UK Bribery Act catches corporate and bank
Four years after the English Bribery Act 2010 came into force, a UK company (Sweett Group plc) has been prosecuted for a failure to prevent bribery abroad by a foreign-related entity and Standard Bank entered into a deferred prosecution agreement relating to similar conduct.
Sweett Group plc has been ordered to pay GBP 2.25 million in penalties after pleading guilty to a failure to prevent bribery relating to a hotel project in the United Arab Emirates. The actions of a Cypriot subsidiary, carried on outside the UK, in relation to the UAE contract were caught by s7 of the Bribery Act (failing to prevent bribery). While Sweett's Cypriot subsidiary may (as the defence suggested) have been a "gangrenous limb" within the organisation, the systemic failures of Sweett, as the parent company, to properly supervise its subsidiary made Sweett liable.
Standard Bank (a UK-regulated bank) avoided prosecution because it was offered a deferred prosecution agreement, the first of its kind in the UK. Standard Bank and its Tanzanian sister company, Stanbic Bank Tanzania, pitched for a joint mandate from the Government of Tanzania to act as lead managers for a sovereign note issuance. The proposed fee for the mandate was 2.4% of the proceeds raised, although two of Stanbic's senior officers had arranged (initially unbeknown to Standard Bank) that 1% of this fee would be paid to a local Tanzanian partner company called EGMA, whose Chairman and substantial shareholder was the Commissioner of the Tanzania Revenue Authority, and therefore a member of the Tanzanian government. EGMA did not subsequently provide any services in relation to the deal, leading to the inescapable inference that the Stanbic officers intended that the 1% fee would induce EGMA's Chairman (and perhaps others in the government) to show favour to Stanbic and Standard Bank's proposal. Standard Bank self-reported the conduct to the Serious Fraud Office (the UK enforcement agency) and following what was praised as "full co-operation" entered into a deferred prosecution agreement, in return for Standard Bank compensating the Tanzanian government USD 6 million (being the 1% fee paid to EGMA), disgorging the USD 8.4 million profits in respect of the transaction (being the remaining 1.4% fee) and paying a USD 16.8 million fine, as well as submitting to a review of its anti-bribery policies and paying the SFO's costs.
Sweett was not offered a deferred prosecution agreement, probably because of its self-reporting and co-operation shortcomings. However, it is interesting to compare the penalty given to Sweett and that agreed between the SFO and Standard Bank.
The fine component of both Sweett's and Standard Bank's financial penalties was calculated based on the benefit gained from the bribery. This was multiplied by a percentage to reflect culpability in accordance with sentencing guidelines. For Standard Bank, this percentage was assessed at 300%, while for Sweett, it was only 250%.
It can be argued that such a difference in the assessed level of culpability is explained by the fact that Standard Bank had previously received an FCA fine for failings in its money laundering systems and controls. However, Sweett had wilfully ignored multiple auditors' warnings regarding its subsidiary, permitted bribery payments for 18 months and been at points less co- operative with the SFO. While Sweett serves to illustrate the discretion that judges will have in enforcing the Bribery Act 2010, it is notable that the first corporate criminal conviction for bribery incurred a lower financial penalty (in both absolute and relative terms) than the first deferred prosecution.
Taken together, the Standard Bank deferred prosecution agreement and the Sweett case provide some guidance as to the extent of co-operation needed to have a chance of securing a deferred prosecution agreement. If the indications from the SFO are anything to go by, there may well be several more Bribery Act cases to guide us by the end of the year.