Appendix: Government response
The Government welcomes the International Development
Committee's Report on Financial Crime and Development. We welcome
the support by the Committee to ensure that the ex gratia
payment from BAE Systems (BAE) is made as soon as possible after
a long delay; and that the payment is used effectively for development
purposes. The Committee's Report provides clear and useful recommendations
on both the specifics of the BAE Tanzania case; and on the handling
of future cases, described by the Committee as reparation payments.
This Government Response has been co-ordinated by
the Department for International Development (DFID) but is a joint
response from DFID, the Ministry of Justice (MoJ) and the Serious
Fraud Office (SFO). This Response follows the main headings and
paragraph number of the section on Conclusions and Recommendations
in the Committee's Report.
Ensuring payment is used effectively for development
purposes
1. The Government agrees with the Committee that
BAE should have sought an early discussion with DFID. If DFID
had been assigned a designated role in the BAE payment at the
outset, some of the delays in arranging payment of funds might
have been avoided. We also agree with the Committee's recommendation
that DFID be involved from an early stage in providing advice
for any future reparation payments of this kind. (Paragraphs 1
and 3)
2. The Government welcomes the Committee's endorsement
of the proposal from the Government of Tanzania that the ex gratia
payment from BAE be used for education purposes. We confirm that
all parties have agreed that the payment from BAE Systems will
be used specifically to finance textbooks, teachers' guides, syllabi
and desks for primary schools in Tanzania. This will be known
as the Primary Education Support Project (PESP). (Paragraph 2)
3. We further agree with the Committee's recommendation
that an external audit of the Project be carried out to international
standards. This will help ensure that the use of the funds for
the benefit of the people of Tanzania can be clearly demonstrated.
(Paragraph 2)
4. On DFID's recommendation, the management of the
funds will be governed by a Memorandum of Understanding (MoU)
to be signed by the Government of Tanzania (GoT), BAE, DFID and
the SFO. The MoU and its annexes provide detailed arrangements
for audit, comprising:
i) The GoT agencies' internal audit processes;
ii) Routine audit by the Tanzanian National Audit
Office (NAO) of all the agencies in the education sector on an
annual basis;
iii) External audit for the PESP (recruited by
the NAO for all parties); and
iv) A Procurement Agent to oversee the procurement
aspects, which will feed into the external audit (recruited by
DFID).
5. In addition, DFID has recruited a textbook
expert to review the textbook part of the procurement process
including textbook selection. This is currently underway.
Timing and arrangements for making the payment
6. The Government fully recognises the Committee's
concerns about the long delays by BAE in making the ex gratia
payment to Tanzania. (Paragraph 4)
7. The Government welcomes the fact that BAE have
sent the IDC a letter undertaking to make the ex gratia
payment to the Government of Tanzania and that BAE will shortly
be signing the MoU referred to in paragraph 4 above.
8. The Government does not envisage that the SFO
will need to take any action to enforce its agreement with BAE.
However, the SFO does have powers to take further action, if this
is needed.
Monitoring the impact of the Payment
9. The Government welcomes the committee's commitment
to monitor that the promised additional textbooks, syllabi for
teachers, desks for children, houses for teachers in remote areas
and other educational materials have been delivered. To assist
the Committee in this objective, DFID will provide periodic progress
reports on delivery of textbooks, teachers' guides, syllabi and
desks as requested. (Paragraph 5)
Proceedings against individuals in Tanzania
10. The Government agrees that those involved in
financial crime should be dealt with appropriately and welcomes
the Committee's intention to monitor proceedings in Tanzania.
(Paragraph 6)
Future Settlement Agreements
11. We accept the Committee's recommendation that
future settlement agreements made by the SFO, on the basis of
plea bargaining in relation to financial crimes, should be drawn
much more tightly than the agreement concluded with BAE Systems.
The SFO accepts that the agreement with BAE could and should have
been drafted more precisely, with specific, explicit provisions
relating to the date and method of payment and with appropriate
safeguards to protect the interests of the intended beneficiaries.
The SFO therefore accepts the central conclusion of the Committee's
Report that future agreements of this type "should be explicit
about what those involved are required to do and include a timetable
for the action required of the company". (Paragraph 7)
Reparations to Developing Countries
12. We welcome the Committee's analysis that existing
legislation is sufficient to allow for reparations to be made
to developing countries by British companies found guilty of financial
crimes. We also agree that reparation payments be proportionate
to the offence. (Paragraph 8)
Changes to the Bribery Act 2010
13. The Government endorses the Committee's recommendation
that there should not be any changes to the Bribery Act 2010 at
this very early stage in the life of the Act. Although it is
too early to make any assessment of the impact of the legislation,
the Government is confident that the Act will have a positive
benefit for UK business through an enhanced reputation for ethical
standards, reduced costs incurred in doing business and a clearer
business framework. In addition, the Act is an integral part of
the UK's contribution to raising standards of anti-corruption
measures internationally through the OECD, United Nations, the
Council of Europe conventions against corruption and G20. (Paragraph
9)
Judicial Involvement
14. The Government welcomes the Committee's comment
on the suggestion from SFO that in cases of complex financial
crime involving plea bargaining, there should be the possibility
of taking a proposed resolution to a judge before a formal charge
has been brought. Since giving evidence to the Committee in July,
the SFO has been considering this issue with the Crown Prosecution
Service and the Attorney General's Office. There has also been
informal consultation with stakeholders on the possibility of
"deferred prosecution agreements" which would address
the SFO suggestion. Once the proposals are sufficiently developed,
Government will decide whether to take these proposals forward
and, if so, whether to initiate a formal consultation process.
(Paragraph 10)
Government Policies on Transnational Crime
15. The Government agrees with the Committee's view
that there is a need to inform the public about the investigation
and prosecution of transnational financial crimes. (Paragraph
11)
16. The Government is keen to communicate its anti-corruption
activities to the public and the Justice Secretary is raising
the profile of the UK's work in this field in his capacity as
International Anti-Corruption Champion. He has briefed the All-Party
Parliamentary Group on Anti-Corruption in November 2011 and will
address delegates at the G20 Anti-Corruption Working Group in
February in London, which the UK is co-chairing with Mexico.
17. The UK will be reviewed on its anti corruption
work this year by OECD and the UN Convention against Corruption
(UNCAC) and their conclusions will be published. As part of the
Government's much enhanced work to combat corruption, DFID is
considering the argument for producing an annual Anti-Corruption
Report, as suggested by the Committee. In addition we will report
quarterly to the Independent Commission for Aid Impact (ICAI)
on progress in implementing their recommendations on strengthening
our anti-corruption mechanisms, particularly in light of our decision
to work in more fragile and conflicted affected states.
| 
