Yesterday, the U.K. Serious Fraud Office (“SFO”) issued a release (here) announcing that it “has reviewed its policies on facilitation payments, business expenditure (hospitality) and corporate self-reporting.” According to the SFO, the purpose of the “revised policies” is to
- restate the SFO’s primary role as an investigator and prosecutor of serious or complex fraud, including corruption;
- ensure there is consistency with other prosecuting bodies; and
- meet certain OECD recommendations.
For the most part, although much ink is likely to be spilled by FCPA Inc. / Bribery Act Inc. in the coming days, the SFO’s “revised policies” are a yawner.
As to facilitation payments (here) and business expenditures (here), the SFO notes as follows. Whether or not the SFO will prosecute in respect of a facilitation payment or payments or in respect of a bribe presented as hospitality or some other business expenditure will be governed by the Full Code Test in the Code for Crown Prosecutors and the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010.
The Full Code Test (see here at Section 4) is essentially a realistic prospect of conviction plus in the public interest standard for bringing prosecutions.
As to facilitation payments, the SFO stated that “facilitation payments were illegal before the Bribery Act came into force and they are illegal under the Bribery Act, regardless of their size or frequency.”
Treatment of facilitation payments under the Bribery Act has been analyzed to death since enactment of the Bribery Act, however I have yet to see any reference to a pre-Bribery Act prosecution even though such payments were illegal prior to the Bribery Act. That would seem to answer the public interest prong of the Full Code Test the SFO refers to regarding facilitation payments.
The Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010 (here) that the SFO refers to in its “revised policies,” and that it reaffirms, states as follows concerning facilitation payments and hospitality expenditures.
“Facilitation payments
Facilitation payments are unofficial payments made to public officials in order to secure or expedite the performance of a routine or necessary action. They are sometimes referred to as ‘speed’ or ‘grease’ payments. The payer of the facilitation payment usually already has a legal or other entitlement to the relevant action. There is no exemption in respect of facilitation payments. They were illegal under the previous legislation and the common law and remain so under the Act.
Public Interest Considerations
Prevention of bribery of foreign public officials is a significant policy aspect of the Act. In the context of facilitation payments, the following public interest factors tending in favour of and against prosecution may be relevant. A prosecution will usually take place unless the prosecutor is sure that there are public interest factors tending against prosecution which outweigh those tending in favour.
Factors tending in favour of prosecution:
- Large or repeated payments are more likely to attract a significant sentence;
- Facilitation payments that are planned for or accepted as part of a standard way of conducting business may indicate the offence was premeditated;
- Payments may indicate an element of active corruption of the official in the way the offence was committed;
- Where a commercial organisation has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and these have not been correctly followed.
Factors tending against prosecution:
- A single small payment likely to result in only a nominal penalty;
- The payment(s) came to light as a result of a genuinely proactive approach involving self-reporting and remedial action;
- Where a commercial organisation has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and these have been correctly followed;
- The payer was in a vulnerable position arising from the circumstances in which the payment was demanded.
Hospitality and promotional expenditure
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.
Hospitality and promotional expenditure could, however, form the basis of offences under s1 (bribing another person) or s6 (bribing a foreign public official) and constitute a bribe for the purpose of s7 (failure to prevent bribery). Under section 1 there must be an element of “improper performance”. Under section 6, it will be necessary to show that the provision of hospitality or promotional expenditure was intended to influence the foreign public official so as to obtain or retain business, or an advantage in the conduct of business.
The more lavish the hospitality or expenditure (beyond what may be reasonable standards in the particular circumstances) the greater the inference that it is intended to encourage or reward improper performance or influence an official. Lavishness is just one factor that may be taken into account in determining whether an offence has been committed. The full circumstances of each case would need to be considered. Other factors might include that the hospitality or expenditure was not clearly connected with legitimate business activity or was concealed.
Public Interest Considerations
Prevention of bribery of foreign public officials is a significant policy aspect of the Act. When considering the public interest stage, the factors tending in favour of and against prosecution referred to in respect of “active bribery” (section 1) are likely to be relevant. A prosecution will usually take place unless the prosecutor is sure that there are public interest factors tending against prosecution which outweigh those tending in favour.”
As noted in this March 2011 post, U.K. guidance on facilitation payments and hospitality expenditures pretty much aligns the Bribery Act and the FCPA despite the obvious statutory differences. I predicted in January 2011 (see here) that enforcement of the Bribery Act will be disciplined and measured and this belief is further strengthened by yesterday’s SFO release of its “revised policies.”
As the SFO indicates in this Q&A regarding its “revised policies,” the only change “is that reference in the joint prosecution guidance to the SFO’s former policy on self-reporting has been removed.” (See here for that policy which explained that “the benefit to the corporate [in self-reporting] will be the prospect (in appropriate cases) of a civil rather than a criminal outcome as well as the opportunity to manage, with us, the issues and any publicity proactively.”
The Joint Prosecution Guidance, which the SFO reaffirms in its “revised policies,” stated as follows regarding self-reporting.
“The SFO encourages corporate self-reporting, but offers no guarantee that a prosecution will not follow any such report.”
The remainder of the “revised policy” on self-reporting (here) states as follows.
“If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so. The fact that a corporate body has reported itself will be a relevant consideration to the extent set out in the Guidance on Corporate Prosecutions. That Guidance explains that, for a self-report to be taken into consideration as a public interest factor tending against prosecution, it must form part of a “genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice”. Self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.”
There is nothing revolutionary about any of this.
It substantively aligns with the DOJ’s Principles of Prosecution of Business Organizations (here) which states that a company’s “timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents” is one factor the DOJ will consider in deciding whether to criminally charge a business organization.”
In short, although much ink is likely to be spilled in the coming days, the SFO’s revised policies are a yawner. Speaking of the ink, before the clock struck midnight on the SFO’s “revised policies” the industry was cranking out the marketing material.
This industry participant stated as follows regarding the “revised policies” and the DOJ’s promised forthcoming guidance. “Given this activity from government regulators, it is more important than ever that companies develop a meaningful compliance program that can be adapted if needed to meet changing government expectations. A successful compliance system must adequately educate employees and create a framework that can prevent violations before they occur. [Company] has the expertise to implement a truly functional FCPA or UK Bribery Act compliance program. We can help companies protect themselves in the face of strict enforcement of these laws and constantly changing government guidance.”
This industry participant stated as follows. “Given the new [Bribery] Act’s tough penalties and the apparent ambiguity surrounding the consequences of self-disclosure, businesses may want to take extra care to comply with its provisions. Accordingly, businesses should consider seeking the advice of legal counsel in navigating this statute and its attendant revisions.”
