Corporate agendas are driven by reactive and proactive considerations. Reactive policies are particularly susceptible to what is on the press agenda, and corruption is certainly one such item at the moment. The international media abounds with coverage of emerging and escalating graft investigations, from the revelations relating to the hitherto obscure Monaco-based broker Unaoil, to the Petrobras and 1MDB corruption scandals, which threaten the stability of the governments of Brazil and Malaysia respectively.
Topical events certainly influence the corporate agenda, as the recent international anti-corruption summit in London has showed. Christine Lagarde’s statement on the £1 trillion cost of bribery to the economy, and David Cameron’s announcement on The Global Forum for Asset Recovery, a global plan to help recover stolen assets, have both ensured that anti-corruption is positioned as a business priority. But ultimately, it is legislative change and enforcement action that focuses minds the most. Here too there have been significant developments.
The Foreign Corrupt Practices Act (FCPA), the bellwether of anti-corruption legislation, continues to be a source of ever increasing enforcement penalties, while the UK’s Anti Bribery Act has at long last become a piece of legislation to be feared, in large part due to several recent prosecutions and settlements instigated by the Serious Fraud Office (SFO).
In the first of these, in November 2015 the SFO secured its first deferred prosecution agreement with ICBC Standard Bank. The bank, whose sister company Standard Bank Tanzania paid a local company to induce members of the Tanzanian government to grant it a private placement contract, agreed to pay the Tanzanian government $6 million plus interest. More recently, in February 2016 the SFO secured its first conviction under section 7 of the Bribery Act when UK construction firm Sweett Group Plc. was fined £2.3 million for bribery in securing a hotel development contract in the UAE. The Sweett Group fine has been widely seen as a major milestone for the Bribery Act, and section 7 in particular, which goes beyond most international anti-corruption provisions by requiring businesses to prevent bribes being paid on their behalf.
Across the Channel, France has now launched the biggest overhaul of its anti-corruption legislation in decades with the introduction of a bill that marks a major shift in the corporate culture of French business. Spurred by a growing domestic sense that US law enforcement agencies were carrying out the duties of the French state and financially benefitting from the pay-outs, France’s finance minister, Michel Sapin, introduced the framework of a new anti-corruption bill in July 2015. French companies have certainly been heavily impacted by enforcement action under the FCPA. Three French majors alone – Technip, Alstom and Total – have collectively been fined over $1.2 billion by the US Department of Justice in the last few years. The bill, colloquially known as Loi Sapin, was presented to the French cabinet of ministers by Michel Sapin on 30 March 2016 and is expected to come into force shortly.
Loi Sapin shows that the major jurisdictions are pulling in the same direction in the legislative arena, a welcome sign that complements the growing trend of cross-border cooperation between law enforcement authorities. Such cooperation is long established between countries like the US and the UK, and was in fact a prominent feature of the investigation that led to the above deferred prosecution agreement with IBCC, but is also starting to take place between countries traditionally suspicious of one another, like China and the US. Last year, China sent a list of over 150 officials suspected of fleeing to the US to avoid corruption charges. The US responded by arresting one of these individuals, the ex-wife of a former Chinese government official, on charges of money laundering and immigration fraud.
All of these developments point to this being a pertinent time for businesses to take stock and revisit their existing anti-corruption policies and practices. Aside from the financial incentives of bringing anti-corruption to the top of the corporate agenda, businesses that fail to do so stand to suffer considerable reputational damage. In the best case scenario, companies could be forced to withdraw from the market where the offence took place, as publisher Macmillan did with the closure of its education division in Africa following an admission that it had paid bribes in South Sudan; exclusion from public tenders or from projects funded by the World Bank and other development institutions can also result; and in the worst case scenario the reputational damage can force companies into winding up the business altogether.
It goes without saying that companies should review their internal policies across communication, training, conduct, compliance and the proper implementation of such policies by their staff. However, what the recent SFO actions under section 7 of the Bribery Act also show is that businesses need to pay much greater attention to who they deal with, as it is no longer enough to plead ignorance of the conduct of a local representative. Businesses in the UK have to demonstrate that they have put in place adequate procedures to ensure that bribery does not take place (the so-called ‘adequate procedure’ defence). One of the most effective and proactive ways to do this is to show that they have done their due diligence and taken steps to gain a better understanding of the background, track record and modus operandi of their local interlocutors.