The UK’s Serious Fraud Office (SFO) is to crack down on multinationals that bribe foreign officials or offer lavish hospitality to win lucrative overseas contracts.
SFO investigators will adopt “a zero-tolerance approach” towards companies offering inducements or “kickbacks” to foreign governments in return for preferential treatment. The onslaught against bribery and corruption is being driven by Britain’s new Bribery Act, which comes into force in April.
There could be an increase in prosecutions, SFO officials warn, if firms fail to adhere to the principles of the act, drawn up by the former Labour government.
New legislation was introduced after a decision by the SFO to abandon an inquiry into BAE’s ￡43 billion (US$69 billion) al-Yamamah arms deals with Saudi Arabia. The case was dropped in 2006 despite a lengthy corruption investigation, after the then prime minister Tony Blair intervened.
The head of the World Bank’s anti-corruption unit, Leonard McCarthy, met the SFO’s director, Richard Alderman, last month about strengthening cooperation between the two agencies, as the campaign to stamp out corporate wrongdoing gathers pace.
McCarthy said the Bank wanted to work with the SFO to ensure that stolen funds were repatriated from developing countries. The bank can bar companies guilty of corruption from securing future work in emerging economies.
“We need a few decisions. We need to inject some action,” he said on Friday.
The Bribery Act replaces Britain’s patchwork of late 19th-century statutes and 20th-century common law, which has made it difficult for the authorities to secure successful prosecutions.
For the first time, any company with British offices or owning a UK subsidiary will be subject to the act, and for the first time the SFO will not have to prove intent by a board’s directors — merely that fraud has been committed.
A company whose overseas agents, suppliers or joint venture partners are involved in fraud will be held liable. The only defense for a company is to show that it has rigorous anti-bribery systems in place.
London-based multinationals have been urgently consulting law firms to clarify new rules on corporate hospitality and “facilitation” payments to people such as foreign customs officials.
Some lawyers believe the act goes too far.
“This is a highly unsatisfactory piece of legislation as it criminalizes activity previously regarded as perfectly normal. If a firm takes someone to the Ryder Cup and buys them a drink, is that deemed as improper? What about countries where there is no legal framework to fall back on?” Richard de Carle, of Slaughter & May said.
Critics insist that a grey area exists and that, in some jurisdictions, bribing customs officials to ensure goods get from one country to another is par for the course.
However, Barry Vitou of Winston & Strawn said: “Much of what is required is common sense. If a minister from overseas is put up in a five-star hotel for five days to justify a one-day visit to a factory site, and spends most of his time in the swimming pool, or out with his wife shopping ... that sort of thing is going to be very hard to justify.”
“In addition to obvious cases of bribery, facilitation or ‘grease’ payments — the payment of small sums of money to ensure someone performs their duty — are illegal,” he said.