Tackling white collar crime – the role of business
Earlier this month the UK Government published a response to the findings of review of the Bribery Act 2010 by a House of Lords Select Committee. The response provided an insight into the increased co-ordination of the UK authorities, including Scotland’s Crown Office and Procurator Fiscal Service, Police Scotland, the Serious Fraud Office, and the Financial Conduct Authority, to investigate economic and corporate crime, including the working of the new National Economic Crime Centre and the UK Bribery and Corruption Threat Group, which is led by the SFO with support from Scottish law enforcement.
A particular focus of the House of Lords report was the workings of a new corporate enforcement model of making companies criminally liable for failing to prevent certain economic crime. The Houses of Lords was supportive of the corporate failure to prevent model for holding companies to account for criminality connected to their businesses. This model may be expanded to all economic crime because the UK Government will shortly respond to a consultation on reforming the criminal law to make it easier to prosecute companies. The proposed reforms, if implemented, would bring UK law closer to the USA where companies are criminally liable for all economic crimes of their employees and agents which are connected to the business.
Internationally, the USA continues to lead the fight against economic crime through offering leniency deals for companies which self-report violations and by paying whistleblowers significant financial rewards. Just last week the US Securities & Exchange Commission paid a whistleblower $4.5m for reporting bribery violations by a Brazilian medical devices company to the US authorities. As a result of the tip-off, the Brazilian company paid $30m to resolve alleged breaches of US bribery laws.
Many larger companies and their business leaders appreciate the increased risk of companies being caught up in and being liable for economic crimes such as bribery, failing to prevent tax evasion, fraud, money laundering, and sanctions breaches. While lager companies have the resource to tackle these risks, smaller companies can find compliance challenging due to a lack of expertise and resource.
The House of Lords report considered that the UK Government should publish clearer anti-bribery guidance for businesses, particularly small and medium size businesses, and provide better support on corruption issues in the countries to which UK companies export. Unfortunately, the UK Government disagrees with the House of Lords and argues that it is not for the government or the prosecution agencies to suggest the procedures that should be put in place. Instead, the UK Government recommends that companies should consult legal and compliance professionals to evaluate their compliance with relevant laws and regulations.
The UK Government’s reluctance to publish guidance is in contrast to the developing approach in the USA. The US Department of Justice published guidance earlier this month on the ways in which companies should evaluate the effectiveness of their corporate compliance programmes. The US Department of Treasury has also recently published a new guide on compliance with economic and trade sanctions such as those which impact on business in Iran and Russia.
The US guidance on the “Evaluation of Corporate Compliance Programs” recommends that business answer three “fundamental questions”. Is the company’s compliance programme well designed? Is the programme being applied earnestly and in good faith? Does the company’s compliance programme work in practice?
The guidance is written in plain English and provides a useful reference document for companies to follow in introducing a compliance programme or when assessing the effectives of an existing programme. Emphasis is given to the importance of a conducting a financial crime risk assessment, having in place a Code of Conduct which is supported by appropriately tailored training and communications, and ensuring that there is an effective whistleblowing and investigation process. There is a need for those charged with a compliance programme’s day-to-day oversight to have sufficient authority, stature, independence and resources. It notes that regardless of a company’s size, compliance personnel “must be empowered.” There should also be “incentives for compliance and disincentives for non-compliance” with compliance being a metric for career advancement.
In a time of increased criminal enforcement against companies, the US guidance is to be welcomed. Companies would be well served to conduct an honest and critical assessment of the answers to the three fundamental questions posed. It should be a straightforward exercise and the answers may be illuminating.
Tom Stocker, Head of White Collar Crime & Compliance at law firm Pinsent Masons