How can Organisations be Anti-Money Laundering Compliant?

Organisations need to implement effective anti-money laundering policies in order to remain compliant with legislation and maintain credibility. If they fail to do so, the results could be detrimental to their future. Money laundering can damage reputations, customer/business relationships, and your organisation’s financial stability – not to mention funding criminal activity and even terrorism. Organisations that are part of the regulated sector (regulated by the Financial Services Authority) are required to meet the day-to-day standards set to prevent money laundering, and must remain compliant with the below standards.

The Steps Towards Anti-Money Laundering Compliance:

Customer Due Diligence

  • Due diligence means checking that your customers are who they say they are to increase security. This is so you know exactly who you are doing businesses with, reducing the chances of problems occurring in the future due to dodgy connections.
  • Failing to train staff to carry out proper KYC (know your customer) checks means you could become a target for criminals looking to commit money laundering offences. This means you become involved in a crime – even if you never realise it.
  • The checks have a win-win result because they’ll either give you peace of mind before creating a new business link, or it keeps you out of the way of the wrong people that are wanting to exploit your business. When it comes to anti-money laundering, vigilance is key.

Internal Controls and Monitoring

  • A business must have efficient internal controls and monitoring systems to avoid becoming the next victim of money laundering. This should alert anyone within the business if criminals are attempting to use the company for laundering, they can take the right steps to prevent the threat from progressing to an incident.

Your controls should include:

  1. A nominated officer creates a figure within the business that employees can report issues to when needed.
  2. For businesses of higher complexity, having a compliance officer can maintain a shared understanding throughout the whole workforce.
  3. Make sure that the senior managers know their responsibilities and importance in the process of AML, providing them with regular information on the risks in money laundering.
  4. Providing relevant training to employees means that your first line of defence is well prepared to deal with threats that come their way.
  5. Recording and regularly updating you AML policies, controls and procedures by completing a policy statement (and sticking to it!)

Legislation Awareness

There are three main pieces of legislation that businesses need to be aware of to be compliant:

Proceeds of Crime Act 2002 (POCA)

  • This Act is concerned with recovering assets that have been gained through crime, also known as the proceeds of crime. The Act meant that the confiscation and recovery of assets could suddenly occur before a conviction had taken place, speedy up the whole process.
  • The primary aim is to reduce the number of loop-holes in the financial system in order to reduce the chances of criminals having success, it does this by taking away their motivations – money and assets.
  • POCA is clearly doing something right, as £746 million of criminal assets were seized between 2010 and 2014, as well as more than £2.5 billion worth of assets being frozen, preventing criminals from being able to use them.

Terrorism Act 2000

  • This is the UK’s permanent anti-terrorism legislation, looking to combat the global problems in terrorism, and the financing that comes with it, something that comes from reverse money laundering.
  • Terrorist operations are often fuelled from legitimate sources of money through the process of reverse money laundering. By using this clean money for deadly causes, they are tainting it rather than trying to make it blend in with normality, which is why it’s called reverse laundering.

The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017

  • This Act moves the European Union’s Fourth Anti-Money Laundering Directive (4 MLD) into UK national law. It replaces the Money Laundering Regulations as well as the Transfer of Funds Regulations, both regulations from 2007.
  • These developments have a risk-based approach to money laundering. Through controls and procedures such as customer due diligence, regular record keeping and imposing a number of obligations on senior management and employers. Organisations must keep up with the changes to ensure that the more efficient policies and procedures are in place to deal with the risks they could face.

Are Offshore Accounts Illegal?

Offshore accounts are accounts that exist outside of your home country, allowing you to save money and make transactions in different currencies. Offshore accounts operate in another jurisdiction, meaning that they are outside the legal power/judgement of your residential country. Usually, having an offshore account means that individuals enjoy tax benefits since the money avoids taxation in their home country, and there may not be similar taxes to pay in the country the account is set up in. Whilst there a lots of reasons a person or organisation may benefit from an offshore account, some countries also have a less regulated and less stringent financial sector than, say, here in the UK. This means they may attract criminal customers who want to bank their money off the radar. It is for this reason that some countries are known as ‘high risk’ to do business with or accept transactions from.

Using the offshore accounts can open up a channel of professional services abroad, and also encourages global business expansion, trading, investments and growth – all qualities that lead to a strong economy. As above, though, some offshore accounts exist simply to avoid taxation, which can detriment the UK economy. Some popular places to hold offshore accounts for UK residents include the Crown Dependencies of Guernsey, Jersey, and the Isle of Man, Monaco, Switzerland, and Lichtenstein.

Whilst an onshore account is generally considered to be a business/current/savings account within the individual’s country of residence, offshore accounts are used for different types of savings accounts and sometimes have links to foreign stock markets.

Depending on the offshore bank, the minimum account opening balance differs. This can start at £10,000 and go all the way up to £100,000 depending on the type of customer they are dealing with, and what the accounts are for.

The links between offshore accounts and ‘tax-havens’ is because the interest on the accounts is paid without the prior deduction of tax. It is up to the individual to declare income from offshore bank accounts to their relevant tax authorities, and because this is their responsibility, people find ways to avoid it and therefore pay less tax by failing to declare extra income. You may have seen offshore accounts linked with ‘tax dodging’ in the media.

Two Sides to the Coin

Offshore accounts aren’t always used with the aim of avoiding tax, there are legitimate reasons to use them too depending on different circumstances. Plus, the media has a big part to play in the presentation of offshore accounts, in reality the account holders still need to pay tax because you are still liable for tax on the interest you earn in the same way you would be in the UK. So despite the misconceptions, there is nothing illegal about offshore accounts, it’s how the owner conducts business that counts.

  • If you are a retired British Expatriate and have savings which you would like to invest, then an offshore account is best for you. This is because if you’re a resident overseas, most UK banks and buildings won’t allow you to open a new savings account whilst the offshore accounts will accept it.
  • If you aren’t a British Citizen and you’ve acquired wealth (possibly through inheritance, investment or working in a sterling economy), but you’re now a resident outside of the UK, then an offshore bank may support your sterling savings.
  • If you are an expatriate worker and move between countries periodically, having an offshore account for your savings in an independent location can be more convenient than constantly having to open and close savings accounts with each change of residence.
  • Of course you may be resident in an offshore jurisdiction full time, so a local offshore bank may be conveniently located.

The Positives to Offshore Accounts:

  • Ability to bank in foreign countries
  • Quite often tends to be a higher interest rate
  • You can delay tax payments with them
  • Reduces the risks in currently fluctuations

And the Negatives:

  • They can be difficult to open
  • They can have higher everyday fees (i.e. withdrawal fees)
  • Limited levels of protection
  • Tax does still needs to be paid, despite what people think

5 Basic Money Laundering Offences

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The Proceeds of Crime Act (POCA) published in 2002 changed the way we understand money laundering offences. Money laundering or conspiracy/attempt to money launder is an offence under sections 327-329 of the POCA.
To put it simply, the POCA discusses and defines offences in money laundering as the following:
A person commits an offence if he/she…

  • Conceals criminal property
  • Disguises criminal property
  • Converts criminal property
  • Transfers criminal property
  • Removes criminal property from the UK
  • Enters into an arrangement which he/she suspects facilitates the control of criminal property by or on behalf of another person
  • Acquires criminal property
  • Uses criminal property
  • Has possession of criminal property

So as you can see, organisations don’t need to know that they have been involved in a crime to become legally involved, and become tainted by it as a result. The whole focus is on the “criminal property” otherwise known as money/assets gained from crime. The point of laundering is to make the criminal property blend in with normal financial practices, essentially getting lost in the system before anyone can track it down or track it back to the crime.
This worry makes it all the more important that companies do what they can to avoid getting involved in money laundering, as it could result in unlimited fines and reputational damage. By understanding the threats out there, and having an efficient policy prepared, organisations can prevent themselves becoming the next victim of laundering, increasing success and stability as a result.

5 Money Laundering Offences:
1. Tax evasion

  • This is when people use offshore accounts to avoid declaring their full income level, and as a result they can avoid paying their full amount in tax.
  • Possibly one of the most well-known tax avoiders in recent years is the famous comedian, Jimmy Carr. Using a Jersey-based account, he was able to avoid paying higher taxes back in 2012 by sheltering £3.3 million per year of his assets.

2. Theft

  • Probably the most straightforward crime, theft becomes money laundering once it has actually happened. The criminals then try to take the proceeds of the crime and move them into the economy without people noticing, and as a result it becomes much more unlikely that it will ever be tracked down.
  • An example of this came with an accountant from South Wales in February 2018. Jeffrey Bevan was working for the Bermudan government when he stole and laundered £1.3 million. His position as head of expenditure meant he had access to a lot of money, something he took advantage of. Bevan laundered the money through his UK bank accounts, claiming it all as legitimate overtime. As a result he was sentenced to seven years and four months in prison.

3. Fraud

  • Crime related to fraud generates money that needs to be laundered for the criminals to use it without raising suspicion, so where there is fraud there is money laundering. Many organisations actually have a department that is dedicated to preventing money laundering and fraud.

4. Bribery

  • Bribery can occur in money laundering when it comes to politically exposed persons, also known as PEPs. PEPs are a big threat when it comes to money laundering because of their status in society. This status makes them a higher risk customer for companies to work with because they have more chances to gain assets through illegal methods compared to regular public citizens. As soon as corrupt PEPs accept bribes, money laundering can take place.
  • Bribery is a serious global issue because it has significant effects on economic development, political stability and international crime.

5. Terrorist Financing

  • More often the not, terrorist activities are being financed through a technique called reverse money laundering. It is reverse because it works by using legal assets to carry out illegal activities, in this case terrorism. The ‘clean’ money can come from the least suspicious sources such as charitable organisations, as well as legitimate businesses.
  • The 9/11 terrorist attack was facilitated by reverse money laundering. Money from the United Arab Emirates passed through a New York bank account before reaching the accounts of the hijackers in Florida. It was also revealed that the terrorists actually carried bundles of cash straight into the country.

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What Level Of Hospitality, Gifts Or Travel Is Acceptable?

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The Bribery Act 2010 references the controversy surrounding the practice of hospitality within business, as hospitality can be used to conceal bribery. Therefore, the Bribery Act and the Ministry of Justice have drawn a distinction between hospitality and bribery to allow the practice of hospitality to continue, but in an honest, transparent and lawful way. If an organisation wishes to engage in hospitality, then they need to have a thorough understanding of the Bribery Act to ensure compliance.
What does the Bribery Act 2010 state about hospitality?
The Bribery Act 2010 does not explicitly prohibit corporate hospitality and gifts, instead it states that hospitality and gifts which are reasonable and proportionate are allowed. However, the act does take into consideration the fine line between hospitality and bribery; therefore, the Bribery Act can be used to expose certain cases in which hospitality is used to conceal a bribe.
Kenneth Clarke, when conducting a statement on the Bribery Act, highlighted that although the new legislation could be considered as strict, it was not aimed at making it difficult for law abiding firms to treat their employees or work associates with gifts and hospitality. The act is simply ensuring this practice of hospitality is conducted in an appropriate and fair way.
The Ministry of Justice and the Bribery Act both demonstrate consideration of this, and therefore in conjunction there has been three critical factors created for organisations to consider when partaking in hospitality.
1) The intention behind the offer (is the intention to achieve a business advantage?)
2) The value of the offer (if the gift is very high in value, then it might be questionable)
3) The timing of the offer (if the gift is offered just before an important business deal is about to be processed, then it might be questionable)

How can businesses continue to offer hospitality and gifts whilst remaining compliant with the Bribery Act 2010?
For a business to offer hospitality and gifts, they need to ensure that what they are offering is appropriate, therefore a threshold needs to be established. This needs to be established in relation to the industry in which the business rests, this will ensure that gifts are not excessive for the industry. For example, a business which wants to offer reasonable travel expenses to an employee or work associate as a gesture of good work relations can do so, as long as this gesture is reasonable and proportionate to the business.
A company which wishes to still administer gifts, hospitality gestures and travel to work associates, can conduct this whilst protecting themselves, through establishing policies on this matter. For example, if an organisation creates a set of policies which reference the specific types of hospitality which are not permitted, then this written policy is a demonstration of the organisation’s compliance with the Bribery Act, as it is a form of adequate procedure. This policy needs to be well communicated amongst employees to ensure each employee understand when and how to conduct hospitality gestures correctly, if they wish to do so.
If an employee offers a gift to a contractual counterparty which opposes the organisation’s hospitality policy and standards, then that employee will be held accountable, not the organisation which has clearly demonstrated implementation of adequate procedures. Adequate procedures are in place to prevent bribery and corruption from taking place within an organisation, and this is why the Bribery Act stresses the importance of adequate procedures, because they can protect an organisation against a fine.
Furthermore, it is wise for an organisation to avoid hospitality offerings with foreign public officials as this aspect of the Bribery Act is more contentious. Bribing a foreign public official is a specific and considerable offence, therefore more analysis and investigation will be taken into the hospitality and gift offering to a foreign public official than would normally take place. Thus, to avoid the potential fine, it is probably wise to avoid engaging in hospitality with foreign public officials.
Therefore, if an organisation wishes to conduct hospitality and gift offering, then they should have a sound understanding of the Bribery Act 2010 first, to avoid any serious repercussions from bribery offences.

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What Is The Bribery Act 2010?

The Bribery Act 2010 is the UK based law which strengthens bribery and corruption legislation, in response to the increasing rate of bribery offences. The act effectively updates the bribery offences which an individual or an organisation can be found guilty of. Subsequently, the act states the penalties which will be administered against an individual or organisation for committing a bribery offence. Compliance with the Bribery Act 2010 is of utmost importance if an individual or organisation wants to avoid the severity of unlimited fines and unlimited prison sentences.

Why was the Bribery Act 2010 introduced?

The Organisation of Economic Co-Operation and Development (OECD) criticised the UK from 2007, claiming that the UK’s treatment of bribery and corruption has been weak and ineffective. The OECD was effectively comparing the UK’s previous legislation, which was the Prevention of Corruption Act 1916, against the more robust US Foreign and Corrupt Practices Act (FCPA). The OECD’s Working Group on Bribery conducted a 2007 report which criticised the UK’s failure to align the anti-bribery laws with international obligations.

The Prevention of Corruption Act 1916 was regarded by the Secretary of State for Justice in 2009, as old and anachronistic. Therefore, it was widely agreed that a new legislative force was needed.

The reforms introduced in the Bribery Act 2010:

The act explicitly states the bribery offences as follows:

1) The action of an individual bribing another individual (for example, through money), and in return an individual accepting a bribe.

2) Bribing a foreign public official is forbidden, this is particularly new to this 2010 act.

3) The failure of a corporation to prevent a bribe which has taken place through their contractual counterparties. This exposes that the corporation did not have sufficient anti-bribery and corruption procedures. Again, this is specific to the 2010 Bribery Act as it establishes company liability for corrupt actions committed by their employees or individuals who work on behalf of the company.

If an organisation has implemented anti-bribery and corruption procedures, then they have effectively complied with the “adequate procedures” section of the Bribery Act 2010. The Bribery Act 2010 stresses the importance of adequate procedures, as it demonstrates that an organisation has attempted to prevent corrupt activities.

Adequate procedures include:

1) Proportionality

2) Top-level commitment

3) Risk assessment

4) Due diligence

5) Communication

6) Monitoring and review

Penalties for bribery offences:

The penalties administered for a bribery offence was decided through the co-operation of the UK Serious Fraud Office (SFO) and the UK Crown Prosecution Service.

The penalties include:

– A maximum of 10 years imprisonment: This does not apply to organisations.

– An unlimited fine: As expected, the fine imposed upon an organisation which has failed to prevent a bribery offence occurring within their environment, will be a larger sum than the fine imposed upon an individual convicted of a bribery offence.

– Confiscation of property: This is enabled through the Proceeds of Crime Act 2002, which states the confiscation or civil recovery of property achieved through a crime can be taken.

– Disqualification of Directors: The Company Directors Disqualification Act 1986 states that company directors can be disqualified for certain cases of misconduct, such as bribery.

What has been the reaction to the Bribery Act 2010?

The Confederation of British Industry (CBI), which speaks on behalf of 190,000 businesses, has criticised the Bribery Act 2010 as putting British business at a disadvantage, due to the act criminalising certain behaviour which is able to exist upon the global market legally. Some UK businesses expressed reservations over the Bribery Act 2010 through referencing the corporate criminal offence of “failing to prevent a bribe by an associated person.” A corporation is only protected against this clause if they have implemented adequate procedures, which have been regarded as excessive by some organisations.

Although it seemed initially daunting, the Ministry of Justice has published guidance on the act to settle the grievances of organisation and individuals. The Bribery Act 2010 has introduced some complex procedures which were not previously exercised. However, if an organisation wants to achieve a fair and ethical work environment, then they should comply with the Bribery Act 2010 through sound education and training.

What Is Section 7 Of The Bribery Act 2010? | DeltaNet

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The UK Bribery Act 2010 incorporates Section 7 entitled “Failure To Prevent Bribery.” This section has been established with the purpose to set out company liability for corrupt activity committed by their employees or associated persons, which demonstrates the intention to create an advantage in the conduct of business for their organisation. If an organisation can prove that they have implemented adequate procedures to protect against bribery and corruption, then they will be protected, if they cannot demonstrate this, then they will be at risk of an unlimited fine. Therefore, sound understanding of Section 7 of the Bribery Act 2010 is essential.
How does Section 7 of the Bribery Act work?
The Ministry of Justice has published guidance on the new Bribery Act 2010, as it anticipated confusion surrounding the new reforms. However, most of this confusion is directed at Section 7 of the act, as this has been newly introduced.
Section 7 states that a commercial organisation will be found guilty of a bribery offence if a person associated with the organisation has been found guilty of bribing another individual with the incentive to:
– Obtain or retain business for their organisation
– Obtain or retain a business advantage for their organisation.
The penalty which will be administered to the organisation will consist of:
– The individual (employee or associated person of the organisation) liable on conviction on indictment to a fine.
– The organisation will also potentially face an unlimited fine.
The only way that an organisation could protect itself from this risk, is through implementing adequate procedures, which are stated in the Bribery Act 2010 as:
1) Proportionate procedures. This states that the organisation’s procedures, which are intended to prevent bribery offences, are proportionate to the bribery risk which the organisation could potentially face.
2) Top-level commitment. This is a demonstration of an organisation’s board of directors’ commitment to preventing bribery and the creation of an environment which does not tolerate bribery and corruption.
3) Risk Assessment. An organisation needs to demonstrate that they have conducted an assessment to analyse the potential outlets which could create a risk, this risk assessment needs to take place periodically.
4) Due diligence. The due diligence procedures conducted by organisations need to be proportionate and risk based, in respect of the individuals who will be performing services for the organisation.
5) Communication. It is expected that communication and training on bribery offences are conducted, to ensure that bribery prevention is well understood and known across the whole organisation.
6) Monitoring and review. This is the demonstration that an organisation regularly reviews and updates their bribery prevention policies and procedures to ensure they are still appropriate.

Why is Section 7 incorporated into the Bribery Act 2010?
The rate of bribery offences and avoidance of bribery and corruption law has been increasing, and therefore there needed to be a concerted effort by legislative bodies to respond to this issue. Therefore, through holding companies liable for corruption exercised by their employees, it will promote a culture which is conscious of anti-bribery and corruption.
The reaction to Section 7:
The reaction to Section 7 has certainly been mixed. The “failure to prevent” model, which Section 7 is based upon, has been regarded as widely attractive, and this model has now formed the basis of other legislations in the UK, for example the “failure to prevent” facilitation of tax evasion. Moreover, Ireland and Australia have exposed how they are considering similar legislation to this, and Kenya has even adopted “failure to prevent” corporate offences.
However, Section 7 is not so popular amongst the business sector, as they have had to tackle the confusing aspect of this new reform. For example, there has been suggestions that Section 7 violates the principle of fair warning, and organisations are entitled to have this fair warning. Furthermore, there has been questioning over what defines “failure” of prevention.
Ultimately, organisations will have to comply with the Bribery Act 2010, and subsequently Section 7 of this act, if they want to avoid prosecution. Therefore, education and training of how to implement Section 7 properly, will be beneficial to organisations if they want to create a fair business culture.

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What Is Bribery And Corruption?

Bribery is the action of offering another individual something of value, notably money, in exchange for something which will be beneficial to the briber. Corruption can apply to a large range of actions, which are essentially conducted with illegitimate and dis-honest intentions. Bribery and corruption can offer an individual within the business sector the opportunity to speed up certain processes, as well as achieving targets or deals which they would not have been able to achieve lawfully. Therefore, bribery and corruption has become rife in the business sector, and consequently there have been demands to control this type of deceitful activity.

Bribery and corruption today:

The Bribery Act 2010 came into effect due to the increasing number of bribery offences. The Bribery Act 2010 effectively states the most notable forms of bribery:

1) The act of bribing another individual (with money or something of value). Then, in-turn the act of being bribed (you are guilty for accepting a bribe).

2) The act of bribing a foreign public official.

3) The act of organisations failing to prevent a bribe from taking place in their environment, which is an indication that they do not have precautionary anti-bribery and corruption procedures in place.

4) The act of senior officials within organisations consenting to and partaking in bribery and corruption.

Corruption, which is more widely applied to a range of deceitful activities within an organisation, occurs due to individuals who are willing to enhance their personal profit, through illegal measures. Corruption can occur because no individuals or set of procedures have been implemented to stop it. Therefore, corruption can assume the form of:

1) Bribery

2) Extortion

3) Fraud

4) Money-laundering

5) Embezzlement

Why has the rate of bribery and corruption increased in recent years?

The rise of technology and the expansion of organisations into new markets has facilitated the rise in corruption rates, as organisations and individuals have been exposed to new technologies and opportunities which can enable corruption. This has been followed by the new anti-bribery and corruption laws which have been introduced, such as the UK Bribery Act 2010, which has cast light upon bribery and corruption scandals which have previously been covered up. However, tighter controls now ensure that these scandals cannot be covered up so easily.

Organisations and businesses have been renowned for their lack of commitment to implementing anti-bribery and corruption procedures, perhaps because they have assumed it will take up too much time and money. A study conducted by HR Magazine found that notable companies were not risk aware, with almost 1 in 5 of organisations questioned stating that they do not have an anti-corruption policy. Moreover, 43% of the organisations questioned do not conduct a bribery and corruption risk assessment more than once a year, and 17% of the organisations have never conducted an anti-corruption risk assessment at all.

The failure to implement anti-bribery and corruption procedures is careless, as anti-bribery and corruption procedures are far more beneficial than they are a burden. These procedures will protect an organisation from the threat of an unlimited fine for allowing bribery and corruption to occur within their environment, therefore they are necessary.

What attempts have there been to control bribery and corruption?

The Institute of Chartered Accountants in England and Wales (ICAEW) has allied with other similar professional organisations with the mutual goal of tightening controls on bribery and corruption, through using anti-corruption summits. The corrupt activity which is currently plaguing corporations and governments includes bribery, money laundering, financing of terrorism and tax-evasion. Therefore, for corruption to be tackled properly, there needs to be a concerted effort from corporations and governments.

The Chief Executive of ICAEW, Michael Izza, during a statement in 2018, declared that this concerted effort to tackle corruption was going to take place, in order to achieve a high standard of ethics and integrity.

KPMG, a professional service company based in the Netherlands, advise multinational companies with regards to Anti-Bribery and Corruption (ABC) risks and concerns. KPMG do this through working in conjunction with the UK Bribery Act 2010 and the Foreign Corrupt Practices Act (FCPA). Through utilising KPMG’s advice and ABC risk guidelines and assessments, it ensures that an organisation can demonstrate whether they have effectively implemented anti-bribery and corruption procedures. Therefore if a risk did occur, an organisation will have the power to demonstrate they have attempted to prevent bribery and corruption. KPMG offer advice on ABC risk assessments, ABC due diligence and ABC third-party risk assessments.

Therefore, it is certainly wise for organisations to make sure they enforce anti-bribery and corruption procedures to protect their workplace against corruption.

What Is A Facilitation Payment?

A facilitation payment is a contentious type of payment, as it can sometimes constitute a bribe. The UK Bribery Act 2010 considers a facilitation payment to be a form of bribery, this is because it is a payment to a foreign public or government official with the intention to persuade them to expedite an administrative process to benefit the bribing party. However, Australia and America do not consider facilitation payments to be corrupt in nature. Considering the UK Bribery Act does class a facilitation payment as a bribe, it is essential for an organisation to know when facilitation payments cannot be used.

Which situations do facilitation payments occur within?

The Organisation for Economic Co-Operation and Development (OECD) in its 2009 Recommendation for Further Combating Foreign Bribery, adopted a negative stance towards facilitation payments, suggesting that member countries should avoid facilitation payments. The OECD stated that facilitation payments had a negative effect upon economies and actually demonstrate illegal conduct in the countries which they are formulated within. The UK, in its Bribery Act 2010, incorporated the OECD guidance and therefore it does not include an exemption to allow facilitation payments.

The UK Serious Fraud Office (SFO) considers a facilitation payment to be a form of bribery. Therefore, whether the SFO will prosecute in respect of a facilitation payment is dependent upon the joint prosecution guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. Richard Alderman, SFO director, stated that he did not expect facilitation payments to cease immediately following the new legislation, but Alderman did say that hopefully the 2010 act will provide the necessary legislative force to put an end to facilitation payments in the future.

The reference to adequate procedures in the Bribery Act 2010 is of importance to facilitation payments too, as it is expected that if an organisation has adequate procedures in place then they will be able to put an end to facilitation payments.

Small, unofficial payments to foreign or public officials can be customary and legal in certain countries. For example, in Australia, since 2006 their legislation has deemed facilitation payments as a payment of nominal value, to a foreign official to expediate minor routine action and is subsequently documented. Therefore, facilitation payments can occur under Australian law, but only if the organisation can prove that the benefit was “minor in value” and “offered for the sole or dominant purpose of expediting or securing performance of a routine government action of a minor nature,” according to the Criminal Code. However, the controversial nature of facilitation payments has encouraged some Australian states to override the federal legislation and deem facilitation payments as illegal and a form of bribery.

With regards to the United States, the Foreign Corrupt Practices Act (FCPA) 1977 considers facilitation payments, which are also referred to as “grease payments,” to be payments intended only to affect an official’s actions for timing reasons, not to influence the outcome of the routine. Ultimately, facilitation payments are one of the few exemptions in the FCPA. Facilitation payments have become an exemption due to representatives of the US claiming that organisations can’t do business as easily with particular countries, if they can’t offer facilitation payments to low-level bureaucrats. Recently, there seems to have been a shift in opinion over the exemption of facilitation payments in the FCPA, as there has been a call to remove the exemption. This seems to have occurred due to the increasing number of legislations which do not include an exemption for facilitation payments, such as the UK’s Bribery Act 2010, as it has instigated a debate at international anticorruption conferences. Moreover, the OECD’s Working Group on Bribery and its senior officials have lobbied US representatives regarding the facilitation payment exemption, voicing their negative perception of such payments.

If an organisation wants to remain compliant with the UK Bribery Act, then it would be wise to conduct some training and well-formed knowledge regarding when facilitation payments can be used, and when they cannot be used.

What Constitutes Bribery In The Workplace?

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Bribery in the workplace involves an employee or associated person accepting or issuing a bribe in order to gain a business advantage for either themselves or their organisation. The Bribery Act 2010 references bribery and corruption in the workplace in Section 7, which states that an employee and the organisation can be held accountable for a bribery offence in the workplace. However, an organisation will be protected against the bribery offence if they can demonstrate that adequate procedures were implemented to protect against bribery and corruption. Consequently, employees and employers need to have a thorough understanding of the Bribery Act 2010.
How can bribery take place in the workplace?
Bribery is common in the workplace, this is because it can be used by individuals to achieve targets and business deals, which they might not be able to achieve through normal business conduct. Bribery becomes more frequent within situations of intense pressure, if an individual needs to complete something quickly, they might offer a bribe in order to speed the process along. This is not honest or fair business ethics, and therefore the Bribery Act 2010 has become the necessary legal force to crackdown on bribery and corruption within the workplace.
Bribery within government organisations tends to be more highly publicised as government officials are considered to hold positions of trust, and therefore if they accept a bribe, they are compromising the trust of many people, perhaps a whole country. Accordingly, if a government official is bribed, then it is considered to be a matter of public interest.
In April 2018 Ernst & Young published a report which stated that 34% of executives within UK businesses believe that bribery offences and corruption takes place regularly within their organisation, this is a rise from 20% in 2012. The UK’s percentage is higher than the rest of Western Europe, where 21% seem to believe that corruption happens extensively. In response to these worrying conclusions, the global fraud investigation leader for Ernst & Young, Andrew Gordon, stressed that there now needs to be a stronger commitment to stopping corruption and bribery.
Evidently, since 2012 there has been a rise in the rate of bribery and corruption, which is worrying for the future of the business sector. Since 2012, the UK’s Serious Fraud Office (SFO) and the US’ Securities and Exchange Commission (SEC) have distributed £7.9 billion worth of penalties for the crimes committed. This does demonstrate that bribery and corruption offences are not left unpunished, and perhaps the rising rate of offences is due to the stricter anti-bribery and corruption legislation, such as the UK Bribery Act 2010, which has issued a crackdown on offences.

What are the consequences of bribery in the workplace?
The consequences of bribery in the workplace can be severe for both the individual and the organisation involved. Under Section 7 of the UK Bribery Act 2010, companies are held liable for corruption if there is no evidence that they had implemented adequate procedures to protect the workplace against corruption and bribery. Therefore, if an employee or associated person conducts a bribery offence, then the responsible individual and the organisation could be issued with an unlimited fine.
For example, in May 2018 the SFO filed a case against Chadian Officials and Griffiths Energy, an oil company based in Calgary, for their corrupt handling of oil, meaning the SFO received £4.4 million. This case represents the first time that the SFO has issued a fine, and received the money, from an international civil recovery case. Griffiths Energy were accused of bribing Chadian Officials with discounted business deals and eventually, Griffiths Energy pleaded guilty to “bribes intended to illegally secure commercial interests in Chad.”
If an organisation wishes to protect themselves against bribery charges and investigation, then they need to implement adequate procedures, which will demonstrate an organisation’s compliance with the Bribery Act 2010. An organisation will then need to ensure that these adequate procedures are well communicated around the business, ensuring all employees and associated persons are aware of the procedures and are well trained in them.

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What Are The Penalties For UK Bribery Act Offences?

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An individual or organisation guilty of a bribery or corruption offence will be subject to Section 11 of the UK Bribery Act 2010. Section 11 stipulates the penalties for bribery and corruption offences, which increase in severity according to the scale of the offence. Therefore, to avoid crippling fines, prison sentences and reputational damage, it is wise to comply with the UK Bribery Act 2010. 

The Bribery Act Penalties:

The UK Bribery Act 2010 states that the penalties inflicted upon an individual who commits a bribery offence are:

1) The penalty of imprisonment up to 10 years, this prison sentence will be decided regarding the severity of the bribery offence.

2) The penalty of a fine. This can be unlimited, and therefore will be higher regarding the severity of the bribery offence.

If an organisation has allowed a bribery offence to occur due to in-sufficient procedures being in place, then the UK Bribery Act 2010 states that the penalties which will be inflicted upon the organisation are:

1) An organisation will face an unlimited fine, and this fine tends to be higher than the fine inflicted upon individuals, due to the size of corporations.

2) The organisation will be told to implement serious crime prevention orders, to ensure that bribery offences do not occur in the future. Serious crime prevention orders will include how an organisation conducts their finances, to ensure no doctoring of finances can occur.

3) The Proceeds of Crime Act 2002 states that any financial gain which the organisation received through the bribery offence, must be returned.

4) Disqualification of an organisation’s directors will also occur, as there has been a demonstration of a lack of top-level commitment (one of the adequate procedures which should be implemented). Thus, directors can be disqualified from holding the position as director for up to 15 years.

How else will organisations be affected by bribery offences beyond the official penalties of the UK Bribery Act 2010?

If an organisation has allowed bribery and corruption to take place, it suggests that they have not implemented the adequate procedures stated in the UK Bribery Act 2010. Therefore, there will be more repercussions for an organisation than just the penalties set out in the UK Bribery Act.

1) Damage to the organisation’s reputation. If an organisation is found to be guilty of allowing a bribery offence to occur, then clients and other organisations will be less inclined to work with this particular organisation.

2) In turn, this will create a loss of revenue if fewer organisations are willing to co-operate and invest in the organisation.

3) Lots of money will be spent in legal fees during an organisation’s attempt to prove their honesty regarding the case against them. Therefore, this emphasises how important it is for organisations to implement adequate procedures in order to avoid bribery cases against them.

4) The ability of a bribery offence to tarnish an organisation will inevitably lead to a loss of morale within the organisation, reducing the work ethic and output.

Skansen Interiors Limited are an example of an organisation which suffered the repercussions of a bribery offence. Skansen offered a bribe to an employee of DTZ Debenham Tue Leung (DTZ) worth £10,000, allowing Skansen to win a vital business contract. A newly appointed CEO to Skansen in 2014 highlighted concerns regarding the payments which were being issued to DTZ. Following this, the CEO conducted an internal investigation which included the implementation of new anti-bribery and corruption policies. However, the police and SFO did not regard the new anti-corruption policies to be sufficient, as the bribery offence had already taken place. Consequently, Skansen was faced with charge of a bribery offence, despite Skansen claiming that adequate procedures were now in place. The UK jury filed against this case and stated that the procedures which had been implemented were not adequate in order to prevent bribery. Now, Skansen have been convicted for a bribery offence and will ultimately face the stated penalties in the UK Bribery Act 2010.

The penalties inflicted upon organisations and individuals for allowing bribery and corruption to occur, can be severe. Therefore, the necessary steps to prevent bribery and corruption need to be conducted by both individuals and organisations.

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