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3 January 2014 US and UK anticorruption regime By Dmitry Dementyev.

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Presentation on theme: "3 January 2014 US and UK anticorruption regime By Dmitry Dementyev."— Presentation transcript:

1 3 January 2014 US and UK anticorruption regime By Dmitry Dementyev

2 2 WHAT IS US / UK ANTI-BRIBERY REGIME? - easy and complex at the same time

3 33 US FCPA summary §78m(а). 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 US Code / Title 15. Commerce and Trade / Chapter 2B – Securities Exchanges Bribery of Foreign Officials §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 §78m. Periodical and other reports §78dd-2: Prohibited foreign trade practices by domestic concerns §78dd-3: Prohibited foreign trade practices by persons other than issuers §78dd-1(a): general jurisdiction - issuers (78l/78j(d)) - use of the mails or any means or instrumentality of interstate commerce §78ff. Penalties 1 2 §78dd-1(g): alternative jurisdiction - U.S. domestic issuers - use of mails or any means or instrumentalities is unnecessary

4 4 | 4 UK BA summary 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 Separate offense for bribery of foreign officials (drafted to resemble Anti-bribery Convention) Does not require the showing of improper performance U.K. Bribery Act 2010 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) 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 liability for management if offense has been committed with their consent or connivance Books and records under UK Companies Act

5 5 WHAT EXACTLY ARE THE THINGS THAT I MUST NOT DO? - must not bribe public officials

6 6 What is a bribe? - Anything of value Gifts Entertainment and hospitality Facilitation payments?

7 7 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

8 8 CAN I STRUCTURE MYSELF OUT? - most likely not

9 9 UK BA Jurisdiction 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 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

10 10 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

11 11 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


13 13 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)

14 14 CAN I CHOOSE TO STAY QUIET? - choose wisely

15 15 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)

16 16 WILL THEY LET BYGONES BE BYGONES? - most likely not

17 17 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)]

18 18 CAN I PLAY IT SAFE? - you should try

19 19 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

20 20 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?

21 21 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


23 23 - 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


25 25 Contact information Dmitry Dementyev Corporate Group Tel.: +7 495 633 70 17 Fax: +7 495 644 05 99 Email :

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