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Civil recovery an essential tool for businesses in fight against bribery

Out-Law Analysis | 19 Sep 2018 | 1:59 pm | 3 min. read

ANALYSIS: For businesses which are victims of bribery and fraud, civil remedies can be a quicker and more effective means of obtaining redress than awaiting the outcome of a criminal investigation and prosecution.

It is estimated that fraud costs the UK economy £190 billion a year according to The Annual Fraud Indicator 2017, while a report by PwC found that the number of UK businesses which had experienced bribery and corruption in the last two years had jumped to 23% from just 6% in 2016.

A House of Lords select committee is currently examining whether the 2010 Bribery Act has led to more prosecutions of corrupt conduct, higher conviction rates and a reduction in such conduct; as well as, importantly, the impact the Act has had on small and medium-sized enterprises (SMEs).

The Act has undoubtedly generated headline-grabbing prosecutions and facilitated agreed settlements with major businesses which have paid out multi-million pound fines. In England and Wales, eligible corporate offenders may agree a deferred prosecution agreement (DPA) with a prosecutor such as the Serious Fraud Office (SFO), which may allow them to avoid a criminal investigation and potential prosecution if strict conditions set by a judge are met. In Scotland, companies which self-report their failure to prevent bribery to the Crown Office and Procurator Fiscal Service (COPFS) can enter into an agreement to pay over profit earned from a bribe in return for avoiding a criminal prosecution.

However, the Act has also been criticised for being uncertain and causing confusion, especially for SMEs which may not have easy access to advice as to what may constitute 'adequate procedures' to prevent corrupt conduct, something which is key to avoid being held liable for an agent's payment of a bribe. Meanwhile, across the UK, law enforcement bodies face major budgetary pressures, constraining their ability to quickly and efficiently investigate bribery and financial crime.

Cases of this nature require significant resources because the investigations are complex, document heavy and cross-border in nature. Obtaining admissible evidence from overseas is challenging, and building a criminal case can take years of work and significant funding. The SFO received £21.4 million extra funding to investigate Libor-rigging, and it regularly receives 'blockbuster' funding of £2.5m or more to investigate individual cases. COPFS recently received £3.6m of additional funding to recruit more prosecutors to handle increasingly complex cases.

The select committee report will hopefully prove to be a definitive assessment of how effective the Act has been in reducing incidents of bribery and corruption over the seven years since it came into force. But alongside that, and against a backdrop of prosecutor funding constraints, increased awareness and implementation of civil law remedies would increase the number of culpable individuals who are held to account – and the number of victims who obtain a form of redress.

For example, an organisation which has been a victim of a bribe may be entitled to damages. It can also employ methods to follow or 'trace' the bribe into a recipient's hands, which may give the organisation better rights to recover the money even where the agent has become insolvent. In addition, a claim against the person who paid the bribe or the business for which he acts could also be pursued.

When a business identifies that a bribe has taken place, it often incurs extensive investigatory costs as it engages forensic accounting specialists and legal advisers to examine email trails, documents, computer systems and infrastructure, to pinpoint how the fraud took place and to avoid a repeat. It may be possible to recover some or all of such costs, which can amount to millions of pounds, through civil action.

Pursuing the perpetrator and/or end recipient of the bribe can cross international borders and involve multiple jurisdictions. However, the English civil law regime recognises the international character of fraud, including bribery, and supports the objective of holding to account culpable individuals who (or whose assets) may be outside home jurisdiction. An array of court powers, including search, disclosure and freezing orders can be applied worldwide, and UK courts have shown a willingness in assisting claimants to help identify and punish fraudsters, regardless of where they have taken refuge or attempted to conceal illegal gains.

Civil law remedies are therefore a powerful option for victims of bribery.  Businesses and public prosecutors can and should work together to tackle the rise of financial crime, thereby ensuring that the UK remains a clean and safe place to do business.

Jennifer Craven is a civil fraud and asset recovery expert at Pinsent Masons, the law firm behind Out-Law.com.