This week the OECD Working Group on Bribery (WGB) review team have been in London reviewing the UK’s implementation with the OECD Anti-Bribery Convention. This is the sixth time the UK has been reviewed. The UK has been reviewedby the WGB three more times than any of the other major OECD countries such as Germany, France and the US, mainly because of the very long time (a decade) the UK took to enact fit-for-purpose anti-bribery legislation.
OECD Working Group on Bribery reviews have generally been meticulous, detailed and robust in their analysis of failings. The UK is one of the first countries, along with Finland, to be reviewed under its fourth round of monitoring, Phase 4, in which the OECD is focusing on detection, corporate liability and enforcement. The review team looking at the UK is made up of government officials and law enforcement experts from Norway and South Africa and members of the OECD WGB Secretariat (UK government and law enforcement officials get to monitor the US and Canada).
UK’s previous pariah status
The UK achieved the closest to pariah status a country can get at the OECD Working Group on Bribery in 2008. In an unprecedented move, the group placed a quarterly reporting requirement on the UK and warned that UK companies may need heightened due diligence placed on them because of the weakness of UK anticorruption laws.
This followed the 2006 dropping of the SFO’s investigation into corruption allegations involving BAE on the Al Yamamah project in Saudi Arabia following a personal intervention from Tony Blair. The UK drove a coach and horses through the OECD Convention by citing ‘national security’ as a reason for dropping a bribery investigation – despite Tony Blair citing jobs and damage to relations with Saudi Arabia as the real reasons. Both of these reasons are prohibited under Article 5 of the OECD Convention but national security is not explicitly so.
Is the UK out of the hot seat yet?
The sustained pressure from the OECD WGB was one of the reasons behind the Bribery Act which finally brought the UK into compliance with the OECD Convention. The UK was reviewed again as part of Phase 3 focusing on implementation and enforcement in 2012. That review welcomed the Bribery Act but highlighted serious concerns with the use of civil recovery orders to deal with foreign bribery – the favourite strategy of Richard Alderman, former SFO Director, who reportedly overrode his prosecutors to enter into fireside-chat deals with companies.
The OECD noted that these deals were private and lacked transparency. It also criticised the use of confidentiality agreements with companies by the SFO, the provision of advice by the SFO to companies, and the loose definition that the SFO used of self-reporting (famously Mabey and Johnson were credited with having self-reported their wrongdoing despite the fact that allegations of corruption had appeared in the Guardian and that the UN Volcker Commission Inquiry into the Oil for Food programme in Iraq had found wrongdoing by the company. It specifically criticised the use of a blanket immunity clause in the plea agreement that the SFO entered into with BAE for minor accounting charges in relation to Tanzania.
All these criticisms helped shaped the new Deferred Prosecution Agreement regime that was introduced in the Crime and Courts Act 2013 and have framed the SFO’s strategy to fighting bribery since 2012 when David Green took over as Director. Green ended the SFO policy of civil recovery orders for self-reporting companies and the role of the SFO in giving advice to the companies on whether specific acts could constitute breaches of law. While these have not made him popular with companies and defence lawyers, he has re-established the SFO’s credibility and legitimacy in the eyes of many as a result.
So what can the UK expect this time?
The Phase 4 monitoring process is focusing on:
How countries detect corruption including:whether tax authorities, embassies, and export credit agencies are passing information onto enforcement bodies; whether information is coming through from Financial Intelligence Units and money laundering investigations; whether and how countries are encouraging self-reporting by the private sector (including auditors); and whether countries are investigating media reports and encouraging whistleblowers.
How countries enforce their laws including: resources for anti-corruption authorities, cooperation with overseas authorities through Mutual Legal Assistance (MLA), measures to ensure that authorities aren’t taking into account prohibited Article 5 considerations such as relations with other states or national economic interest, and results from enforcement actions.
How countries deal with corporate liability; and
Engagement with the private sector.
The UK’s British Overseas Network on Development (BOND) Anti-Corruption Group made a written submission to the OECD as well as meeting with the Review team. The full submission can be viewed here. It highlighted the following issues:
The UK needs to make a strong commitment to the Bribery Act in the post-Brexit world and do more to raise awareness among SMEs particularly of what steps they should be taking to be in compliance;
The UK needs to ensure that corporate liability laws in the UK don’t disadvantage SMEs and give serious consideration to Director’s Disqualification for Bribery Act convictions as a way of holding Directors to account for failures to prevent Bribery.
The UK should make a final decision about law enforcement structures for fighting corruption, including improving funding for the SFO, changing the funding model of the SFO away from blockbuster funding, and giving the SFO the remit and powers to investigate all foreign corruption cases.
The UK should ensure that there is a specialist economic crime court to hearing foreign bribery cases to get around the long delays in getting foreign bribery cases into court.
The UK should introduce Corporate Probation Orders so that companies that do not cooperate with the SFO and face prosecution face greater scrutiny of their compliance procedures – at the moment they face none.
In its use of Deferred Prosecution Agreements, the SFO should ensure it is not overly reliant on company internal investigations, that it has a consistent definition of self-reporting and cooperation, and that individuals are properly held to account for wrongdoing. It should ensure that any changes to the DPA regime are made through an accountable policy making process not through DPAs themselves which cannot be challenged or reviewed.
Scotland should not continue to use discredited civil recovery orders as a means of dealing with foreign bribery cases.
The SFO should be more transparent about enforcement statistics, more ready to use civil recovery orders where prosecutions are not an option and should ensure it provides detailed analysis of the full benefit and harm of corruption to the courts.
There iscontinued systemic risk that prohibited Article 5 considerations could play a part in investigations: the need for Attorney General’s consent for Prevention of Corruption Act offences which still make up a significant portion of the SFO’s workload; the ability of the Attorney General to appoint and sack the Director of the Serious Fraud Office; and the use of ‘Shawcross’ exercises, which were very controversial in the BAE/Al Yamamah case and have been used more recently in 2014.
The lack of implementation of exclusion from public procurement of companies convicted of corruption.
Serious concerns about the adequacy of anti-corruption and bribery procedures at the UK export credit agency (UKEF), and the need for an independent review of its handling of corruption risks in the Petrobras/Brazil scandal.
The need for the Ministry of Defence to set up an independent transparency and ethics review of its handling of corruption risks, particularly in light of corruption allegations involving another government to government deal with Saudi Arabia, and Airbus subsidiary, GPT.
The need to ensure the independence of the Financial Conduct Authority.
Ongoing weaknesses in the UK’s whistleblowing laws particularly as they apply to expatriate workers and the need for the UK to conduct a public awareness campaign around whistleblower protection laws, and to produce through consultation a Whistleblowing Code of Practice to establish best practice standards.
There’s no doubt that there is room for improvement in the UK’s enforcement of the Convention and hopefully the OECD’s review will act as a prompt for that to happen.
And a word on process…
Back in the heady days of the London Anti-Corruption Summit, the UK government announced that it intended to be the most transparent government in history when it announced its Open Government Action Plan.
In that spirit, the BOND Anti-Corruption Group wrote to the government in the run up to the OECD review (see the full letter here), asking the government:
To make invitations to the non-governmental meetings open, transparent and public;
To make public the agenda for the meetings;
To commit to open meetings during the review process (except where sensitive case material is being discussed);
To provide a copy of its written response to the OECD questionnaire to non-governmental actors, including the law profession, the private sector and civil society;
To provide a draft of the final report for comment prior to publication to non-governmental actors; and
To invite governmental and non-governmental actors from victim countries (those affected by bribery by UK companies) to provide an input into how UK enforcement could be improved.
Unfortunately, the government responded that most of these things were not in its power and were the decisions of the OECD WGB. It’s worth noting that the US in its Phase 3 review published its response to the written questionnaire online. The Phase 4 resource guide specifically says that a country can take “whatever steps it felt appropriate to release information concerning its report.”
While it is entirely legitimate that governments don’t release case sensitive material, making as much of their written response to the OECD as public as possible can only help make the OECD WGB’s reviews more robust and credible. How else can the OECD ensure it is receiving accurate information about governments’ enforcement efforts?