AML/CFT: UK countdown for Bribery Act to come into force

It will surprise many that the UK has not yet implemented the Bribery Act 2010. Delays have arisen as opponents have lobbied for parts of the Act to be repealed or not brought into force, arguing that it is unenforceable, too complex, will render British businesses uncompetitive and too costly to implement and comply with.

And some of those complaints were heard. The original in-force date of 1 April was suspended and no new date given.

But the UK Government has taken action and announced that the Act will come into force on 1 July.

In January, the Ministry of Justice announced a moratorium: the Act would not be brought into force until new Guidance was issued. And, the Ministry said, that would not happen until May at the earliest.

But, it also said, there would be no significant changes to the Act itself.

The new Guidance was issued on 5 April and on 13th April the Serious Fraud Office (which has handled major cases under the old Bribery laws) and the Director of Public Prosecutions (under whose auspices the Crown Prosecution Service operates) issued Guidance for Prosecutors.

Around the world, British Embassies and High Commissions have been holding seminars for British businesses operating overseas, notably in trouble spots such as Nigeria.

A significant issue for many businesses, especially UK headquartered banks operating overseas, is the overlap of the Bribery Act and counter-money laundering laws.

The scope of the law includes corrupt practices conducted entirely overseas by UK companies, their subsidiaries - and even representatives.

Previously, companies have argued that they pay commission-only agents or sales teams and that they have no information as to what happens to that commission nor control over it.

One consequence of the Act is that UK head-quartered businesses will need to review such commission arrangements. Where commissions are regarded as unusually high, even for independent contractors, that may be regarded as prima facie evidence that there is wrongdoing.

The Act relates to all persons doing business in or out of the UK, regardless of their nationality or status. Therefore a foreign business bribing a UK person is as much as risk as a UK business bribing a foreign person.

The Act will place upon internal and external auditors a level of responsibility that they have so far evaded under counter-money laundering laws. Almost no suspicious transaction reports have been filed by either group since the UK introduced counter-money laundering measures in 1994. Both were largely outside the reporting requirements until 2002 when the Proceeds of Crime Act created a universal requirement that anyone who came into possession of information relating to suspected money laundering must make a report. However, even then, some remained outside the scope of the regulatory requirement to put in place measures to detect and deter money laundering. By 2007, however, they were clearly within the regulatory net within the UK (although other countries have failed to include auditors).

For ordinary businesses, the consequences are wide-ranging. Individuals face substantial jail terms; companies face unlimited fines.

One of the areas that is now under review is the question of corporate hospitality. The provision of holidays has long been a bone of contention, being virtually untraceable. But this enters a much more fuzzy area when it comes to questions such as sponsorship of customers to attend product seminars: put it in a three star hotel in Brixton and no one will come; put it in a themepark in Florida with tickets for the whole family (buy a first class ticket and then exchange it for four economy seats) and the gig will be over-subscribed.

Sponsorship of conferences will change: often a company will sponsor an event in exchange for a number of "free" tickets for its customers. The money goes to the conference company, the tickets go to the customer, obfuscating the paper trail.

Publications will have to take care: a quid pro quo arrangement of advertising in exchange for an article with a positive spin are open to question. Many trade magazines survive because they allow advertorial masquerading as editorial.

For a guide as to how deep into the fabric of commercial society bribery and corruption goes, there is no need to look beyond the work of Hong Kong's Independent Commission Against Corruption. There is no significant sector of the economy that has not been the subject of prosecutions. In Hong Kong, ICAC prosecutes without fear of favour: hotel bell-boys taking kick-backs for recommendations to a particular tailor at one end of the scale are balanced by a current investigation reaching to the upper echelons of the Hong Kong Jockey Club.

Politicians will be nervous: there were widespread allegations that the Blair-Brown government made many appointments, including some of the most senior government posts, to those who had supported them in opposition and in their attempts to topple the previous conservative government.

But for governments at large, there are other considerations: where does corporate social responsibility end and corruption start?

A builder wants permission to construct a dozen expensive properties in a village: he is told that he can do so only if he builds a dozen low-cost homes at a location the local authority specifies, or that he can do so only if he transfers a proportion of his development to the local authority to house whoever they choose (both are examples from the UK). Is this a corrupt practice, or is it sound negotiation?

A businessman sponsors the construction of a grandstand at a municipally-owned sports field. Later, he is awarded a substantial contract by the Council (this example is from Russia). No official took a personal direct benefit. Assuming that the contract price was not too far from the expected price - and the additional sum was certainly not sufficient to cover the cost of the grandstand), is this CSR or a form of corruption.

A foreign businessman gives a political donation to a political party - and then the passage to citizenship is "eased." This is without doubt corruption, but would it ever be prosecuted?

Each case will stand on its merits. In the UK in the past two years, politicians have been prosecuted for making fraudulent claims on their expenses. That has caused uproar. But it is the revolving door that will make their lives hardest - and the lives of companies. In Alaska, a politician was found to have supported a position proposed by a company that had made a vague promise of a job for him when he left office. The job did not materialise and both parties escaped conviction, even on the basis of a conspiracy or attempt.

The Bribery Act 2010 has teeth. Prosecutors, particularly in the SFO have been champing at the bit to get the powers they need to deal with cases, particularly after Tony Blair's government interfered with and shut down a case involving BAe and the Saudi Arabian government, ultimately leading to the resignation of the SFO's extraordinarily honourable boss.

The Act is big, complex and powerful. Whether it operates effectively, or merely as a regulatory tool outside the criminal justice system remains to be seen. If it is to work, it must be the former.

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Nigel Morris-Cotterill is Head, The Anti Money Laundering Network, ultimate owner of BankingInsuranceSecurities.Com