Out-Law Legal Update
High Court guidance will reassure banks acting to freeze accounts suspected of holding proceeds of crime
Out-Law Analysis | 03 Apr 2017 | 4:21 pm | 2 min. read
Foreign bribery should attract significant penalties, and Scotland's civil settlement regime is potentially too lenient, according to the report, which assessed the effectiveness of UK and Scottish law enforcement agencies in detecting and prosecuting bribery and corruption of foreign public officials. The OECD also prefers the more transparent nature of DPAs, and the fact that there is judicial oversight.
However, at the heart of the OECD's recommendation there is an inconsistency. It supports a regime to encourage companies to self-report but it also wishes to make the penalties in Scotland for resolving cases more severe.
As the OECD also points out, the real mischief is a UK-wide failure to detect most cases of overseas bribery. Although the UK is a major enforcer of overseas public sector bribery, the total number of enforcement cases relative to the UK economy remains low. Over half of the cases brought are a result of corporate self-reports. This is disproportionately high, and it leads to more ethical companies being the subject of enforcement action than criminal enterprises.
If the scourge of international bribery is to be tackled, increasing the risk of detection should be the real priority - and that can only be achieved through funding specialist investigators and prosecutors, and by greater inter-agency cooperation within the UK and internationally. The report highlighted Scotland's oil and gas sector, which operates in parts of the world where there is a high risk of bribed being paid to public officials, and therefore identified the need for effective bribery enforcement in Scotland.
Under Scotland's existing civil settlement regime, a company that self-reported to the Crown Office and Procurator Fiscal Service (COPFS) may enter into an agreement to pay over any profit earned from a bribe and to remediate, in return for COPFS not prosecuting the company for any bribery offences. DPAs in England are similar, but a DPA includes a penalty which may be up to four times the profit earned from a contract that is tainted by bribery, the entering into of the agreement is overseen by a judge and the case details are published.
The English or US model is unlikely to be right for Scotland because we have a far clearer separation between the role of the prosecutor in exercising prosecutorial discretion and judicial responsibility for sentencing. Scottish judges may not welcome DPAs as it conflates the role of prosecutor and sentencer.
Care is also needed not to undermine the substantial success that COPFS has achieved in encouraging self-reports in Scotland. The existing regime is designed to encourage companies to self-police and self-report failures to prevent bribery for which companies are criminally liable under the Bribery Act. Self-reports under this regime have led to enforcement action, and the recovery of significant sums of money, from businesses including Abbot Group (£5.6 million); Braid Group (£2.2m); Brand-Rex (£212,000); International Tubular Services (£172,000); and TGNS (£138,000). Those cases have involved bribes of persons working for companies rather than of foreign public officials, and therefore the settlements were not taken into account by the OECD in its analysis of Scottish enforcement.
The Scottish Government and COPFS will need to report back to the OECD within two years on the steps taken to implement its recommendations. It therefore seems likely that DPAs in some form will be introduced into Scotland. While they are under consideration, however, the civil settlement regime remains open - and perhaps more companies will take the opportunity to clean out any skeletons before the enforcement regime hardens.
Tom Stocker is a corporate crime expert at Pinsent Masons, the law firm behind Out-Law.com.
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