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Lewis Nedas Law are London-based solicitors. Frequently rated in both Chambers UK and The Legal 500, we can help you or your business today. Tel: 020 7387 2032.
NOV
18

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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JUL
15

Fraud Sentencing Success for LNL & Siobhain Egan’s Client

suit in handcuffsSiobhain Egan represented a businessman facing a series of serious dishonesty offences. He managed to repay all the monies that were misappropriated, entered a guilty plea, and offered a great deal of mitigation. As a result, he received a conditional discharge and an order for costs to be paid.

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AUG
25

Collapse of Controversial Restructuring Group: RBS Bosses to Leave

handshakeThe controversial GRG division at Royal Bank of Scotland has begun to be dismantled, with two senior executives leaving after scrutiny of unit’s dealings with small companies.

Derek Sach who is the head of the global restructuring group (GRG) and Aubrey Adams another executive who runs the property unit within GRG will leave the bank in March 2015.

Laura Barlow, who is currently the head of the restructuring team within GRG for the UK and the US has now been appointed as the head of the RBS restructuring division - her appointment is to take immediate effect.

GRG who deal with companies facing collapse have faced criticism over a report produced by advisor to business secretary Vince Cable that the unit forced viable business entities ‘to the brink’ in order for the bank to buy their properties and make a sizeable profit.

The Financial Conduct Authority is also investigating the claims. The decision to close GRG as a stand alone unit also comes at a time of economic recovery in the UK which means far fewer restructuring cases. RBS chief executive, Ross McEwan, said only a few weeks ago that the number of cases referred to GRG had dropped by 40%.

Contact Lewis Nedas Specialist Solicitors

If you are affected by and FCA investigation, or any other issues highlighted by this article, please contact our experienced solicitors by calling 020 3432 6608 or completing our online enquiry form.

This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.

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JAN
18

Many Companies are Unprepared for Rise in Cross Border Investigations

According to a recent survey by accountancy firm KPMG, of 60 global executives, 90% indicated that the number of cross-border investigations have either increased or remained the same over the last year. Yet over 50% of these executives also reported that they have limited protocols in place and have insufficient resources to conduct cross-border investigations.

As global regulations, laws, and enforcement actions increase, companies with well-designed cross-border investigation protocols will be positioned for more positive outcomes than those that are not prepared, say KPMG.

“Conducting cross-border investigations is no simple endeavour,” said Phil Ostwalt of KPMG in the US. “Add the complexities of legal and cultural differences and you have one of the biggest challenges facing global corporations.”

Only 35% of respondents in KPMG’s survey indicated that their companies conduct cross-border investigation training each year, a vast decline from KPMG’s 2007 survey when that figure was 80%. Furthermore 42% of the executives believe their companies lack sufficient resources to handle cross-border investigations.

According to KPMG foreign data privacy laws and regulations pose some of the greatest challenges to conducting cross-border investigations because of restrictions on the kinds of data that can be collected and transferred out of the jurisdiction. Many countries have enacted laws that place a high priority on protecting personal data, including establishing a fundamental legal right on the privacy of personal data, even if such data are contained on an employer’s system or computer. The survey indicates that over 46% of respondents reported that their greatest challenge in conducting cross-border investigations is handling data privacy issues.

Cultural differences also remain one of the top three challenges in conducting cross-border investigations, up from 26% in 2007, to 37% in 2013.

In terms of the type of cross-border investigations being carried out 67% of respondents identified allegations of bribery and corruption closely followed by investigations into allegations of embezzlement or misappropriation at almost 65% and conflicts of interest at 63%.

Contact Lewis Nedas’ Criminal Lawyers in London

If your company could be affected by these issues and you require specialist legal advice, please contact our solicitors Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or complete our online enquiry form here.

This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.

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AUG
22

New Offences for Remote Gambling Operators

As part of on-going moves to tackle tax avoidance, the Government has recently announced plans to ensure that gambling companies located outside the UK are taxed on gambling profits obtained from UK customers.

The new rules will be supported by tough enforcement measures, including the creation of new criminal offences. Failure to comply could result in prison sentences of up to seven years, unlimited fines, or the loss of a remote gambling operator’s licence to operate.

What is remote gambling?

Remote gambling is a form of gambling in which the participants are not physically present, but carry out their gaming over some form of communication device, such as the internet, telephone or television.

This means that gambling companies can operate from anywhere in the world, and still reach customers in a particular country. This has regulatory and tax implications, as companies can take advantage of the different regimes imposed by different countries.

The current position

The UK is a prime example of this because, at present, no UK tax is paid on earnings derived from remote gambling. Instead gross gambling profits are taxed on a ‘place of supply’ basis.

Many large gambling companies have therefore moved part of their operation overseas, where they can still reach UK customers, without having to pay tax on the profits. For example, according to the Guardian, William Hill and Ladbrokes have based their online operations in Gibraltar, where they are taxed at 1% and subject to a cap of £425,000.

In contrast, the Gambling Commission reckons that the UK remote gambling market is worth in excess of £2 billion each year, which could lead to around £300 million in increased tax take for the UK.

Proposed changes

The Government has been planning to tackle the taxation of remote gambling since 2011. It consulted on its proposals in 2012, and has now published its conclusions. These are again up for consultation.

The hope is that the proposed changes, which should come into effect in December 2014, will create a level playing field across the industry, with all remote gambling companies paying tax on gambling profits derived from UK customers.

The proposals are technical, relating to the minutiae of tax law, but will change the underlying tax basis: moving it from a ‘place of supply’ basis to a ‘place of consumption’ basis.

The enforcement mechanism

But the proposals will only work if there is an effective enforcement regime. The Government is therefore intending to:

  • Work with other tax authorities to recover outstanding tax
  • Require remote gambling operators, based in a country with which “the UK does not have a reliable debt collection and assistance agreement, to either:
    • appoint a joint and severally liable fiscal representative; or
    • appoint an administrative representative (who would not be joint and severally liable) and provide HMRC with a security”
  • Require a security from operators who have a poor compliance history.

The Government will also create new summary criminal offences to deal with:

  • those operators who do not provide a security when required to do so, and
  • those operators who fail to appoint a fiscal or administrative representative when required to do so.

In the most serious cases of non-compliance, the Government plans to seek the revocation of the operator’s Remote Operating Licence.

What next?

While it is inevitable that gambling corporations will be unhappy about the proposed changes – according to the Guardian, William Hill is already considering contesting the proposals as being a breach of EU competition law - it appears that the Government is equally determined that the changes become law.

“It is unacceptable that gambling companies can avoid UK taxes by moving offshore, and the Government is taking decisive action to ensure this can no longer happen in the future,” said Sajid Javid, Economic Secretary to the Treasury. “These reforms will ensure that remote gambling operators who have UK customers make a fair contribution to the public finances.”

Contact Lewis Nedas’ Criminal Lawyers in London

For specialist legal advice please contact our solicitors Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or complete our online enquiry form here.

This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.

Contains public sector information licensed under the Open Government Licence v1.0

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