US and UK anticorruption regime

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US and UK anticorruption regime

• By Dmitry Dementyev

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• WHAT IS US / UK ANTI-BRIBERY REGIME?
• - easy and complex at the same time

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US FCPA summary
US Code / Title 15. Commerce and Trade / Chapter
2B Securities Exchanges
Bribery of Foreign Officials
78m. Periodical and other reports

• 78m(?). Reports by issuer of security contents
• issuers, registered pursuant to 78l
• keep information and documents reasonably
  current
• annual and quarterly reports

78dd-1 Section 30A of the Securities Exchange
Act of 1934 Prohibited foreign trade practices
by issuers

• 78dd-1(a) general jurisdiction
• issuers (78l/78j(d))
• use of the mails or any means or instrumentality
  of interstate commerce

• 78m(b). Books, records, and internal accounting
• issuers registered (78l), and filing reports
  (78o(d))
• in reasonable detail / accurately and fairly
  reflect
• system of internal accounting controls

• 78dd-1(g) alternative jurisdiction
• U.S. domestic issuers
• use of mails or any means or instrumentalities
  is unnecessary

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78dd-3 Prohibited foreign trade practices by
persons other than issuers
78dd-2 Prohibited foreign trade practices by
domestic concerns
78ff. Penalties
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UK BA summary
U.K. Bribery Act 2010
Section 1 Bribing another person
Section 6 Bribery of foreign public officials
Section 7 Failure of commercial organizations to
prevent bribery
Section 14 Offenses 1, 2 and 6 by bodies
corporate

• Offering, promising or giving something before /
  after the fact
• It does not matter if something is not given in
  return
• what matters is improper performance of a
  relevant function or activity (reasonable
  expectation test)

• Separate offense for bribery of foreign
  officials (drafted to resemble Anti-bribery
  Convention)
• Does not require the showing of improper
  performance

• liability for management if offense has been
  committed with their consent or connivance

• A relevant commercial entity is guilty of an
  offense in this section if an associated person
  is guilty of an offense under Section 1 or 6 or
  would be guilty had the jurisdiction applied

• Books and records under UK Companies Act

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• WHAT EXACTLY ARE THE THINGS THAT I MUST NOT DO?
• - must not bribe public officials

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What is a bribe?

• Anything of value
• Gifts
• Entertainment and hospitality
• Facilitation payments?

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Who are public officials?

• Foreign official is any officer or employee of a
  foreign government or any department, agency, or
  instrumentality thereof
• What is instrumentality?
• The term is loosely applied by US DoJ
• Recently considered by federal district courts
• ownership / financial control
• actual control
• privileges and obligations
• financing
• perception is reality

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• CAN I STRUCTURE MYSELF OUT?
• - most likely not

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UK BA Jurisdiction
Section 7 Failure of commercial organizations to
prevent bribery
Section 14 Offenses 1, 2 and 6 by bodies
corporate
Section 6 Bribery of foreign public officials
Section 1 Bribing another person

• Section 12 territorial application
• act or omission which form part of the offense
  is committed in the UK
• if outside the UK there must be close
  connection

Section 7 Carrying business or part of business
in the UK
Non-executive director with knowledge
Executive director acting illegally
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UK BA Jurisdiction uncertainty

• Ministry of justice
• common sense approach on a case-by-case basis
• having demonstrable business presence
• listing ?
• Courts
• no binding precedent / instructive only
• part of a business under Financial Services and
  Markets Act 2000
• SFO
• likely take an expansive view
• value competitive disadvantage for UK business

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US FCPA Jurisdiction

• Issuers (foreign domestic) / director, employee
  or agent
• Domestic concerns / director, employee or agent
• While in the territory of the US
• - Use of means and instrumentalities of
  interstate commerce
• - Expansive interpretation of prong 3
• - Aiding and abetting / conspiracy

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• WILL THEY EVER KNOW WHAT I DID IN GEORGIA?
• - they may

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How will they know about a violation?

• Requests for legal assistance
• Competitors
• SARs to UK Serious Organized Crime Agency (SOCA)
• Whistleblowers (US SEC UK SFO)

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• CAN I CHOOSE TO STAY QUIET?
• - choose wisely

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Disclosure Obligations

• US
• FCPA violations are categorized as a type of
  fraud and trigger SOX violations
• The application of SOX can affect a decision
  regarding disclosure
• Sec. 302 of SOX (certification of financial
  statements by CEOs and CFOs) mandates auditors
  and the board of directors to disclose any fraud
  (material or immaterial) involving persons with a
  significant role in corporate internal control
• Sec. 404 of SOX (internal control procedures)
  requires reporting on internal controls with
  respect to all consolidated subsidiaries,
  including minority-owned subsidiaries
• The UK
• UK Proceeds of Crime Act (POCA)

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• WILL THEY LET BYGONES BE BYGONES?
• - most likely not

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Statute of Limitations

• FCPA
• Tolling agreements
• MLATS
• BA
• - no Statute of Limitations

Giving of a bribe crime is complete Pendergast
v. United States, 317 U.S. 412, 418 (1943)
No criminal prosecution, UNLESS
5 years
No criminal prosecution
Criminal conspiracy United States v. Milstein,
401 F.3d 53, 71 (2d Cir. 2005)
5 years
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• CAN I PLAY IT SAFE?
• - you should try

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Compliance Program

• UK BA
• Adequate procedures (UK BA, Official Guidance)
• Full defense under Section 7
• FCPA
• Compliance and internal controls (Sentencing
  Guidelines, DPAs, NPAs)
• Mitigating factor

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Compliance information flow

• Are there rules and procedures in place?
• Have the rules been properly conveyed?
• Has the target audience had a chance to ask
  questions?
• What are the consequences for breaking the rules?
• Have the rules been updated?

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Compliance liability pitfalls

• Sec 802 of SOX obstruction of justice
• Punishable by a fine and imprisonment of up to 20
  years
• CCI case
• flushing down stuff
• during internal investigation
• US v Ray obstruction before any federal
  investigation
• Investigating company counsel are deputized

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• FINAL THOUGHTS

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• The laws are relevant for companies that do NOT
  fall within the jurisdictional reach
• Transition from compliance-curious to
  compliance-focused
• Compliance implementation requires effort
• Compliance implementation must take into account
  local law specifics

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• QUESTIONS?

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Contact information

Dmitry DementyevCorporate GroupTel. 7 495 633
70 17Fax [phone]Email
DDementyev_at_salans.com