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#Anti Money Laundering

Anti-Corruption Conference raises corruption awareness and there’s no room for complacency

International Compliance Association

Bribery , Corruption , Petrobras , Transparency International

The UK-led Anti-Corruption Summit held in London earlier this month attracted some significant publicity, much of which focused on David Cameron’s inadvertent remark that Nigeria and Afghanistan were ‘fantastically corrupt’.

A look at Transparency International’s most recent Corruption Perceptions Index (CPI) suggests that this was fair comment, although the two countries are making efforts to reform: the CPI ranks Nigeria and Afghanistan 136th and 166th respectively, Afghanistan one place above Somalia and North Korea, joint bottom of the table in 167th place.

Easy to point the finger, then, but wherever corruption takes place in the world, it takes two to tango, as it is tricky to carry out bribery or a corrupt transaction or activity alone. The UK Bribery Act 2010 recognised this and went beyond a focus on corrupt behaviour itself by introducing the Section 7 offence, covering commercial organisations’ failure to prevent bribery and the requirement to have adequate procedures in place.

Even if there are adequate procedures in place and a senior executive at a firm was aware of a bribe being made, albeit from a third party or agent, then the adequate procedures defence cannot used and the senior executive would be open to a Section 1 offence, under what is known as the ‘identification doctrine’.

An interesting case relating to this issue been rumbling quietly along in the background for the last three years or so, involving a Serious Fraud Office (SFO) investigation into Rolls-Royce that was announced in December 2013. There was another development in this case just a few days after the Anti-Corruption Summit when it was reported that the SFO had extended its inquiries to look into allegations of suspected bribery relating to energy operations…in Nigeria.

The SFO has said it is ‘conducting a criminal investigation into allegations of bribery and corruption at Rolls-Royce’ but not much more. Nevertheless, while we wait for a conclusion, the case is a valuable reminder of the importance of anti-bribery and corruption activities and the need for constant vigilance in this area, which is why we look at the case some detail in workshops that form part of our ICA qualifications involving governance, risk and compliance.

With the SFO staying quiet on the investigation ­­– which came after a former long-serving Rolls-Royce employee, Dick Taylor, spoke out over alleged bribes made in Indonesia relating to the sale of aircraft engines, including in a 2012 interview in The Telegraph – much of what we do know is based on media reports, information from other organisations and from Rolls-Royce.

For example, in December 2012 Rolls-Royce announced it had passed information to the SFO relating to concerns in overseas markets, then announced on 10 January 2013 that it had appointed a senior solicitor, Lord Gold – the man appointed to monitor compliance systems at BAE Systems following the company’s $400 million settlement with the US Department of Justice, after it admitted making false statements to the US authorities over payments to foreign middlemen – to review its own compliance systems.

In 12 February 2014, it was reported that the SFO had arrested Bhanu Choudhrie, executive director at C&C Alpha Group Ltd (a company that invests in aviation, amongst other industries) and his father Sudhir Choudhrie; in September that year, there were media reports that SFO chief David Green had promised ‘more arrests’. In March 2015, the Choudhries were said to have written to the SFO seeking a decision on whether they would be charged; no charges have been brought.

Meanwhile, in March 2014, India’s Central Bureau of Investigation began investigating orders and payments involving Rolls-Royce and India’s state-run Hindustan Aeronautics Ltd.

 

Moving onto 2015, on 16 February there were allegations that Rolls-Royce paid bribes to secure a £65 million contract in Brazil in relation to the Petrobras scandal; whistle-blower Pedro Barusco, a former Petrobras employee, alleged that he personally received $200,000 from the agents of Rolls-Royce with other bribes also paid to executives and politicians.

So what has Rolls Royce been saying? A year or so on from the Lord Gold appointment, it announced in March 2014 that it had set up a whistle-blower hotline for staff to report bribery concerns, while its last three annual reports, for 2013, 2014 and 2015, have referred to investigations by the SFO and its co-operation with the SFO and other agencies, including the Department of Justice.

The 2015 report noted that the SFO and other authorities continued to examine ‘concerns about bribery and corruption involving intermediaries in overseas markets…and these investigations are not yet complete’, adding: ‘We have done much to address the root of these problems and this work is being continually reinforced’. Measures have included introducing new anti-bribery and corruption polices and training.

The company has also confirmed, in August 2015, that it is co-operating with Brazilian authorities in the Petrobras inquiry and in November 2015, announced it had it had appointed law firm Slaughter and May to advise on the SFO’s probe.

So even though this case has yet to be resolved, it certainly provides food for thought from various angles: the complexity and time-consuming nature of bribery and corruption investigations, the way they can spread to jurisdictions around the world, how a company involved in such an inquiry responds and addresses the issues involved. It also brings home the fact that no country, regardless of its ranking on the CPI, or company can be afford to be complacent about these issues.

 

If you are interested in more information with respect to bribery and corruption, ICT is soon to launch some innovative training products in this area so watch this space, and also I have recently recorded a bribery and corruption CPD webinar for the ICA, where you can watch the video, answer some questions and add to your CPD log.

To stay updated on the latest developments in governance, risk and compliance, anti money laundering and financial crime prevention, please follow us on LinkedInFacebookand Twitter, where you are guaranteed to be notified when our next blog post goes live.

 

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