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8 Out of 10 UK Managers Operating Overseas Forced to use Bribery

A 12-year study has found that over 85% of UK managers operating abroad in emerging markets are involved with bribery on a monthly basis.

The study, carried out by Henley Business School, also found that 80% of board level executives are aware of the practice, but that very little can be done to stop it. The inquiry was carried out over a 12 year period, beginning in 2004, and is based on private “intimate” conversations with the executives, ranging from general managers to chief executives, of more than 1000 businesses operating internationally, of which more than 10% were UK based.

Struggling to Combat Bribery

According to Andrew Kakabadse, professor of governance and leadership at Henley Business School, the report originally began as an exercise to help coach and support high-level business individuals struggling with aspects of their employment. “However,” he added, “it quickly became apparent that a key obstacle was dealing with everyday fraud, bribery and corruption.”

The study has drawn from research in Australia, Belgium, China, Finland, Georgia, Germany, India, Ireland, Nigeria, Pakistan, Russia, Saudi Arabia, South Africa, and Sweden. It also found that bribery was costing the organisations in question some 5% of their annual revenue on average.

The report noted that bribery was so institutionalised in some markets that it had been informed of instances where agents would try and ‘out-bid’ each other by asking for lower bribes – usually a percentage of the contract’s value and often up to 10% – to ensure a company would engage them over competitors.

Mr Kakabadse stated that while the stiff penalties contained in laws like the UK’s Bribery Act and the US’s Foreign Corrupt Practices Act “bring fear to boards”, they have also created a class of “fall guys”.

“Many boards are following the act but know bribery is a fact of life lower down the company, the people on the ground,” he added. “It is the managing directors and general managers in country… who are being forced to give bribes to win business. These are good people being forced to do bad things. Boards are doing worse than paying lip service to anti-corruption laws because they are using them to protect themselves while they know bribery is going on.”

The study found no specific sector or area which was particularly susceptible or likely to indulge in bribery and Mr Kakabadse expressed surprise that only 85% of managers had admitted to using bribes. These findings stand in sharp contrast to PwC’s recent global economic crime survey which found that 18% of senior management was involved in crime, including accounting fraud, while 80% of senior executives admitted to having seen such corrupt practices.

Mr Kakabadse reported that many of the managers in question felt that bribery was the only option if they wished to remain competitive in these emerging markets, with the only other option being to withdraw from the market completely. In other words, “if they didn’t pay-up to achieve their organisation’s objectives, then their competitors certainly would.” Working in foreign markets naturally means adopting local practices, and when that country or market is deeply corrupt, the only alternative to corrupt business is no business. It is therefore somewhat unsurprising that many companies have chosen to turn a blind eye, giving tacit permission to their subordinates. Commenting on the report, Michael Littlechild, director of GoodCorporation, the anti-corruption and business ethics advisor, observed that it starkly illuminates the difficulties faced by companies operating in emerging markets. He added: “Many large international organisations give explicit instructions to staff to refuse bribes and some have pulled out of countries where the risk is too great (…) Those that have ignored the law have faced huge fines.”

Severe Penalties

If any of these “fall guys” or the companies who employ them are found guilty of an offence under the Bribery Act 2010 the consequences can be severe. Section 11 of the Act provides for a potentially unlimited fine and up to ten year’s imprisonment for individuals found guilty of serious bribery offences and a similarly unlimited fine for any company or partnership who fail to prevent such bribery from happening.

A criminal conviction also triggers the power to impose a confiscation order under the Proceeds of Crime Act 2002. This order will almost always be applied for after a conviction unless there are compelling reasons not to do so. It is designed to prevent offenders from benefitting from the crime they have committed and forces those convicted of an offence to pay a sum of money equal to the ‘benefit’ they received as a result of the bribe.

If the defendant cannot be brought to trial, has been acquitted, or where there is insufficient evidence to obtain a criminal conviction, a Civil Recovery Order can be applied for. Being a civil claim, the agency bringing the claim (for bribery the Serious Fraud Office) need only establish criminal activity and that the funds it is seeking to recover are the proceeds of that crime. This is a lower standard of proof than in a criminal case. There are clear advantages to using this procedure for both parties as, if they settle (which they typically do), the resulting settlement will be confidential and will not result in a criminal conviction.

It seems likely that the companies in question see the possibility of such measures as par for the course and a worthy price to pay for the opportunity of working in these emerging markets. It also seems to demonstrate an almost foolhardy faith in not getting caught, or in being able to lay the blame squarely at the door of a subordinate and walk away scot free.

Lewis Nedas Financial Crime Lawyers, London

Lewis Nedas Law are London-based solicitors, frequently rated in both Chambers UK and The Legal 500. With over 30 years’ experience as specialist solicitors in central London, UK, we can help you or your business today. on 020 7387 2032 Please contact Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or contact us online.

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An Overview of the Senior Managers Regime

The law as it applies to senior personnel working in financial services has been subject to a great deal of attention in previous years. The financial crisis of 2007-2008 raised a number of questions on the rules that the managing powers in banks and other financial institutions are obliged to follow. There has been a great deal of media attention on changes to the law as it applies to businesses and their employees in the financial services industry, with more to come.


In October this year, HM Treasury announced that the Senior Managers Regime (SMR) would be extended to apply to all firms that are authorised to work in financial services under the Financial Services and Markets Act. With the changes due to come into force in 2018, there will be a great deal of interest in the SMR, how it will apply and what the consequences of this development will mean.

Precisely what is the SMR?

The SMR is a regime designed to encourage individuals who have a significant decision-making role in financial services firms to take responsibility for their decisions. Simply put, where individuals take decisions that threaten the commercial viability of an organisation and risk its failure, they will face sanctions as a result.

What is being proposed under the SMR?

The SMR, when it is fully introduced, will take over the ‘Approved Persons Regime’ that currently applies to personnel working in the banking sector. Needless to say, any change to the rules governing activities in financial services, which is vital to the UK economy, will attract a great deal of attention. There are however certain key components of the SMR that warrant particular attention:


When the SMR was originally introduced, it provided for a ‘presumption of responsibility’ on the part of senior managers in financial services. This resulted in a situation where a senior manager or director will be deemed guilty of misconduct where one of their staff members violated their responsibilities as an ‘authorised person’ to work in financial services. However, this has resulted in a great deal of unrest among many in the banking sector, who believed that there was no way to credibly defend against their being presumed guilty of misconduct. In its announcement of the extension of the SMR, HM Treasury also commented that the current situation is unworkable, and have agreed that the in cases of suspected misconduct, senior personnel will be presumed innocent until proven otherwise.

It should be noted however that senior individuals working in financial switches will still owe a statuary duty, in performing their duties, to take reasonable care to avoid violate the responsibilities that they owe to regulators.

Transparency of accountability

Firms that are governed by the FMCA will be obliged, under the new arrangements, to fully disclose the nature of their governance and accountability structures. Historically, there was a concern among many, both within and beyond the financial services industry, that it was difficult to determine precisely who was accountable to whom, and how this could be enforced. Under new arrangements, banks and other financial institutions will need to provide to the FCA a yearly ‘responsibility map’, outlining how the firm is run and who is responsible for its different activities.

Fitness for practice

Regulators have carefully considered the need to ensure that those who are authorised to work in financial services are capable of doing so, and will do so and take the requisite level of care and diligence required. This has resulted in the introduction of a ‘Certification Regime’, which will require firms working in financial services to actively review the ‘fitness for practice’ of their staff. Under these new arrangements, it is hoped that firms will take their role seriously, and ensure that only those who are truly capable of working effectively in financial services, in full compliance with regulatory requirements, do so. It is important to point out that the Certification Regime applies to those aspects of a firm’s business that present a significant risk either to its customers or to its continued viability, e.g. personnel involved in providing investment advice.

Who will be governed by the SMR?

For those working at senior levels in financial services, it is wise to take account of whether or not they will be governed by the SMR. As was mentioned earlier, the regime will apply to ‘senior managers’. In other words, the SMR will apply to individuals who hold a particular position or have a level of responsibility in a key or important area of the business. There will also be some applicability of the SMR to Non-Executive Directors, e.g. individuals who chair certain board committees such as the risk committee or remuneration committee. Furthermore, the SMR will also have some impact on the activities of overseas firms operating in the UK: an individual will be required to be deemed as the ‘Head’ of the UK Branch, and will owe responsibilities under the SMR.

What does this mean for financial services in the UK?

The regulatory landscape facing financial services in the UK is changing. The burden of policing activities within firms is increasingly being placed on businesses themselves, and they alone will be held responsible for failing to observe the rules that apply to them. Furthermore, individuals are under particular pressure to ensure that they do not expose the organisation to unnecessary risk. Taken together, these new changes mean that it will be more important than ever to have the assistance of specialist advisers when dealing with regulators, and other actors in the financial sector.

Lewis Nedas is a leading city law firm, providing comprehensive advice on all aspects of regulatory and financial law in the UK. Our teams are regularly involved in advising individual and corporate clients on the law that applies to them, assisting in their dealings with regulatory bodies and representing their interests in court room litigation.

Contact our Regulatory and Business Solicitors London

If you would like to know more about the work of our team, or to hear more about the impact of the SMR on financial services in the UK, contact our team today via our online contact form or give us a call on 020 3553 7916.

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