Corporate Anti-Corruption Sanctions – The Risk to UK Business
The UK’s new global anti-corruption sanctions regime came into force on 27 April 2021 but what does it mean in practice for the UK business community? The underlying intention is to prevent the corruption via the UK and catches the conduct of anyone within the UK and that of UK individuals and entities anywhere in the world.
Under the new rules (the Global Anti-Corruption Sanctions Regulations 2021):
· The foreign secretary has power to freeze assets and impose travel bans on ‘designated’ persons (including entities) where they have reasonable grounds to suspect they are linked to corruption. Such designation must be ‘appropriate’.
· It is a criminal offence for those sanctions to be breached in the UK; and for a UK individual/entity to breach them wherever they are located. Breaches could be sanctioned by prison sentences of up to seven years and/or a fine.
The new sanctions regime is already beginning to bite: by 4 May, measures had already been imposed on 22 individuals.
Implications for business
UK businesses and organisations (including those with branches operating in other countries) and UK subsidiaries of foreign companies are all caught by the new regime. Businesses – beware.
So, what factors will the government consider when designating a person or entity? In April, it set out some of the relevant factors, including government anti-corruption policy priorities; the scale, nature and impact of the serious corruption; the person’s status, connections and activities; and risk of reprisals.
‘Corruption’ includes corporate bribery - one of the key priorities for government in recent years as far as corruption is concerned.
Importantly, relevant firms are required to submit a report to HM Treasury as soon as practicable in circumstances where they know or suspect a person is a designated person or has breached the regulations. Failing to do so itself carries a potential 6-month prison sentence and or fine.
Unsurprisingly, individual directors and officers can also be personally liable if their company commits an offence with their consent or where they were negligent. It will presumably be extremely to ‘hide’ behind the corporate structure to resist potential charges.
What does this mean?
Companies and their individual directors and officers cannot afford to ignore this new regime. Translating this into practice requires a tightening of due diligence procedures and reviewing relevant policies and procedure to reduce any risks of being caught by the regulation.
Bribery and corruption risk assessments should be updated in light of the introduction of the new regime to mitigate the potential for being caught under the new regime.
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