Warning to all SME’s after Directors Convicted of Failing to Prevent Bribery
The most recent Bribery Act conviction of two Directors and a conviction for the corporate offence of failing to prevent bribery is a warning shot across the bows of SME’s in relation to the Bribery Act and the Criminal Finance Act.
Dated: 30 April 2018 Author: Allan Maund, Director of Counter Fraud
The Bribery Act was enacted in 2010 and other than the first prosecution of a court clerk who abused his position, a trickle of prosecutions and deferred prosecution agreements has targeted the corporate arena.
The investigation of corruption offences is onerous and complex and typically involves significant sums. What is unique with this prosecution is that a former managing director of Skansen Interiors Limited, gave an individual of DTZ Ltd, £10,000 and promised him a further £29,000 in return for confidential information in 2012 and 2013. The former Managing Director of Skansen Interiors Limited was intending to use the information to help his company gain contracts through DTZ. Skansen won contracts in excess of £6million. Two items to note, the amount of the bribe and the date of the offence.
The former Managing Director was sentenced to 12 months’ imprisonment and was disqualified as a director for six years and the individual from DTZ Ltd was sentenced to 20 months’ imprisonment and was disqualified as a director for seven years at Southwark Crown Court.
In relation to the corporate offence of failing to prevent bribery, Skansen Interiors Limited was previously convicted of failing to have in place adequate procedures.
SME’s should take note.
Firstly, the amount of the ‘active’ bribe paid by the former managing director of Skansen Interiors Limited. The amount was nominal in comparison to typical bribes paid where prosecutions or deferred prosecution agreements has occurred in the investigations undertaken by the SFO. The ‘active’ element of the bribery offence, paying the bribe (rather than the ‘passive’ offence of receiving a bribe) ultimately exposed Skansen Interiors Limited who did not have adequate procedures in place.
Adequate procedures, assessed and applied appropriately and proportionally, provide a statutory defence to the corporate offence to failing to prevent bribery.
The adequate procedures of the Bribery Act are replicated in Criminal Finance Act. As a reminder, the Criminal Finance Act relates to a corporate failure to prevent the criminal facilitation of tax evasion (in the UK and overseas). Of note, a business will not be able to imply they have simply adopted the six adequate procedures for either Act.
The SFO has made clear with this prosecution they are not restricted to investigating bribery in Corporates. This is the first SME consideration.
The second consideration is HMRC will be undertaking the investigation of Criminal Finance Act offences in the UK. With an increase in the HMRC compliance units, SME’s could be ‘low hanging fruit’ or ‘easy hits’ for a compliance unit eager to ‘cut their teeth’.
SME need to evidence risk assessments for either Act and be confident their ‘adequate procedures’ are fit for purpose and proportionate.
Need further assistance?
For further information please contact us on 0800 298 3899 or email: Email Allan Maund.