Regulatory update: UK anti-corruption strategy 2017-2022

Posted: 20th December 2017

BACKGROUND

This month, the government published its long-term anti-corruption strategy, in which they plan to tackle corruption both domestically and internationally.

Corruption is a threat to security, and a barrier for open and competitive markets. The strategy will improve business integrity on a global level and increase confidence by making UK firms fair for everyone.

The strategy states that:

“Corruption can increase the cost of doing business for individual companies by as much as 10%, distorting markets and deterring trade and investment. Worldwide, the cost of corruption is estimated to be more than 2% of global GDP ($1.5 billion to $2 trillion). The World Bank estimates that over $1 trillion is paid in bribes each year…”

The UK government has a vision with three long-term outcomes to combat corruption:

1. Reduced threat to our national security – including instability caused by corruption overseas
2. Increase prosperity at home and abroad – including UK businesses
3. Enhance public confidence – in our domestic and international institutions
    

The strategy will be guided by four approaches to combat corruption: Protect; Prevent; Pursue and Reduce.  These approaches will work towards the six priorities, which are:

1. Reduce the insider threat in high-risk domestic sectors
2. Strengthen the integrity of the UK as an international financial centre
3. Promote integrity across the public and private sectors
4. Reduce corruption in public procurement and grants
5. Improve the business environment globally
6. Work with other countries to combat corruption

The media coverage of corruption seen within businesses, politics and sport has sparked the importance of integrity. 

The strategy focuses on public and private sectors, with a strong commitment to ensure that firms are competing on even terms, in a rules-based system.

Improving the reputation of businesses provides certainty that allows investors to innovate and take risks, building confidence that ideas are protected and cannot be stolen.  Therefore, the government will enhance the UK’s AML system and ensure that professionals operating in the financial sector will act with the highest standards.

Transparency will be at the heart of the strategy, which will include continuing to champion the adoption of UK public registers of beneficial ownership. The government will improve the ability of law enforcement to prosecute grand corruption and returning assets. 

The report commented on the recent progress made in the UK with the implementation of the Bribery Act, the Criminal Finances Act and the Policing and Crime Act. The UK has promoted anti-corruption with the beneficial ownership transparency agenda, and has concluded 14 foreign bribery-related cases since 2012.

KEY POINTS

The priorities in the strategy will have an impact on firms over the coming years.

• The government will establish a new Minister for Economic Crime in the Home Office.
• Anew National Economic Crime Centre based in the National Crime Agency (NCA) will task and coordinate law enforcement.
• The Crime and Courts Act will be amended - adding the Serious Fraud Office to the list of organisations that can be directed by the NCA to investigate cases of economic crime.
• The findings from the Call of Evidence for corporate criminal liability of economic crime will be considered, which is likely to be based on the ‘failure to prevent’ model.
• There will be a robust approach to Sanctions with continuous support to the Office of Financial Sanctions (OFSI) to impose monetary penalties for sanction breaches. Financial sanction awareness will be raised in the industry and the general public to improve compliance reporting obligations and prevent breaches.
• The law enforcement response and capability to counter bribery and corruption will be strengthened through enhanced training that is currently provided by the City of London Police Economic Crime Academy.
• There is a goal to reform the SAR regime by improving feedback and reporters to enhance the value and quality of SARs.
• ‘Integrity’ will be promoted through public and private sectors. The government announced that measures will be made to improve shareholder scrutiny of executive remuneration and strengthen the employee voice in boardrooms to drive higher standards. The report highlights that a culture of integrity within companies is critical to combat corruption and for sustainable growth.
   

CONSIDERATIONS FOR FIRMS

The UK is currently ranked 10th on the Corruption Perceptions Index 2016 by Transparency International.  There is more to be done to improve the UK's reputation to move up the Index.

The strategy has made its message clear: that firms will be expected to act with integrity and there will be more scrutiny on Sanctions compliance from hereon in.

Firms that lead with integrity will permeate a culture of integrity which will spread and embed itself throughout the organisation, and result in an improved reputation for professionalism with its customers and regulators.  Other benefits include improved operational effectiveness and strengthened employee morale.

There is no doubt that next year we will see further changes in the AB&C space - driven by a new Home Office Minister focused on economic crime, the National Economic Crime Centre, and the stepping down of David Green QC as Director of Serious Fraud Office (with a new Director to be confirmed in the new year).

Firms should aim to review their anti-corruption policies that comply with the Bribery Act 2010, US Foreign Corrupt Practices Act 1977, and the Criminal Finances Act 2017.

Those that fail to implement ‘adequate’ and ‘reasonable’ procedures to prevent bribery and the facilitation of tax evasion are criminally liable.  The strategy highlights the importance of implementing controls and procedures to mitigate the risk of corruption.