosecutor, and that is not just a semantic distinction, it is a practical one. As our Director has memorably said in the past, “we are not in the business of telling people how not to rob banks”. We are in the business of catching those that do, and holding them to account.

We were created by the Criminal Justice Act 1987 and our statutory remit is to investigate and prosecute the most serious or complex fraud, a concept that includes bribery and corruption. The unusual feature of the SFO is that combination of both investigators and prosecutors under the same roof, something I think is absolutely essential for the work we do. So for any given case we will have a multi-disciplinary team from day one – investigators, accountants, digital forensic experts, lawyers, and other specialists, looking into the case, gathering evidence to understand whether any criminal offences have taken place.

So that is the world we are in – one in which the SFO is investigating precisely what has happened in order to pursue the most appropriate criminal justice outcome if the evidence of an offence is there. It is important to emphasise that if you do find yourself in our world there are a range of possible outcomes and that is why I’d like to explain to you what the SFO is doing at the moment; so that you have a chance, if you want to, to positively influence what happens if something does go wrong.

If there is one message to take away from what I say today it’s this – if you find out about a problem I think it is overwhelmingly in your best interests to engage with us early and to do so fully, honestly and with integrity. Just as you urge those in your business not to treat the compliance process as a passive, box-ticking exercise but rather something that needs substance more than just form, so too engaging with us at the back-end of that process needs substance. If it is worth doing at all, it is worth doing properly.

There are three reasons why I say that I think engaging with us properly is in your interests, and I’ll expand on those in the time I have left. The first is that we will be unimpressed if we find out about a problem from someone other than you, and there is a good chance we will. The second is that when we do find out about it, if the evidence is there we will prosecute those who didn’t tell us about their own wrong-doing, or who did so in an artificial, less-than-frank way. And thirdly – a more positive note- for those who do engage with us properly, there is an opportunity to deal with a problem in something other than a traditionally adversarial way. And while we don’t start from this point, it seems to me this option has the potential to be, by some distance, the most effective commercial outcome for a responsible company wanting to resume honest business quickly.

Taking these three things in turn then – what if the SFO finds out about a problem from someone else? Well, it is more likely than ever that we will so if anyone is thinking that just sitting on something is a sensible strategy they need to reflect on that. In complex business like yours there are just too many people in the know, too many channels through which the truth might surface. The well-written literature for this conference notes that the recent OECD study into foreign bribery found that the extractive industries represent 19% of cases involving bribery of a foreign official. That is striking in itself, but if you read the full report you’ll know there’s more to the story than that. The study considered a total of 427 foreign bribery cases that have concluded since 1999. So that’s 81 concluded cases of foreign bribery in your sector. That is to say nothing about those cases that are ongoing and to say nothing about conduct that hasn’t yet come to the attention of law enforcement. The 19% figure, incidentally, was the highest in the study – yours is by some margin the sector with the highest incidence of criminal enforcement for corruption, a full 4% above the next one – construction. And in case anyone is thinking it must be lots of low-level examples featuring rogue employees, actually it’s not. 41% of the cases involved knowledge by corporate management; 12% involved knowledge of the CEO him or herself. We’re talking about companies like yours, and people like you.

So there are red flags, and I’m afraid that means you are front and centre in our minds – we know the problem is there and we are working with whistle-blowers, disgruntled competitors, domestic partner agencies and international colleagues who share our interest to find out what’s happening. I think the very existence of a conference like this, on this scale, and this well attended, shows we are on the same page in terms of appreciating the inherent risk in the mining sector. There are obviously problems, so I would urge you to come and talk to us about yours before someone else does. It is easy for you to do, but it is just as easy for someone else to do, so be careful assuming you have a head start on us.

My second point is that if you don’t tell us, or you do and don’t engage with us properly, prosecution is a likely outcome. As I said earlier, the SFO is a prosecutor first and foremost and our Director has made it very clear that that is our function. We are not in the business of cosy deals, short-cuts or easy targets. We have the stamina and resources to take on the most demanding cases as a snap-shot of our publically known case-load demonstrates – Libor, Forex, Barclays, Rolls Royce, GSK, Alstom, Tesco and closer to home, ENRC. These are hard cases, but that’s what the SFO is for.

Not only do we have that case load though, but in terms of trial outcomes relating to corruption we have built a good trajectory over the last year – we’ve had our first contested conviction of individuals for overseas corruption (senior managers of Innospec who got custodial sentences), our first contested conviction of a corporate for overseas corruption (Smith & Ouzman, paying bribes into Africa, in relation to election ballot papers, of all things), and our first convictions of individuals under the Bribery Act – and in total the SFO convicted 18 defendants (corporates and individuals) in the last calendar year. If that trajectory continues through our current case load, then common sense tells you that we will soon have convictions of major organisations under the Bribery Act – the kind of work the SFO exists to do, and the public expect us to deliver. So if you try to hide a problem, or engage with us in anything less than a full and frank way, if the evidence is there you can expect to be prosecuted.

So what about that more positive note I mentioned earlier? Well, there is an alternative. If you have a problem somewhere in your network and you are prepared to engage with us honestly then we can have a different relationship. The Deferred Prosecution Agreement regime provides a structure for those wanting to resolve their criminal liability to do so quickly and with a degree of control and certainty largely absent from traditional prosecution. A DPA responds to criminal liability – as I said, no cosy deals – so don’t be under any illusion. In a process scrutinised by a Crown Court judge, criminal proceedings will be commenced against the organisation but immediately suspended pending compliance with the terms of the agreement. Those terms can pack a hefty punch too – a fine, compensation, remedial measures, in some cases a monitor and other possible terms. But it has a lot going for it too – speed and certainty, as I have said; a level of compatibility that enables us to get a bit closer to that hallowed ground of a global resolution for conduct that crosses borders, as I suspect much of the activity in your sector inevitably would; and also the chance to really live your corporate values – integrity around facing up to what’s gone wrong and putting it right rather than being on the back foot, having to be defensive. That’s a much better message for your stakeholders is it not? – employees, customers, shareholders, potential investors, the media, regulators even. You could show that it isn’t just rhetoric: that the ‘tone from the top’ means something in real life in your business, not just on paper. And while it’s not my area of expertise, from attending conferences like this one I always get the impression that the way you talk about compliance and ethics now isn’t about moral high ground, nor about threat even, but actually about adding commercial value. Well if that’s right, I put it to you that genuine engagement with us is the consistent extension of that message; the appropriate and commercial way to fix problems that your well-considered compliance procedures identify.

So those are my three reasons for cooperating with us – if you don’t, we stand a good chance of finding out anyway; anything other than proper cooperation risks prosecution; yet proper cooperation offers the chance to resolve risk sensibly.

The final thing I want to say is a word on proper cooperation. I’ve mentioned a few times how important it is to do things properly if you do choose to engage with us, if you set off down that fork in the road as opposed to electing to be a traditional adversary. And it is really important – it’s what I want you to take away from this. We are no longer, at the SFO, in the world of having to talk up DPAs like some sort of salesmen; corporates want them and some will get them. We have issued our first invitation letters giving corporates the opportunity to enter into DPA negotiations. Where we are now is working with corporates on how best to go through that process – not “why DPA”, but “how DPA”. And when it comes to “how”, the DPA Code is clear; we and the court need you to cooperate fully with our investigation. I and others at the SFO have spoken in some detail about what that looks like so I’m not going to go over that ground extensively again, I will just say this. We have made clear what we expect. It’s all there in the DPA Code. Crucially, where suspicions of corrupt activity arise, we do not require you to carry out internal investigations; investigation is our job. And while we do understand that up to a point you will need to do some work to look into allegations of bribery, we find internal investigations that ‘trample over the crime scene’ to be unhelpful. Our stance is to ask for genuine cooperation with our investigation, not duplication of it. We don’t expect you to keep us in the dark while you carry out extensive private investigations and some months or even years later present us with a package of your findings. If there is suspected criminal conduct, that is our job and there are some important issues around access to, and integrity of, evidence (especially regarding witness accounts) and we expect those to be respected in the same way they would be in any other criminal investigation. We expect you to engage with us early, and to work with us as we investigate, not to rush ahead and, whether intentionally or not, complicate the work we need to do. This is, we appreciate, to some extent a departure from the way things used to be and the way certain practices have built up in other jurisdictions, but we make no apology for that. Our job is to investigate possible criminal offences and we take a very dim view of anything anyone does that makes that job more difficult than it needs to be.

You should know that from where I sit, there appear to be emerging two schools of practice among those advising companies like yours. There are those who seem to view our requests for cooperation as some sort of game, to be instinctively resisted but, I’m sure they would think, cleverly managed nevertheless. They roll out the same stale tactics we have come to know well. And then there are those who seem to actually listen to what we are saying, and take the more innovative approach of genuinely trying to respond to it. It is very clear to me which of those approaches is in the respective companies’ best interests, but until the examples of those who have co-operated filter out across the market I suppose there will continue to be people who want to do things the old way. That’s fine, but you can expect no credit for doing your minimum legal duty. You don’t have to cooperate with us, it is your choice. If you do want to then you have to move beyond that, really make the effort to make our job of investigating a possible crime easier. That is what it takes – not the “impression of cooperation”, saying one thing while really working a more guarded agenda (we know all about that) but actually helping us, being fully frank and honest with us, as little by little, some companies now are.

Remember also that engaging with us doesn’t necessarily mean a criminal sanction at all. We are not looking for scalps. If the evidence is not there then we must conclude that it is not a matter that should be prosecuted. That is an entirely valid and appropriate outcome, and one we are perfectly content to reach. We must be – and will be – fair, and make decisions based on evidence and the public interest alone. So there is that safety-valve built into any engagement you have with us. You can come to us early, before you have gone to the four corners of the earth to form a final view of what has happened, and we can work together to understand what has happened. It could well be the case that having done so, no further action on our part is appropriate – you are not committing yourselves to an inevitable sanction, but you are giving yourselves the best shot at a controlled outcome if it turns out there is criminal conduct that needs to be resolved.

So that is a bit about the SFO. As I say, we are in some ways the last chapter in the cycle of compliance, and if you find yourself at that point you have options in terms of how you engage with us if you want to. I hope you will take that into account as you work together over the next few days to address the risk of corruption in your sector – your high risk, chart-topping sector. Because of the nature of your business, decisions you make here have the power to change real lives, the lives of whole communities in some cases. Remember it isn’t just academic discussion about an abstract issue, so I wish you luck in your efforts during this conference, and I thank you again for the opportunity to contribute to it.