Bribery Act - Where Will the SFO Strike First?

On Friday 1 July 2011 the biggest overhaul of UK bribery laws in a century will come into force.  Under the new Bribery Act individuals could face up to 10 years in prison and companies could receive unlimited fines. 

Jeremy Cole, a partner at law firm Hogan Lovells International LLP and head of the firm's Global Bribery and Corruption Taskforce said:

"With one of the most stringent anti-corruption laws in the world, where will the SFO strike first?  The most likely targets are the third party 'fixers' employed by corporates to do their 'dirty work'.

"Following the initial hype on corporate hospitality it is unlikely to provide the ammunition for the first prosecution, particularly following the recent guidance. Regular corporate entertainment is unlikely to fall foul of the Act unless special circumstances apply - for example, you are best to avoid entertaining someone with whom you are currently negotiating to win some business."

SFO survival?

"Today there is even greater incentive for the SFO to pursue a Bribery Act prosecution.  The SFO has so far avoided being merged into the proposed National Crime Agency. However the position is under review and what better way to prove the need for its independence? 

Financial exposure for corporates

"There is every financial incentive for the SFO to pursue Bribery Act prosecutions - there is still a gaping government deficit. Although the size of the fines to date has been in the millions, the new legislation provides for unlimited fines.  Added to that is recent UK judicial comment that UK fines should match those seen in the US which regularly amount to $100 millions.

Are just UK companies caught? 

"Corporates based outside the UK will come under the SFO spotlight and unfortunately they are the least prepared.  Even if you are not a UK company, if you carry on business here, then you will be caught by the Act - and that includes any of the company's activities anywhere in the world.

"It is hard to see how a global company can insulate itself from the far reaching tentacles of the Bribery Act.  It may be theoretically possible to ring-fence its UK subsidiaries but there are many other 'trip wires' that means that this approach is far from water-tight.

"Adequate procedures" defence

"However there is no need to panic from 1 July - you don't need to be over the finish line (in terms of implementation) by 1 July. As long as you've taken reasonable steps to assess the risks of bribery within your organisation and implemented the necessary and proportionate measures to deal with those risks. 

"Following the programme set out in the Ministry of Justice Guidance will take you a long way to securing the protection of the "adequate procedures" defence.  But this is not a one-off event - corporates will need to continue to monitor and review their compliance arrangements."

The impact on insurers

Christian Wells, a partner in the insurance team at Hogan Lovells International LLP added:

“In all the publicity over the Bribery Act and the Ministry of Justice guidance, insurers and others regulated by the FSA should not forget that the FSA may reasonably expect them to have systems and controls in place already to prevent bribery and corruption.  The checklist published by the FSA in May 2010, albeit addressed to commercial insurance brokers, is a useful starting point for many regulated businesses.  For them and their directors, the risk of being investigated and fined by the FSA if they do not respond adequately may well be greater than that of prosecution.”


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