The Guardian recently reported that during the G7 Summit in Germany last month, David Cameron warned that the Fifa scandal highlighted a need for a more concerted effort from world leaders to combat corruption. The prime minister is reported to have been highly critical of the reluctance on the part of many to identify corrupt organisations, noting that: “just as with Fifa, we know the problem is there, but there is something of an international taboo over pointing the finger and stirring up concerns”.
While allegations of corruption often feature on the pages of tabloids, the UK’s framework for combatting corruption is not particularly well understood. In this blog post, the team at Lewis Nedas give an overview of the legislation designed to combat corrupt practices in the UK.
What are ‘corrupt practices’?
The term ‘corrupt practices’ tends to cover a range of activities that are deemed illegal under UK law, including:
Money Laundering
This is where there has been an exchange of money that is the result of illegal activities. These ‘proceeds of crime’ are then exchanged for money that is not tainted by criminal activities.
Bribery
Bribery relates to the providing (and receipt) of an advantage or benefit (either monetary or otherwise), so to entice someone not to fulfil his or her duties as would be expected. The offence of bribery also includes the payment (and receipt) of money or some other kind of payment, to condone questionable or improper conduct.
Fraud
The offence of fraud is multifaceted. It covers a variety of activities including: representing to someone that something known to be false is true; failing to disclose information that someone owes a duty to disclose; and, abusing a position which someone is expected to protect.
How are corrupt practices regulated in the UK?
The different offences listed above are heavily governed by statute. Listed below are the important statutes that deal with each offence and who they apply to.
Money laundering
The rules concerning money laundering are contained within the Money Laundering Regulations 2007.
The Money Laundering Regulations 2007 apply to a variety of organisations, based on their being part of a particular business sector. Under the 2007 Regulations, the following organisations are required to observe their terms: money service businesses – businesses that exchange any currency, transmit money from one place to another or cash cheques; high value dealer – businesses that accept cash payments of €15,000 euros or more in exchange for goods; trust or company service providers – a firm of or individual practitioner(s) who are engaged in, amongst other things, the creation of legal entities, arranging for people to act as a director or secretary of a company or a partner for legal entities, and providing a registered office or business address for an organisation; accountancy service providers – auditors that carry out statutory auditory work, and accountants and tax advisors that provider advice to clients; and estate agency businesses – organisations that are involved in the buying and selling of residential or commercial property for and to customers.
In order to comply with the Money Laundering Regulations, an organisations must design and implement certain procedures to establish an individual’s identity; be aware of where their money is going to and coming from; and keeping individuals activities under constant review in terms of the risk of your business becoming implicated in money laundering.
HM Revenue and Customs (HMRC) is the organisation that has responsibility for ensuring that organisations observe their responsibilities under the 2007 Regulations. Where there is a failure to comply, HMRC is empowered to issue a financial penalty or in more serious cases, pursue criminal prosecutions.
Bribery
The Bribery Act 2010 is the governing piece of legislation in the context of the offence of bribery.
The legislation applies to both organisations and individuals (including the employees of an organisation) and requires that they actively avoid becoming implicated or involved in bribery. It is not uncommon that different parts of the world handle the practice of bribery differently. However, the fact that bribery is deemed illegal in the UK will have dire consequences for UK-based organisations found to have engaged in bribery elsewhere. In order to avoid becoming embroiled into allegations of bribery, organisations are charged with implementing processes and procedures that will guard against, and identify risks of, bribery occurring at the earliest opportunity. In most cases this will come in the form of an ‘anti-bribery’ policy which should outline, amongst other things:
- The organisation’s position on accepting gifts and corporate hospitality;
- The approach the organisation takes to reducing risks of bribery; and
- The rules that should be followed when engaging in business affairs e.g. negotiating contracts.
The responsibility for policing bribery, and enforcing the Bribery Act lies with a host of regulatory agencies. One of the most important of these is the Serious Fraud Office (SFO), which tends to work with other bodies in government and the police to monitor compliance with anti-bribery legislation.
Where there is evidence that bribery has occurred, the consequences for those involved can be severe. In the case of individuals implicated in bribery, there is a penalty of up to 10 years imprisonment alongside an unlimited fine. For companies that are found to have been involved in bribery, there is also an unlimited fine.
Fraud
The crux of the Fraud Act 2006 is to dissuade anyone – either a corporate entity or an individual – from engaging in fraudulent activity. Policing against fraudulent activity is complicated, and tends to involve a number of organisations. In the UK, considering that fraud often tends to involve some kind of financial element, where organisations are regulated by the Financial Conduct Authority (FCA), so too will it investigate their suspected involvement in fraud. It is empowered to fine and issue sanctions against organisations found to have been involved in fraud and, for failing to prevent it from occurring.
Penalties for involvement in fraud will depend on the circumstances. Where an individual is found to have been involved in fraud, the maximum penalty is up to ten years imprisonment. It will also be open to the courts to issue an unlimited fine, if it deems it necessary. Organisations that are found to have been involved in fraud will also likely be issued with an unlimited fine.
Corrupt Practices in the UK
The law in the UK governing corrupt practices is highly sophisticated and difficult to understand. If you are concerned that you or your organisation have been implicated in any of the activities mentioned above, it is important that you take specialist legal advice at the earliest opportunity. Suspected corruption – however defined – can be disastrous for both individuals and organisations in terms of their reputation and prospects for future success.
Contact Lewis Nedas Solicitors in London
At Lewis Nedas, we are experts in dealing with allegations concerning corrupt practices. Our specialist lawyers are routinely sought for their knowledge of the law governing corporate crime, financial crime and fraud. We understand that being faced with allegations of corruption can be an incredibly damaging experience, and that they must be handled delicately by experienced professional advisors. If you need detailed, practical legal advice on how to deal with allegations of being involved in bribery, fraud or money laundering, contact the team at Lewis Nedas now.
