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Contact info

• Personal email

  • H.Tse

  • hayson.tse

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  • @bis4630

Copyright

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International Licence.

Objectives

At the end of this presentation, you should understand:

• explain the exclusion by Public Contracts Regulation 2015

• explain the civil consequence of bribery

• explain the Ministry of Justice Guidance

• explain risk assessments of bribery

• explain structure of anti-bribery policy

Table of contents

• Course administration

• EU Directives

• UK Public Contracts Regulations 2015

• Civil Consequences

• MoJ Guidance

• Deferred Prosecution Agreement

• Risk Assessment

• Summary

Classroom Conduct

• HKU SPACE Handbook

  • Unauthorised reservation of seats is not permitted.

  • Eating or drinking is not allowed.

  • All mobile phones and pagers are to be turned off.

  • Smoking is prohibited at all HKU SPACE learning centres and the University campus.

  • No video / audio recording is allowed, except with the permission of the Programme Director / Manager, and is subject to any conditions stipulated when such permission is granted.

  • Personal belongings should not be left unattended.

MSc Electronic Security and Digital Forensics Degree

"This course will focus on IT law, professional and ethical issues, criminal law, theories of crime as well as looking at the legal system more generally. You'll also focus on security regulations, contingency planning and risk management as well as intellectual property law, privacy and data protection law." - Course homepage

Compulsory modules that you are exempted

• BIS 4620 Digital Investigation and Evidence Management (30 Credits)

• BIS 4610 Information Security Management (30 Credits)

Compulsory modules for you

• BIS 4600 Legal and Professional Aspects of Digital Forensics (30 Credits)

• BIS4630 Corporate Compliance and Financial Crime Prevention (30 Credits)

• BIS 4992 Postgraduate Computing Project (60 Credits)

Study hours outside class contact

"The study hours for each credit point is 10 hours. For a 30-credit module this equates to 300 hours. Therefore, if a module has time-tabled activities i.e. lecture/seminar/lab, of 3 hours per week for a 24-week period (total of 72 hours), then the out-of-class study commitment expected of students is 228 hours in total." - Course Handbook.

• Practical meaning: 300 hours = 2.5 hours per day x 5 days x 24 learning weeks (Note: only 18 learning weeks for Hong Kong)

Master's degree in UK

"[A] master's [degree] is hard work and requires a lot of commitment. It has to be something you actively want to do . . . Postgraduate study is much more independent than undergraduate study, so, on a practical level, it is important to be aware that you may be working by yourself for much of the time." - Taking the plunge into the master's world (The Guardian, 2009)

Teaching Plan IMPORTANT

• The Hong Kong teaching schedule is set out below. It supersedes the UK model explained in the Module Handbook.

• The Hong Kong schedule consists of a 18-week schedule decided by HKUSPACE. The UK course consists of a 24-week schedule.

• The 2 dates for coursework remain the same: 7 March 2018 and 14 March 2018 (both London time)

Week 9 - 11: 3, 10 & 17.i.2018

• Bribery & Corruption

  • Understanding of how bribery and corruption initiatives work

  • Understanding UK and US regimes

  • Systems and Controls

  • Politically exposed persons

  • FATF recommendations

  • Transparency International

  • Corruption perception index

  • The effect of corruption on economies

  • Regulated sector responsibilities

  • GRECO (The Group of States against Corruption)

Week 17: 28.ii.2018

• Revision, Practise Presentations

  • 7 March 2018 is the deadline to send Coursework A, B and C to Middlesex via Middlesex Turnitin. There is no lecture on 7 March 2018.

  • Revision

  • Practise presentations

  • Examination preparation and practice

Week 18: 14.iii.2018

• Group Presentations & Examination preparation

  • Summative group presentation

  • Revision

  • Examination paper practice

• Assessment Formative assessment

  • Monitor student learning to improve their learning

  • Provide ongoing feedback to teachers to improve teaching

• Summative assessment

  • Evaluate student learning at the end of an instructional unit by comparing it against some standard or benchmark

Important dates

• 11 October 2017 - 6 December 2017, both dates inclusive

  • You are recommended to research for Coursework Section A to C.

• 24 January 2018

  • You are recommended to complete a first draft copy of Coursework Section A.

• 31 January 2018

  • You are recommended to complete a second draft of Coursework Section A and continue to review, edit and amend until you have a ‘camera-ready' piece of soft copy before 7 March 2018.

Important dates

• 7 February 2018

  • You are recommended to complete a first draft of Coursework Section B.

• 14 February 2018

  • You are recommended to complete a second draft of Coursework Section B and continue to review, edit and amend until you have a ‘camera-ready' piece of soft copy before 7 March 2018.

• 21 February 2018

  • You are recommended to complete a first draft of Coursework Section C.

Important dates

• 28 February 2018

  • You are recommended to complete a second draft of Coursework Section C and continue to review, edit and amend until you have a ‘camera-ready' piece of soft copy before 7 March 2018.

Important dates

• 7 March 2018

  • Deadline for Summative Submission of Coursework Section A, B and C, each with its covering page via the supplied Turnitin link in the Middlesex University UniHub module page to Middlesex.

  • Any other means of submission, even to me or to HKUSPACE, means no submission.

Important dates

• 14 March 2018

  • Group presentation for Coursework Section C.

UK anti-corruption strategy 2017 to 2022

• Published in December 2017, the anti-corruption strategy establishes an ambitious longer-term framework to guide UK government efforts to tackle corruption at home and abroad in the period to 2022.

UK anti-corruption strategy 2017 to 2022

• It sets out a longer term vision of anti-corruption action leading to:

1. reduced threats to our national security

2. stronger economic opportunities (especially for British business)

3. greater public trust and confidence in our institutions

UK anti-corruption strategy 2017 to 2022

• This strategy sets out 6 clear priorities for this Parliament. These are:

1. reduce the insider threat in high-risk domestic sectors such as borders and ports

2. strengthen the integrity of the UK as an international financial centre

3. promote integrity across the public and private sectors

4. reducing corruption in public procurement and grants

5. improving the business environment globally

6. working with other countries to combat corruption

UK anti-corruption strategy 2017 to 2022

• Anti-corruption champion

"the Prime Minister has announced the appointment of John Penrose MP as the new anti-corruption champion. In his role, John Penrose will be responsible for challenging and supporting the government in implementing the strategy, as well as promoting the UK's response to corruption both domestically and internationally."

Public procurement / contract

• Public Sector Procurement Directive (2004/18/EC)

  • Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the Coordination of Procedures for the Award of Public Works Contracts, Public Supply Contracts and Public Service Contracts

  • (The classical public sector directive)

  • (The old directive)

  • Mandatory debarment (Article 45(1))

  • Discretionary debarment (Article 45(2))

  • Implemented in UK by Public Contract Regulations 2006

• Public Contract Regulation 2006

  • Section 23: criteria for the rejection of economic operators

Public procurement / contract

• Public Contracts Directive (2014/24/EU)

  • Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on Public Procurement and Repealing Directive 2004/18/EC

  • (The new directive)

  • Implemented in UK by Public Contracts Regulation 2015

Public Contracts Directive (2014/24/EU)

• Article 2(1) definitions

"(10) 'economic operator' means any natural or legal person or public entity or group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market"

• Preamble

"(14) It should be clarified that the notion of 'economic operators' should be interpreted in a broad manner so as to include any persons and/or entities which offer the execution of works, the supply of products or the provision of services on the market, irrespective of the legal form under which they have chosen to operate. Thus, firms, branches, subsidiaries, partnerships, cooperative societies, limited companies, universities, public or private, and other forms of entities than natural persons should all fall within the notion of economic operator, whether or not they are 'legal persons' in all circumstances."

Public Contracts Directive (2014/24/EU)

• Article 57(1) exclusion

"(1) Contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established, by verifying in accordance with Articles 59, 60 and 61, or are otherwise aware that that economic operator has been the subject of a conviction by final judgment for one of the [6] reasons:"

"The obligation to exclude an economic operator shall also apply where the person convicted by final judgment is a member of the administrative, management or supervisory body of that economic operator or has powers of representation, decision or control therein."

Public Contracts Directive (2014/24/EU)

• 6 reasons

  • participation in a criminal organisation

  • corruption

  • fraud

  • terrorist offences or offences linked to terrorist activities

  • money laundering or terrorist financing

  • child labour and other forms of trafficking in human beings

Public Contracts Directive (2014/24/EU)

• Article 57(2) exclusion

"An economic operator shall be excluded from participation in a procurement procedure where the contracting authority is aware that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions and where this has been established by a judicial or administrative decision having final and binding effect in accordance with the legal provisions of the country in which it is established or with those of the Member State of the contracting authority."

Public Contracts Directive (2014/24/EU)

• Article 57(3) derogation from exclusion

"Member States may provide for a derogation from the mandatory exclusion provided for in paragraphs 1 and 2, on an exceptional basis, for overriding reasons relating to the public interest such as public health or protection of the environment."

"Member States may also provide for a derogation from the mandatory exclusion provided in paragraph 2, where an exclusion would be clearly disproportionate, in particular where only minor amounts of taxes or social security contributions are unpaid or where the economic operator was informed of the exact amount due following its breach of its obligations relating to the payment of taxes or social security contributions at such time that it did not have the possibility of taking measures as provided for in the third subparagraph of paragraph 2 before expiration of the deadline for requesting participation or, in open procedures, the deadline for submitting its tender."

Public Contracts Directive (2014/24/EU)

• Article 57(6) further condition not to exclude

"Any economic operator that is in one of the situations referred to in paragraphs 1 (and 4) may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. If such evidence is considered as sufficient, the economic operator concerned shall not be excluded from the procurement procedure. For this purpose, the economic operator shall prove that it has paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct, clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities and taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct. . ."

Public Contracts Directive (2014/24/EU)

• Article 57(6) further condition not to exclude

". . . The measures taken by the economic operators shall be evaluated taking into account the gravity and particular circumstances of the criminal offence or misconduct. Where the measures are considered to be insufficient, the economic operator shall receive a statement of the reasons for that decision. An economic operator which has been excluded by final judgment from participating in procurement or concession award procedures shall not be entitled to make use of the possibility provided for under this paragraph during the period of exclusion resulting from that judgment in the Member States where the judgment is effective."

Public Contracts Regulations 2015 (UK)

• (Public Contract Regulation 2006)

• Effective 26 February 2015

• Summary of regulation 57

  • Similar to Article 57

  • No foreign law mentioned in regulations 57(1)(2)

  • but see regulation 57(1)(n)

  • Definition of corruption is wider than Article 57 and includes common law offence of bribery

  • Self cleaning is complex under regulation 57(13) and does not apply tax issues

  • Did not copy Article 57(6)

Public Contracts Regulations 2015

• Summary

  • Under PCR 2006, companies convicted of certain economic offences faced mandatory debarment for UK public contracts, subject to narrow exception

  • The exception is to be used only in the most serious circumstances, for example in the case of national emergency

  • Discretion arose if a business had been convicted of any offence concerning professional conduct

  • Under PCR 2006, no self-cleaning principle, i.e. regain eligibility

  • Under PCR 2015, number of criminal offences is extended

  • . . .

Public Contracts Regulations 2015

• Summary

  • . . .

  • Discretionary debarment continues to apply to professional misconduct and non-payment of tax, and extends to distortion of competition and insolvency

  • Debarment is not permanent but a maximum term is imposed

  • Authorities are to bring debarment to an early end if company demonstrates self-cleaning

  • Allows company to regain eligibility by self-cleaning

Public Contracts Regulations 2015

• Regulation 2(1) definitions

""economic operator" means any person or public entity or group of such persons and entities, including any temporary association of undertakings, which offers the execution of works or a work, the supply of products or the provision of services on the market;"

• Regulation 57

  • Mandatory exclusions (regulations 57(1) to (3))

  • Discretionary exclusions (regulation 57(4))

  • Discretionary exclusions (regulation 57(8))

  • Self-cleaning (regulations 57(13) to (17))

Public Contracts Regulations 2015

• Regulation 57(1) mandatory

  • "(1) Contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established, . . . , or are otherwise aware, that that economic operator has been convicted of any of the following offences:"

  • (a) conspiracy relates to participation in a criminal organisation

  • (b) corruption within the meaning of section 1(2) of the Public Bodies Corrupt Practices Act 1889 or section 1 of the Prevention of Corruption Act 1906

  • (c) common law offence of bribery

  • (d) bribery within sections 1, 2 or 6 of the Bribery Act 2010

  • (e) offences relate to fraud affection ECC (9 such offences)

  • (f) . . .

Public Contracts Regulations 2015

• Regulation 57(1) mandatory

  • (e) . . .

  • (f) offence listed in section 41 of the Counter Terrorism Act 2008 (eg proscribed organisations, terrorist property, failure to disclose information, weapons training, directing terrorism, collecting information for terrorism, use of noxious things, encouragement, preparation of terrorism)

  • (g) offence under sections 44 to 46 of the Serious Crime Act 2007 in relation to (f) (i.e. inchoate offences)

  • (i) offence in connection with proceeds of criminal conduct within meaning of section 93A, 93B or 93C of the Criminal Justice Act 1988 (e.g. money laundering and related offences)

  • (j) an offence under section 4 of they Asylum and Immigration Act 2004 (trafficking people for exploitation)

  • (k) . . .

Public Contracts Regulations 2015

• Regulation 57(1) mandatory

  • (j) . . .

  • (k) an offence under section 59A of the Sexual Offences Act 2003 (meeting a child intending to engage unlawful sexual activity involving the child or in the presence of the child)

  • (i) an offence under section 71 of the Coroners and Justice Act 2009 (slavery, servitude and forced or compulsory labour)

  • (m) an offence in connection with proceeds of drug trafficking

  • (n) any other offence within Article 57(1) of the Public Contracts Directive

Public Contracts Regulations 2015

• Regulation 57(2) mandatory

  • "(2) The obligation to exclude an economic operator also applies where the person convicted is a member of the administrative, management or supervisory body of that economic operator or has powers of representation, decision or control in the economic operator. "

• Regulation 57(3) mandatory

  • "(3) An economic operator shall be excluded from participation in a procurement procedure where:"

  • (a) the contracting authority is aware that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions; and

  • (b) the breach has been established by a judicial or administrative decision having final and binding effect in accordance with the legal provisions of the country in which it is established or with those of any of the jurisdictions of the United Kingdom.

Public Contracts Regulations 2015

• Regulation 57(4) discretionary

  • "(4) Contracting authorities may exclude an economic operator from participation in a procurement procedure where the contracting authority can demonstrate by any appropriate means that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions. "

• Regulation 57(5) circumstances where regulations 57(3) and (4) cease to apply

  • "(5) Paragraphs (3) and (4) cease to apply when the economic operator has fulfilled its obligations by paying, or entering into a binding arrangement with a view to paying, the taxes or social security contributions due, including, where applicable, any interest accrued or fines. "

Public Contracts Regulations 2015

• Regulation 57(6) exceptions to mandatory exclusion
  • "(6) A contracting authority may disregard any of the prohibitions imposed by paragraphs (1) to (3), on an exceptional basis, for overriding reasons relating to the public interest such as public health or protection of the environment. "

Public Contracts Regulations 2015

• Regulation 57(7) exceptions to mandatory exclusion

  • (7) A contracting authority may also disregard the prohibition imposed by paragraph (3) where an exclusion would be clearly disproportionate, in particular

  • (a) where only minor amounts of taxes or social security contributions are unpaid; or

  • (b) where the economic operator was informed of the exact amount due following its breach of its obligations relating to the payment of taxes or social security contributions at such time that it did not have the possibility of fulfilling its obligations in a manner described in paragraph (5) before expiration of the deadline for requesting participation or, in open procedures, the deadline for submitting its tender.

Public Contracts Regulations 2015

• Regulation 57(8) discretionary

  • (8) Contracting authorities may exclude from participation in a procurement procedure any economic operator in any of the following situations:

• Regulation 57(11) duration for mandatory exclusion

  • 5 years from date of conviction

• Regulation 57(12) duration for discretionary exclusion

  • 3 years from relevant event

Public Contracts Regulations 2015

• Regulations 57(13) to (17) self-cleaning

  • (13) Any economic operator that is in one of the situations referred to in paragraph (1) or (8) may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion.

  • (14) If the contracting authority considers such evidence to be sufficient, the economic operator concerned shall not be excluded from the procurement procedure.

Public Contracts Regulations 2015

• Regulations 57(13) to (17) self-cleaning

  • (15) For that purpose, the economic operator shall prove that it has

  • (a) paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct;

  • (b) clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities; and

  • (c) taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct.

Public Contracts Regulations 2015

• Regulations 57(13) to (17) self-cleaning

  • (16) The measures taken by the economic operator shall be evaluated taking into account the gravity and particular circumstances of the criminal offence or misconduct.

  • (17) Where the contracting authority considers such measures to be insufficient, the contracting authority shall give the economic operator a statement of the reasons for that decision.

Civil Consequences of Bribery

• Company A paid £1,000,000 annually to company B for service

• Company B provided service to company A

• Employee P(b) of B bribed employee P(a) of A with £100,000 to get the contract of service

• Employee P(a) bought a house in Malaysia for £50,000 and stocks of a USA company with the rest of the sum

• As a result of obtaining the service agreement, employee P(b) was promoted to general manager with a 15% increase in monthly salary and fringe benefits.

Civil Consequences of Bribery

• Contract

  • Void or voidable

  • Rescinded

  • Affirmed

• Claim against employee

  • breach of fiduciary duty

  • unjust enrichment

  • unlawful means conspiracy

Civil Consequences of Bribery

• Recovery of assets

  • search and seizure orders

  • freezing (worldwide) orders

  • disclosure orders

• Need a response plan for company

Introduction

• Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing

• MoJ Guidance

Section 1

• Hospitality intended as a bribe

"Prosecution would need to show that the hospitality was intended to induce conduct that amounts to a breach of an expectation that a person will act in good faith, impartially, or in accordance with a position of trust. This would be judged by what a reasonable person in the UK thought." (G)

Section 6

• Policy

"The need to prohibit the influencing of decision making in the context of publicly funded business opportunities by the inducement of personal enrichment of foreign public officials or to others at the official's request, assent or acquiescence." (G)

Section 6 does not require proof of:

• Very likely to involve conduct which amounts to "improper performance" of a relevant function or activity to which section 1 applies

• an intention to induce the above mentioned conduct

Section 6

• Section 6 is unlike section 1 because:

"the exact nature of the functions of persons regarded as foreign public officials is often very difficult to ascertain with any accuracy, and the securing of evidence will often be reliant on the cooperation of the state any such officials serve. To require the prosecution to rely entirely on section 1 would amount to a very significant deficiency in the ability of the legislation to address this particular mischief."

Six principles to help to decide whether or not adequate procedures have been taken

• Proportionality

• Top Level Commitment

• Risk Assessmnet

• Due Diligence

• Communication

• Monitoring and Review

Principle 1

• Proportionate procedures

"A commercial organisation's procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation's activities. They are also clear, practical, accessible, effectively implemented and enforced." (G)

Principle 1

• Proportionate procedures

"The action you take should be proportionate to the risks you face and to the size of your business. So you might need to do more to prevent bribery if your organisation is large, or if you are operating in an overseas market where bribery is known to be commonplace, compared to what you might do if your organisation is small, or is operating in markets where bribery is not prevalent." (QS)

Principle 2

• Top-level commitment

"The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable." (G)

Principle 2

• Top-level commitment

"Those at the top of an organisation are in the best position to ensure their organisation conducts business without bribery. If you are running a business, you will want to show that you have been active in making sure that your staff (including any middle management) and the key people who do business with you and for you understand that you do not tolerate bribery. You may also want to get personally involved in taking the necessary proportionate action to address any bribery risks." (QS)

Principle 3

• Risk assessment

"The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented." (G)

Principle 3

• Risk assessment

"Think about the bribery risks you might face. For example, you might want to do some research into the markets you operate in and the people you deal with, especially if you are entering into new business arrangements and new markets overseas" (QS)

Principle 4

• Due diligence

"The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks."

Principle 4

• Due diligence

"Knowing exactly who you are dealing with can help to protect your organisation from taking on people who might be less than trustworthy. You may therefore want to ask a few questions and do a few checks before engaging others to represent you in business dealings." (QS)

Principle 5

• Communication (including training)

"The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces." (G)

Principle 5

• Communication

"Communicating your policies and procedures to staff and to others who will perform services for you enhances awareness and helps to deter bribery by making clear the basis on which your organisation does business. You may, therefore, want to think about whether additional training or awareness raising would be appropriate or proportionate to the size and type of your business." (QS)

Principle 6

Monitoring and review

"The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary." (G)

Principle 6

• Monitoring and review

"The risks you face and the effectiveness of your procedures may change over time. You may want, therefore, to keep an eye on the antibribery steps you have taken so that they keep pace with any changes in the bribery risks you face when, for example, you enter new markets." (QS)

Appendix A: BA 2010 case studies

• Introduction

"These case studies (which do not form part of the guidance issued under section 9 of BA 2010) look at how the application of the six principles might relate to a number of hypothetical scenarios commercial organisations may encounter." (G)

Appendix A: BA 2010 case studies:

• Case study 1 - Principle 1: Facilitation payments

• Case study 2 - Principle 1: Proportionate procedures

• Case study 3 - Principles 1 and 6: Joint venture

• Case study 4 - Principles 1 and 5: Hospitality and promotional expenditure

• Case study 5 - Principle 3: Assessing risks

• Case study 6 - Principle 4: Due diligence of agents

• Case study 7 - Principle 5: communicating and training

• Case study 8 - Principles 1, 4 and 6: Community benefits and charitable donations

• Case study 9 - Principle 4: Due diligence of agents

• Case study 10 - Principle 2: Top level commitment

• Case study 11 - Principle 1: Proportionate procedures

Introduction

• In May 2012, the Ministry of Justice published a consultation on proposals for a new tool to deal with corporate economic crime, known as Deferred Prosecution Agreements.

• On 23 October 2012, the UK Government published its response to the consultation

• Section 45 and Schedule 17 of the Crime and Courts Act 2013 make provision about deferred prosecution agreements.

• On 14 February 2014, the Director of the Serious Fraud Office and the Director of Public Prosecutions published guidance to prosecutors on the use of DPA

• On 24 February 2014, section 45 and Schedule 15 came into force by the Crime and Courts Act 2013 (Commencement No. 8) Order 2014

Procedures

• (1) Prosecutor concludes DPA is appropriate and sends entity to be subjected to DPA (P) a letter of invitation to negotiate

  • P refuses to negotiate

  • Then no DPA

• (2) If P accepts, prosecutor sends P a letter of undertaking and DPA negotiation period begins

  • Either party may decide to withdraw from the process

  • Then no DPA

• (3) Preliminary hearing at the Crown Court

• (4) Terms of DPA agreed and application made for final hearing

• (5) . . .

Procedures

• (5) Final hearing at the Crown Court

• (6) DPA in place and publication

  • Breach

  • Variation

• (7) DPA expires

• (8) Notice of discontinuance

Procedures

• Variation

  • Prosecutor and P agree to vary the terms of the DPA

  • Prosecutors applies to court seeking declaration that variation is acceptable

• Breach

  • Prosecutor considers entering discussions with P to rectify the breach

  • Agreement

  • No agreement

Procedures

• Prosecution agrees with P that breach is adequately rectified

• No agreement is reached: prosecutor applies to Court for finding that P is in breach

  • Court finds breach and invites parties to propose suitable remedy

  • Court finds breach and terminate DPA and prosecution applies to lift suspension of indictment

DPA is a discretionary tool

• Prosecutor may invite P to enter into negotiations to agree a DPA as an alternative to prosecution.

• An invitation to negotiate a DPA is a matter for the prosecutor's discretion. P has no right to be invited to negotiate a DPA.

(1) Prosecutor considers whether DPA is appropriate

• Stage 1 evidential stage: the prosecutor must satisfy itself that there is sufficient evidence to provide a realistic prospect of conviction; OR there is at least a reasonable suspicion that the commercial organisation has committed the offence, and there are reasonable grounds for believing that a continued investigation would provide further evidence within a reasonable period of time, so that all the evidence together would be capable of establishing a realistic prospect of conviction.

• Stage 2 public interest stage: the public interest must be properly served by the prosecutor entering into a DPA with P instead of prosecuting

(1) Prosecutor considers whether DPA is appropriate

• The Code for Crown Prosecutors

• The Joint Prosecution Guidance on Corporate Prosecutions

• Bribery Act 2010: Joint Prosecution Guidance

• The DPA Code

(1) Prosecutor considers whether DPA is appropriate

• Additional public interest factors in favour of prosecution

  • A history of similar conduct including prior criminal, civil and regulatory enforcement.

  • Failure to report wrongdoing within a reasonable time of the conduct coming to light.

  • Failure to report the full extent of the wrongdoing or reporting it inaccurately or in a misleading way.

  • Ineffective corporate compliance programme

  • . . .

(1) Prosecutor considers whether DPA is appropriate

• Additional public interest factors in favour of prosecution

  • The conduct alleged is part of established business practices.

  • Having been previously subject to warning, sanction or criminal charge and failure to take remedial action.

  • Causing significant harm to the victims, or a substantial adverse impact on the integrity or confidence of markets or the government.

(1) Prosecutor considers whether DPA is appropriate

• Additional public interest factors against prosecution

  • Lacking history of similar conduct including prior criminal, civil and regulatory enforcement

  • Management team adopting genuinely proactive approach when offending is brought to their notice, involving self-reporting and remedial actions, including compensation of victims, and making witnesses available to the prosecutor and disclosing the details of any internal investigation.

  • Having a genuinely proactive and effective corporate compliance programme at the time of both the offending and the reporting.

  • . . .

(1) Prosecutor considers whether DPA is appropriate

• Additional public interest factors against prosecution

  • . . . regulatory enforcement

  • The offending represents isolated actions by individuals.

  • The offending is not recent in nature, and P in its current form is effectively a different body to that which committed the offences.

  • A conviction is likely to have unduly disproportionate consequences for P under the law of another jurisdiction including European Law.

  • A conviction is likely to have collateral effects on the public / P's employees / shareholders.

(2) Prosecutor sends letter of undertaking

• letter of intention

(3) Preliminary hearing

• declaration that

  • Entering into a DPA with P is likely to be in the interests of justice

  • The proposed terms of the DPA are fair, reasonable and proportionate

(3) Preliminary hearing

• may include in the application:

  • Identity of the parties to the proposed agreement

  • Proposed indictment setting out the offences

  • Proposed expiry date of agreement

  • Descriptions of the proposed terms of agreement

  • Explanation of how the terms comply with the DPA Code and any sentencing guidelines or cases

  • P's written consent to the proposal

  • Explanation of why an agreement is likely to be in the interests of justice

  • Explanation of why the proposed terms of agreement are fair, reasonable and proportionate

(4) Terms of agreement

• Pay to the prosecutor a financial penalty (the amount of any penalty to be broadly comparable to the fine that a Court would have imposed on P on conviction for the alleged offence following an early guilty plea)

• Compensate victims of the alleged offence;

• Give out any profits made by P from the alleged offence

• Implement a compliance programme or make changes to an existing compliance programme relating to P's policies or to the training of P's employees or both

• . . .

(4) Terms of agreement

• . . .

• Cooperate in any investigation related to the alleged offence

• Pay any reasonable costs of the prosecutor in relation to the alleged offence or the DPA

• Comply with arrangements relating to the management and conduct of P's business;

• Allow P's compliance to be monitored, the cost of which is borne by P

(5) Final hearing

• Attach the agreement

• Indicate the difference between those proposed in the Preliminary Hearing and the actual terms of agreement

• P's written consent to the agreement

• Explain why the agreement is in the interests of justice and the terms are fair, reasonable and proportionate

• Draft indictment

• Apply for a declaration

  • The DPA is in the interests of justice;

  • The terms of the DPA are fair, reasonable and proportionate

(6) DPA in place and publication

• A DPA comes into force when it is approved by the Crown Court making a declaration at a Final Hearing

• At that stage, criminal proceedings will be instituted with the preferment of an indictment but automatically suspended

• The suspension may only be lifted on an application to the Crown Court by the prosecutor, and no such application may be made while the DPA is in force

• Once a DPA is in force, the Statement of Facts contained within it will be treated as an admission by P

• . . .

(6) DPA in place and publication

• . . .

• Upon approval of the DPA the prosecutor must publish

  • DPA

  • The declaration made by the Court at the Preliminary Hearing and the reasons for the Court's decision

  • If the Court initially declined to make a declaration at the Preliminary Hearing, the Court's reason for that decision

  • The declaration made by the Court at the Final Hearing and the reasons for the Court's decision

(7) DPA expires

• DPA will expire on the specified date unless:

  • an application by the prosecutor for a finding that the DPA has been breached

  • Court has invited the parties to agree proposals after a breach has been found, but the parties have not yet reached an agreement

  • The parties have agreed proposals to remedy P's breach, but P has not yet complied with the agreement

(8) Notice of discontinuance

• If the DPA remains in force until its expiry date, the proceedings against P must be discontinued by the prosecutor giving notice to the Court that the prosecutor does not want proceedings to continue

• When proceedings are discontinued, the prosecutor must publish: P has breached and court terminates the DPA

• Prosecutor may apply to lift the suspension of the indictment

• Criminal proceedings may follow provided the full code test in The Code for Crown Prosecutors is met.

• The Statement of Facts contained within DPA will be treated as an admission by P

First UK DPA case: Standard Bank PLC

" . . . key officials at ST (Standard Bank's sister bank in Tanzania), chief executive Bashir Awale and head of corporate and investment banking Shose Sinare, were able to increase the cost of the $600m sovereign loan by an additional 1% fee to be paid to a company EGMA Ltd. . . . Almost all of the $6m paid into EGMA's account was withdrawn in cash days after the transaction concluded. Staff at ST raised concerns to Standard Bank London about the payments and the bank reported its concerns to the Serious Organised Crime Agency and the SFO the following day." (reported by the Law Society Gazette)

First UK DPA case: Standard Bank PLC

"Standard Bank PLC (now known as ICBC Standard Bank Plc) ("Standard Bank"), was the subject of an indictment alleging failure to prevent bribery contrary to section 7 of the Bribery Act 2010. This indictment, pursuant to DPA proceedings, was immediately suspended on 30 November 2015. As a result of the DPA, Standard Bank were ordered to pay financial orders of US$25.2 million and required to pay the Government of Tanzania a further US$7 million in compensation. The bank also agreed to pay the SFO's reasonable costs of £330,000 in relation to the investigation and subsequent resolution of the DPA."

First UK DPA case: Standard Bank PLC

"The suspended charge related to a US$6 million payment by a former sister company of Standard Bank, Stanbic Bank Tanzania, in March 2013 to a local partner in Tanzania, Enterprise Growth Market Advisors (EGMA). The SFO alleged that the payment was intended to induce members of the Government of Tanzania, to show favour to Stanbic Tanzania and Standard Bank's proposal for a US$600 million private placement to be carried out on behalf of the Government of Tanzania. The placement generated transaction fees of US$8.4 million, shared by Stanbic Tanzania and Standard Bank. Standard Bank agreed to continue to cooperate fully with the SFO and to be subject to an independent review of its existing anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws. It is required to implement recommendations of the independent reviewer (Price Waterhouse Coopers LLP).

This landmark case saw the UK's first DPA and use of section 7 in the Bribery Act 2010 by any prosecutor."

First UK DPA case: Standard Bank PLC

• Final judgment

• DPA

• Statement of Facts

Second UK DPA case

"A UK subsidiary of an unnamed US Company . . . [subsidiary's] parent company implemented a global compliance programme in late 2011. In August 2012, this compliance programme resulted in concerns being raised within the business about the way in which a number of contracts had been secured. . . . The [subsidiary] took immediate action, retaining a law firm that undertook an independent internal investigation. The law firm delivered a report to the SFO on 31 January 2013, after which the SFO conducted its own investigation." (Reported by the Law Society Gazette)

Second UK DPA case

"The counterparty to the DPA is a UK SME that cannot currently be named due to ongoing, related legal proceedings.

The SME was the subject of an indictment alleging conspiracy to corrupt, contrary to section 1 of the Criminal Law Act 1977, conspiracy to bribe, contrary to section 1 of the same Act, and failure to prevent bribery, contrary to section 7 of the Bribery Act 2010, all in connection with contracts to supply its products to customers in a number of foreign jurisdictions.

This indictment, pursuant to DPA proceedings, was immediately suspended.

As a result of the DPA, the company will pay financial orders of £6,553,085, comprised of a £6,201,085 disgorgement of gross profits and a £352,000 financial penalty. £1,953,085 of the disgorgement will be paid by the SME's US registered parent company as repayment of a significant proportion of the dividends that it received from the SME over the indictment period."

Second UK DPA case

• Finaly judgment redacted

Rolls-Royce PLC

"Rolls-Royce was involved in corruption to land major contracts, an investigation has alleged.

The claim was made in a BBC documentary, which said that Rolls-Royce hired a network of agents and used bribes in order to land contracts in 12 countries."

"The documentary, produced with The Guardian, called Panorama: How Rolls-Royce Bribed Its Way Around The World, alleged that payments of around £10m were made to an unregistered Indian agent, and that the company made a suspicious payment which may have helped it win a major contract to build engines for Hawk aircraft."

"The investigation also claims that that agents were hired in Brazil, India, China, Indonesia, South Africa, Angola, Iraq, Iran, Kazakhstan, Azerbaijan, Nigeria and Saudi Arabia." (reported by the Telegraph)

Rolls-Royce PLC

"Following a four year investigation, the SFO and Rolls-Royce entered into a Deferred Prosecution Agreement (DPA) which was approved by Sir Brian Leveson, President of the Queen's Bench Division on 17 January 2017. The DPA enables Rolls-Royce to account to a UK court for criminal conduct spanning three decades in seven jurisdictions and involving three business sectors.

The DPA involves payments of £497,252,645 (comprising disgorgement of profits of £258,170,000 and a financial penalty of £239,082,645) plus interest. Rolls-Royce are also reimbursing the SFO's costs in full (c£13m).

The investigation into the conduct of individuals continues."

Rolls-Royce PLC

• Deferred Prosecution Agreement – SFO v Rolls Royce PLC

• Deferred Prosecution Agreement – Statement of Facts – SFO v Rolls Royce PLC

• Judgment of Sir Brian Leveson, President of the Queen's Bench Division.

Rolls-Royce PLC

• In consideration of:

  • The past and future cooperation of Rolls-Royce as described in part A (Co-operation) and

  • Rolls-Royce's disgorgement of profit of £258,170,000 and

  • Rolls-Royce's payment of a financial penalty of £239,082,645 and

  • Rolls-Royce's payment of costs of £13,000,000 (TBC) and

  • Rolls-Royce, at its own expense, agreeing to complete the actions required at part F (Compliance Programme).

Advantage:

• Avoids conviction if requirements fulfilled

• Avoids reputation damage that come with a conviction

Purpose

• incentives for corporates to self-report

• reduce financial burden of lengthy investigations and prosecutions

Purpose

"A DPA is not a private plea "deal" or "bargain" between the prosecutor and the company. It is a way in which a company accounts for its alleged offending to a criminal court, and can have no effect until a judge confirms in open court that the DPA is in the interests of justice and that its terms are fair, reasonable and proportionate, pursuant to paragraph 8(1) Schedule 17 Crime and Courts Act 2013."

Red flags

"A red flag is a pattern, practice, or specific activity that indicates the possible existence of corruption, unethical practice or fraud." (Association of Certified Fraud Examiner)

Red flags attributed to SFO, UK

• Relating to decision making

  • Missing documents or records regarding meetings or decisions

  • Invoices being agreed in excess of contract without reasonable cause

  • Company procedures or guidelines not being followed

  • Bypassing normal tendering/contractors procedure

  • Unexplained preference for certain contractors during tendering period

  • Raising barriers around specific roles or departments which are key in the tendering/contracting process

  • Agreeing contracts not favourable to the organisation either with terms or time period

  • Abusing decision process or delegated powers in specific cases

  • Making unexpected or illogical decisions accepting projects or contracts

Red flags attributed to SFO, UK

• Relating to payments

  • The payment of, or making funds available for high value expenses or school fees etc. on behalf of others.

  • Abnormal cash payments

  • Payments being made through 3rd party country, eg. goods or services supplied to country ‘A' but payment is being made, usually to shell company in country ‘B

  • Abnormally high commission percentage being paid to a particular agency. This may be split into two accounts for the same agent, often in different jurisdictions

  • Pressure exerted for payments to be made urgently or ahead of schedule

Red flags attributed to SFO, UK

• Relating to behaviors

  • Avoidance of independent checks on tendering or contracting processes

  • Private meetings with public contractors or companies hoping to tender for contracts

  • Unusually smooth process of cases where individual does not have the expected level of knowledge or expertise

  • Individual never takes time off even if ill, or holidays, or insists on dealing with specific contractors him/herself

  • Lavish gifts being received

Third party red flags

• Resource Guide to the U.S. Foreign Corrupt Practices Act

• excessive commissions to third-party agents or consultants

• unreasonably large discounts to third-party distributors

• third-party "consulting agreements" that include only vaguely described services

• the third-party consultant is in a different line of business than that for which it has been engaged;

• the third party is related to or closely associated with the foreign official

• the third party became part of the transaction at the express request or insistence of the foreign official

• the third party is merely a shell company incorporated in an offshore jurisdiction

• the third party requests payment to offshore bank accounts

Anti-corruption risk assessment

• nature of company's operation and risk arising from the operation, e.g. using high risk organisations, agents, intermediaries, countries of high risks

• identify and review all policies and controls (check whether they are against corruption)

• gaps or deficiencies in those policies and controls

• create a anti-corruption compliance program (including additional measures) based on the risks, current policies and controls

Reaction to allegations of bribery

• Need contingency plan to react quickly

• Objectives of plan

  • gauge impact

  • crisis management approach

  • identify and preserve evidence

  • protection of whistleblowers

  • dealing with internal suspects

  • dealing with external suspects (third parties)

  • . . .

Reaction to allegations of bribery

• Objectives of plan

  • investigative steps

  • consideration of legal professional privilege, data protection and labour law

  • members of investigation team

  • functions of team members

  • time to inform regulators and auditors

Risk Assessment

"Preventing and countering bribery cannot be carried out effectively without knowing the range of bribery risks facing the company and deciding which are the most significant to address. The risk assessment process is a systematic way of assessing bribery risks and is used to design the anti-bribery controls forming the anti-bribery programme."

Key elements of risk assessment

• Focus on the highest risks: Resources are necessarily limited so concentrate on the risks that are judged highest.

• Evaluate bribery risks realistically: Use a framework and criteria to make realistic and consistent assessments of likelihood and impact.

• Repeated process: Conduct periodic risk assessments to ensure the controls remain adequate for any changes that may affect the business and position this as part of a continuous improvement process.

Six stages for the anti-bribery risk assessment process

"1. Ensure top level commitment and oversight: Top level commitment is key to effective risk management. The board and senior management provide leadership and commitment to drive adequate and continuing risk assessment and ensure the process does not falter or lose quality."

"2. Plan, scope and mobilise: The planning stage prepares the ground for the risk assessment process. A planning team should consider the following aspects: appointing the project lead, defining stakeholders, allocating team responsibilities, identifying information sources drafting plan for risk assessment, communicating plan and requirements to those involved in the exercise."

Six stages for the anti-bribery risk assessment process

"3. Gather information: Create a comprehensive catalogue of inherent bribery risks to which the company could plausibly be exposed by virtue of the nature and location of its activities."

"4: Identify the bribery risks: The objective of this stage is to identify and examine the activities and risk factors that could increase the company’s exposure to bribery risk."

Six stages for the anti-bribery risk assessment process

"5. Evaluate and prioritise the risks: The risk evaluation stage analyses and prioritises the forms of bribery identified in stage 3 taking into account the risk factors in stage 4. Common practice is to apply two variables to prioritise risks: likelihood of occurrence and the potential adverse impact."

"6. Use the output of risk assessment: The results of risk assessments are applied to a review of the anti-bribery programme and the extent to which existing controls need modification or additions."

Stage 4: Identify the Bribery Risks

"Aim: Create a comprehensive risk register of inherent bribery risks, risk factors and bribery schemes to provide the basis for evaluation of risks in stage 5."

"Designing the register: Cataloguing risks requires identifying activities subject to bribery risks and the related risk factors. For instance, bidding for public contracts is an activity likely to be vulnerable to bribery and the risk is heightened if it takes place in a country known to have high levels of corruption. This could be exacerbated if it is in a sector known to be vulnerable to bribery. Thus the company needs to identify, based on information gathered in the previous stages, which of its activities could be subject to bribery risks and what are the risk factors that could make bribery more likely."

Stage 4: Identify the Bribery Risks

"In this stage the company designs and populates a comprehensive risk register which captures and organises the information gathered in the previous stage 3. The register will provide the basis for the next stage of assessing and prioritising the identified risks. The aim here is to record the main forms of bribery risk that the company could be exposed to as broad evaluations and not related to particular contracts or third party relationships."

Stage 4: Identify the Bribery Risks

• The Three Dimensions of Bribery Risks

1. Activity: The activity vulnerable to bribery, for example, bidding for a public contract.

2. Risk factor: An external or internal circumstance that could make it more likely that bribery will occur; for example, the country of operation.

3. Bribery scheme: The way in which a bribe benefit - financial or non-financial - is transmitted. For example, bribery through gifts and hospitality.

Culture & Tone from the Top

"A corporate culture of ethics and integrity creates the enabling environment in which the anti-bribery programme operates. Without such an environment, the anti-bribery programme will operate in isolation without an ethical compass of corporate values or impetus for action. The key contributing factors to an enabling environment are tone from the top, ethical leadership and employees who understand how they should act when faced with ethically challenging situations, and are motivated to do so."

Key elements of culture & tone from the top

• Culture of ethics and integrity: Employees know what is right and will know how to act when faced with ethical challenges. The company encourages and supports employees to do the right thing.

• Alignment: The anti-bribery policy and programme are an expression of the corporate values.

• Tone from the top: The board and management carry the anti-bribery commitment throughout the company through their support, statements, behaviour and activities.

• Incentives: Design remuneration and incentives so that they do not inadvertently reward behaviour which undermines the company’s anti-bribery commitment.

• Speak-Up: Encourage a speak-up culture and provide confidential advice and speak-up lines for employees.

• Reward: Ensure good behaviour and speaking up is visibly rewarded and bad behaviour is visibly penalised.

University Anti-Bribery Policy Examples

• University of York Anti-Bribery Policy

• University of Warwick

• University of Leeds

• University of Bath

• University of Kent

• Canterbury Christ Church University

Summary

• explain the exclusion by Public Contracts Regulation 2015

• explain the civil consequence of bribery

• explain the Ministry of Justice Guidance

• explain risk assessments of bribery

• explain structure of anti-bribery policy