Does your organisation have "adequate procedures" to prevent bribery?
Two companies in the Rolls-Royce group have agreed to pay penalties of approximately £652 million as a result of 12 counts of bribery, corruption and fraud dating back to 1989. The offences include the making of corrupt payments in India and Russia and failures to prevent bribery in Nigeria and Indonesia. Under the Bribery Act 2010, a commercial organisation is guilty of an offence if it fails to prevent those acting on its behalf from bribing others.
The Serious Fraud Office (SFO) is responsible for investigating and prosecuting complex fraud and corruption in the UK. The SFO began investigating Rolls-Royce in 2012 following concerns raised by various internet postings. The investigation lasted for four years and is the largest conducted by the SFO.
Rolls-Royce avoided prosecution by entering into a Deferred Prosecution Agreement (DPA) with the SFO. DPA's were introduced by the Crime and Courts Act 2013 and they are potentially available to body corporates, partnerships and unincorporated associations in relation to specific financial offences where the only sanction is financial in nature.
Once a proposed DPA is agreed between the prosecutor and an organisation, it goes before a judge for validation. The judge will validate the DPA if it is in the interests of justice and fair, reasonable and proportionate in the circumstances. Once the DPA is agreed, the prosecution is put on hold and eventually dropped as long as the parties comply with its terms.
Sir Brian Leveson, the judge in the Rolls-Royce case, approved the DPA last week. Rolls-Royce is now protected from prosecution in relation to the 12 bribery, fraud and corruption offences as long as it doesn’t breach the terms of the DPA.
Crucially, the DPA does not prevent the SFO from prosecuting those individuals who were responsible for the bribery, fraud and corruption. The SFO is continuing its investigation into those individuals (many of whom will be former employees of Rolls-Royce) and there may well be criminal sanctions for those involved which could include prison sentences of up to 10 years.
Under the terms of the DPA, Rolls-Royce has agreed to pay:
Rolls-Royce has also agreed to pay penalties of c.£155 million to Brazilian and US authorities in relation to the offences in their countries.
Implications for organisations in the UK
The Bribery Act 2010 came into force in July 2011 and was heralded as the most robust anti-corruption legislation in the world. Despite the initial fanfare, it was not until December 2014 that the first bribery prosecutions by the SFO began to arrive. Since then, there have been a stream of successful prosecutions, several of which resulted in fines of approximately £20 million.
The Rolls-Royce DPA is the third which the SFO has agreed:
The Rolls Royce DPA is on an entirely different scale to the SFO's previous prosecutions and DPAs. The financial penalties, and even the contribution towards the SFO's costs, are exponentially greater than what has come before and is likely to enhance the SFO's reputation around the world.
It is worth highlighting that the situation could have been much worse for Rolls-Royce. Since 2012, Rolls-Royce has conducted its own extensive internal investigations and its cooperation with the SFO throughout the saga was said to be "extraordinary" by Lord Justice Leveson. He made it clear that whatever the costs Rolls-Royce have incurred, they are modest compared to the costs which would have been incurred had Rolls-Royce failed to cooperate with the SFO's investigation and instead sought to fight the SFO's prosecution.
How Bevan Brittan can help you
Under the DPA, Rolls-Royce admitted to committing five counts of failing to prevent those acting on its behalf from bribing others, an offence under section 7 of the Bribery Act 2010. Only a 'relevant commercial organisations' can be guilty of the section 7 offence. For the purpose of the Act, relevant commercial organisations are not limited to private sector businesses such as Rolls Royce but potentially include organisations which engage in any commercial activity, even if they are performing a public function or their primary purpose is charitable or educational in nature.
On a more positive note, it is a full defence if a commercial organisation can prove that they have in place adequate procedures designed to prevent those acting on your behalf from committing bribery offences.
What amounts to "adequate procedures" will vary depending on the unique risks faced by a commercial organisation. Bevan Brittan's Compliance Team specialise in working with organisations to establish the risks which they face and to formulate procedures and systems which aim to prevent bribery offences occurring on their behalf, which can include: