Memorandum submitted by the Serious Fraud
Office (BB 14)
A OVERVIEW OF
THE SERIOUS
FRAUD OFFICE'S
ROLE
The Serious Fraud Office (SFO) is responsible
for the Overseas Corruption Register. This is a central register
which records all allegations of corrupt activity overseas involving
British nationals, companies or partnerships. Allegations are
allocated to the agency best placed to conduct an investigation.
This usually means the SFO if the allegations pass our acceptance
threshold:
— the case requires highly specialised
knowledge, eg of financial markets;
— the case would require us to use
our special powers such as Section 2 of the Criminal Justice
Act, 1987; and
— the value of the alleged fraud or
corruption is more than £1 million.
In assessing the amount potentially involved,
the SFO looks at the value of any contract obtained through a
bribe and not just at the amount of the bribe.
The SFO is a lead player in the International
Anti-corruption Strategic Group for Corruption Overseas. This
group, which is chaired by SOCA and also includes the FCO, DfID,
City of London Police, Metropolitan Police and the FSA, enables
these agencies to liaise on the challenges faced.
A Tactical Group comprises representatives of
SFO, SOCA (Terrorist Funding team) Police and FSA. This group
shares intelligence, discusses areas of common interest and identifies
areas for possible targeting.
Anti-corruption is one of the three key areas
of the SFO's work. The others are City Fraud and Individual and
Investment Fraud. The SFO is responsible both for investigating
issues in these areas as well as prosecuting. This follows the
recommendation in the Roskill Report that a taskforce approach,
involving very close teamworking between lawyers and investigators,
was required to tackle the most complex cases of fraud (and corruption).
The SFO is currently investigating 17 cases
of corruption. This involves large corporates as well as individuals.
Some of these are likely to result in prosecution in due course.
We are allocating substantial resource (close to 100 members of
staff, ie a third of our people) to this area.
We have already had one successful prosecution
for overseas bribery. In 2008 an English lawyer was convicted
in the Crown Court of conspiring to corrupt authorities in the
US so that they would unblock assets that had been frozen after
the 11 September events. He was sentenced to 6 months imprisonment.
B. COMMENTS ON
THE BILL
The SFO welcomes the Bill. The current law is
widely seen as fragmented and out of date. It has proved to be
very difficult for prosecutors to enforce. This has led to considerable
public concern about the different approaches the UK and the US
take under the Foreign Corrupt Finances Act.
There are substantial differences between the powers
available to the US authorities and those currently available
to the SFO. The Committee may find it helpful to have a brief
account of these differences. These are:
— the law on corporate criminal liability
is different. In the US a corporation may be held criminally liable
for the illegal acts of its directors, officers, employees and
agents if those acts were (1) within the scope of the individual's
duties, and (2) intended, at least in part, to benefit the corporation.
The test in England and Wales is very different. Prosecutors need
to establish that the necessary mental element in the offence
was committed by the controlling mind of the corporate. This means
looking to see if the Board of the corporate (or those close to
it) were involved in the illegal action. This is a very different
test;
— a number of the most significant
US cases have been dealt with by way of deferred prosecution agreements
within the context of the US criminal justice system. There is
no counterpart for this in this jurisdiction;
— the US prosecuting authorities can
impose fines and these are frequently very substantial. Prosecuting
agencies in the UK, such as the SFO, cannot do this;
— a culture of self reporting of infringements
of the Foreign Corrupt Practices Act has developed in the US.
There is no such culture here (in the absence of any reports required
to be made to the FSA or to SOCA). The SFO is trying to encourage
this culture here.
The offence under clause 5 of the Bill is therefore
particularly significant for the SFO and we welcome the balance
that has been struck here. We particularly welcome the incentive
that this clause gives to corporates to ensure that their internal
procedures are appropriate.
The SFO has engaged corporates in discussions
about our approach to enforcing this provision if the Bill becomes
law. We have made it clear that our approach would be pragmatic
and would recognise the differences between what can be expected
of very large and smaller corporates. There may also be differences
depending on any progress a corporate has already made in living
up to its obligations. The SFO has said that it is looking for
a very visible commitment at the highest level of the corporate
to doing what is needed to prevent corruption and real action
in carrying out that commitment.
We are also encouraging corporates to disclose
any issues relating to corruption. This is an important part of
the culture of self reporting we want to see. There may also be
non-prosecution outcomes here which satisfy the public interest.
The SFO will direct a large part of its investigative
work at those corporates which are involved in corruption and
which are not prepared to take the necessary steps to eradicate
it. We see prosecution as being very important here.
While the SFO therefore welcomes the Bill, it
is right to say that the process of investigating overseas corruption
cases remains very complex. Some of the issues here are outside
the scope of the Bill and it may be relevant to mention these
difficulties:
— we have to trace the bribe. The bribe
may go through many different jurisdictions disguised in various
ways. There will be a complex trail.
— while we would hope to obtain assistance
from the authorities in the various jurisdictions through which
the bribe passes, this cannot be taken for granted. Those involved
in the transactions will do their best to route the bribe through
jurisdictions that provide most difficulties for us.
— we may also need to obtain assistance
from the jurisdiction in which the ultimate recipient is based.
Again, we would hope to receive this but it may not always happen.
There are likely to be more cases for the SFO
if the Bill becomes law. Reference has been made in the Regulatory
Impact Assessment (page 7) to the cost of one additional prosecution
a year. This reference was intended to refer to the cost of one
additional contested trial. We would expect to see guilty pleas
in other cases and a range of non-prosecution outcomes where appropriate.
The additional costs to the criminal justice system of guilty
pleas and other outcomes are unlikely to be large. This issue
is particularly significant in dealing with foreign public officials.
RESPONSES TO
THE JOINT
COMMITTEE'S
QUESTIONS
Q1. Is the extra-territorial reach of the
draft Bill satisfactory? In practice, would you investigate and
prosecute companies that have a limited connection to the UK?
We welcome the ability to investigate and prosecute
companies carrying on part of a business here, irrespective of
where they are registered. It is part of creating a world level
playing field which would see those companies having to adhere
to the same international standards of our own companies and the
international community. The SFO will look at appropriate cases
with a view to investigation and prosecution.
Potential conflicts of jurisdiction will have to
be agreed by the respective authorities in each country on an
individual case basis. The SFO already has agreements like this
with US colleagues.
Q2. Does the draft Bill make it clear when
facilitation payments and corporate hospitality will be unlawful?
Facilitation payments will be unlawful. In some
cases the mere offer (and/or acceptance) of the advantage itself
may amount to improper conduct. Most countries in the world outlaw
such payments since it is very difficult to remove bribery if
they remain legal.
Because of our acceptance threshold, small facilitation
payments are unlikely to concern the SFO unless they are part
of a larger pattern (when, by definition, they would no longer
be small facilitation payments) where their nature and scale has
to be evaluated.
The US does not make small facilitation payments
illegal unless they occur "to continue or to obtain business".
The SFO considers, like Lord Woolf and a number
of UK corporates, that any facilitation is unjustifiable and should
be removed because these payments cut across transparency and
openness. They also render a corporate (and other corporates)
more vulnerable to demands for larger bribes. They are a major
contributor to the belief that bribery is a necessary part of
business culture. The "demand side" should also make
it clear that these payments are not acceptable.
Hospitality is different in that most routine
and inexpensive hospitality would be unlikely to lead to a reasonable
expectation of improper conduct. This would therefore not trigger
the general offences.
For the offence we must still prove that the
payer's intent is to influence the foreign public official in
his/her capacity as a foreign public official. The provision of
routine and inexpensive hospitality to a large group may not have
that specific intent.
It becomes more difficult when more than routine
hospitality is offered to targeted individuals. In circumstances
like these, the SFO would advise the corporate to check the local
laws about what foreign public officials can legitimately accept.
This should not be too onerous for the corporate as it ought to
be part of their due diligence in doing business there.
One would expect government and industry wide
standards or codes of behaviour to cover such conduct in any event.
The SFO considers that prosecutorial discretion,
backed by appropriate guidance, is the proper way forward on small
facilitation payments and hospitality. If a case were to pass
our threshold for acceptance however, we would rarely exercise
the discretion and would look to prosecute.
Q3. Are you concerned that security services
can be exempted from prosecution for bribery, whereas police and
other investigators can not?
This was a Government addition to the Bill.
Exemptions from prosecution for serious crime can only be for
exceptional, necessary and proportional reasons. These are justifiable
for the intelligence services. The SFO does not consider that
this justification applies to us.
Q4. Do you have adequate resources to tackle
bribery at home and abroad?
We are the lead agency for investigating and
prosecuting overseas bribery. As stated above, anti-corruption
overseas is one of the leading areas of our work. We have committed
to putting 100 staff into this area.
The SFO is facing budget reductions in line with
other departments. The challenge for us is to improve our efficiency
so that we are able to deliver much more than before. For this
reason we have had a major Transformation Programme in place in
the SFO over the past year looking at how we work and how we can
work more effectively. The SFO believes that the resource we are
allocating to this area will make a significant improvement in
delivering results.
June 2009
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