Recent Reports on Bribery and Corruption: OECD (Greece) and Fraud Advisory Panel (UK)

In recent days, serious concerns over the state of bribery in Greece and Britain have been published by the OECD and the Fraud Advisory Panel respectively. The OECD is an international organisation in which governments identify good practices and promote decisions and policies that improve economic and social well-being of people around the world. The Fraud Advisory Panel is an influential charity with members from the public and private sectors and academia. It encourages the prevention, detection, investigation, prosecution and deterrence of fraud and corruption.

Greece and the OECD

The OECD Working Group on Bribery expressed serious concerns that recent steps taken by Greece may leave the country in breach of the OECD’s Anti-Bribery Convention. On 11 June 2019, Greece amended the Criminal and Criminal Procedure Codes converting the main active bribery offence from a felony to a misdemeanour, a less serious offence. The Working Group is concerned that this amendment may have far-reaching ramifications, ranging from the closure of ongoing corruption-related investigations and prosecutions, to possible hindrance of international cooperation in future cases and shorter limitation periods. The Codes came into force on 1 July 2019.

As a result the Working Group on Bribery will conduct a further review of Greece, jointly with the Council of Europe Group of States against Corruption (GRECO), reporting in December 2019. The OECD Working Group will send a letter to the Greek Prime Minister outlining its concerns about the potential impact of the revised anti-corruption criminal measures.

Britain and the Fraud Advisory Panel

The UK has had an anti-corruption strategy since 2017, running until 2022. Its six priorities are:

1. Reduce the insider threat in high risk domestic sectors.

2. Strengthen the integrity of the UK as an international financial centre.

3. Promote integrity across the public and private sectors.

4. Reduce corruption in public procurement and grants.

5. Improve the business environment globally.

6. Work with other countries to combat corruption.

But the Fraud Advisory Panel expresses the concern that the government is not focused on domestic corruption risks. Its report “Hidden in Plain Sight”, published in July 2019, sets out concerns about the attitude to domestic bribery in the UK. The list of high-risk domestic sectors (policing, prisons, border control, defence and local authorities) has some “surprising” omissions, including finance, central government itself, and the democratic process. Quoting Corruption Watch, the report suggests that Austerity is itself a driver for corruption and that, although the UK is a world leader in addressing overseas corruption, it is failing to confront and deal with the situation at home. There is no doubt that with decreased resources in policing and prosecuting authorities’ budgets, fraud and corruption is not a priority. A piece of research at Manchester University states that from 2016-2018 there has been an average of 2-3 bribery cases, per police force, per year reported in the UK (327 in total) of which a third resulted in a definite outcome. This data is at odds with the growing evidence of money-laundering and fraud domestically and overseas corruption committed by British companies.

Both reports highlight ongoing worries about how governments approach the problem of bribery in fact, in contrast to the stated aims to eradicate corruption both domestically and internationally.

 

Amanda Pinto QC
33 Chancery Lane

Members of Chambers frequently advise individuals, corporates and law enforcement agencies domestically and internationally in relation to money laundering, alleged bribery and corruption and responding to investigations in civil and criminal matters. To find out more, or to instruct us, please contact Martin Adams or Chris Chiles or call 020 7440 9950.

Anti-money laundering and counter-terrorist financing: supervision report 2017 to 2018

The Treasury has just published its annual report for 2017-18 on the effectiveness of anti-money laundering (AML) and counter-terrorist finance (CTF) supervision in the accountancy and legal services sectors. The UK’s AML and CTF supervisory regime is comprehensive but the results of supervision have proved inconsistent across the supervisors.

The Money Laundering Regulations 2017 require supervisors to ensure that regulated firms who contravene relevant requirements are liable to effective, proportionate and dissuasive measures. Supervisors may use enforcement measures and sanctions such as fines, public censure, suspension or withdrawal of the right to provide services.

In the accountancy and legal services sectors, the Treasury report criticises the supervisory functions of all but three entities: the FCA, HMRC and the Gambling Commission, each of which is said to have a stronger understanding of the ML/TF risks than the other 22 supervising professional bodies. However, the Treasury report does not distinguish between the different types of work and the consequent likelihood of failings amongst those supervised. For example, the Bar Council of England and Wales has not sanctioned anyone for AML/TF breaches in 2017/18, but barristers do not normally handle client funds so the possibility of them being used to launder money is far lower than, for example, solicitors who are supervised by the Law Society. Weaknesses in supervision and sanctions are a significant issue leading also to a reduction in the quality of intelligence. According to the report, the UK has put (unspecified) steps in place to address these issues.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/815240/AML_supervision_report_2017-2018.pdf

Amanda Pinto QC
33 Chancery Lane

Members of Chambers frequently advise individuals, corporates and law enforcement agencies domestically and internationally in relation to money laundering, alleged bribery and corruption and responding to investigations in civil and criminal matters. To find out more, or to instruct us, please contact Martin Adams or Chris Chiles or call 0207 440 9950.

Anti-corruption trends, challenges and good practices in Europe & the United States of America, the 19th General Activity report of the Group of States against Corruption (GRECO)

At the end of June 2019 the Council of Europe published Anti-corruption trends, challenges and good practices in Europe & the United States of America, the 19th General Activity report of the Group of States against Corruption (GRECO): https://rm.coe.int/19th-general-activity-report-2018-group-of-states-against-corruption-g/1680951d14.  In general terms for progress on anti-corruption measures, sadly the report makes for fairly depressing reading.

GRECO was established in 1999 by the Council of Europe to monitor States’ compliance with the organisation’s anti-corruption standards: its 49 Member States include the United Kingdom and the other EU Member States, the Russian Federation and the United States of America.  GRECO prides itself on 20 years of work in this area but in the foreword to the report the President of GRECO also notes that “No country is immune to corruption.  All countries, irrespective of their position in perception indexes, are required to take concrete measures to prevent and counter corruption”, observing for example that 14 GRECO Member States have not yet ratified the Civil Law Convention of Corruption of 1999 (one of three unique treaties developed by the Council of Europe to deal with corruption), and 44 Member States received at least one recommendation on whistle-blower protection. 

GRECO’s monitoring work is organised in rounds, and the current (5th) evaluation round focuses on preventing corruption and promoting integrity in central governments (top executive functions) and law enforcement agencies, as well as checking compliance with earlier unresolved recommendations to individual Member States on themes such as identification, seizure and confiscation of corruption proceeds and reporting of corruption and whistle-blower protection (2nd round); criminalising passive and active bribery offences  and transparency of political funding (3rd round); and prevention of corruption by members of parliament, judges and prosecutors (4th round).

This report evaluated the 4th round in nearly all of the Member States and found that the UK had implemented all of GRECO’s previous recommendations on preventing corruption by MPs and prosecutors, but still had an outstanding recommendation to implement fully in relation to judges (namely, enhancing security of tenure for full-time salaried judicial office holders).

By contrast for example, France had only implemented fully a third of GRECO’s recommendations in relation to MPs and judges, and half of those relating to prosecutors; Italy had implemented only half of the recommendations for each category; Finland had implemented them all; but most other Member States still had quite some way to go, meaning that by the end of 2018 only a third of all 4th round recommendations had been implemented fully.  It is important to note that the Russian Federation and the USA (amongst others) did not make public their implementation statistics, meaning that a true picture of implementation has not been given in this report and compliance generally across the Member States is likely therefore to be even lower.  Perhaps little surprise then that the GRECO President’s foreword also observed that there is “no reason for complacency” and “in some cases GRECO is seeing regression”.

Looking forward in the 5th round of evaluation underway across the Member States, GRECO has already identified a number of shortcomings that require the UK authorities’ attention to strengthen corruption prevention in respect of ministers and senior government officials as well as law enforcement officials; including for example, making more detailed information available regarding meetings held by ministers, special advisers and senior civil servants with third parties (such as lobbyists); clarifying and broadening the scope of what are to be considered “relevant interests” in ministers’ published declarations of interests; strengthening the protection of whistle-blowers within the police service; and reaffirming the obligation for police officers to report corrupt conduct.  The UK was invited by GRECO to report on the progress of implementing these recommendations by the end of June 2019.

Meanwhile, in Transparency International’s Corruption Perceptions Index 2018, the UK scores 80 out of 100 (where 0 is highly corrupt and 100 is very clean), ranking the UK 11th out of 180 countries on perceived levels of public sector corruption according to experts and business people.  The Index’s regional analysis for Western Europe and the EU found “stagnating anti-corruption efforts and weakening democratic institutions”, warning that a number of GRECO Member States have declined in perceptions of corruption (including Malta and Turkey) whilst others should be watched carefully (such as the USA and the Czech Republic).

Update on 10 July 2019: the OECD and GRECO today announced an urgent supplementary review of GRECO Member State Greece to reflect their concerns about Greece’s decision in June 2019 to reduce its main active criminal bribery offence from a felony to the lesser offence of a misdemeanour, in potential breach of the OECD’s Anti-Bribery Convention.  This is not the first time that an OECD Working Group has decided to conduct a supplementary review into Greece’s anti-corruption activities, and in the Report discussed in the article above, Greece was found not to have implemented at all two-thirds of GRECO’s recommendations on preventing corruption by judges and 62% of recommendations in relation to prosecutors.  In an earlier evaluation report regarding Greece’s approach to dealing with sudden changes to funding of political parties, GRECO noted “multiple, often divergent legal changes within short periods of time, creates an unpredictable legal framework which may result in ineffective implementation and a substantial lack of transparency. It jeopardizes legal certainty and puts into question the credibility of the system.” 

Fiona Jackson
33 Chancery Lane

Fiona Jackson and other Members of Chambers frequently advise individuals, corporates and law enforcement agencies domestically and internationally in relation to alleged bribery and corruption and responding to investigations in civil and criminal matters.  Members of Chambers also provide high level training on anti-corruption measures in GRECO Member States and around the world on behalf of entities such as the United Nations, the Council of Europe, the National Crime Agency, the British Council and the UK’s Foreign & Commonwealth Office.  To find out more, or to instruct us, please contact Martin Adams or Chris Chiles or call 0207 440 9950.

Challenge to Disclosure Orders

R (ex p A, B and C) v SFO - 6th June 2019

In 2016, a Disclosure Order was made under section 357(1) of PoCA 2002 in respect of a confiscation order made under Part VI of the Criminal Justice Act 1988 in 2007. In 2019, notice in writing was given to the 3 Claimants (who were NOT identified in the DO) who the appropriate officer considered may have information relevant to the confiscation investigation, requiring them to attend for interview to answer questions relevant to the investigation [under s.357(4), PoCA].

The Claimants challenged the notices on the grounds that:

  1. There is no jurisdiction to issue a disclosure order under Part 8 of PoCA in respect of a confiscation order that was made under the CJA; and

  2. A disclosure order must bear on its face the name of a person upon whom a notice is issued. 


As to jurisdiction, Dove J. held that Part 8 powers are available in respect of confiscation orders made under the earlier statutory confiscation provisions (CJA/DTA): in the absence of express words in s.341 (as amended) limiting the application of Part 8 powers to PoCA proceedings, it was clear from the Explanatory Notes that Parliament intended the Part 8 powers to replace and consolidate the earlier investigative powers (which were repealed by PoCA, although the power to make confiscation orders under the CJA or DTA was retained). The jurisdiction issue was, in any event, decided by R (Horne) [2012] EWHC 1350 (Admin), [2012] 1 WLR 3152.

As to the second ground, the Court noted that Parliament had expressly provided that a DO authorised the appropriate officer to issue a notice under s.357; this might happen at any time after the issue of the DO for as long as the confiscation investigation is underway. That this was the correct interpretation of the statutory scheme was confirmed in Serious Organised Crime Agency v Perry & Ors [2010] EWCA Civ 907, [2011] 1 WLR 542 at §25, per Carnwath LJ., NCA v Simkus [2016] EWHC 255 (Admin); [2016] 1 W.L.R. 3481, per Edis J.  and NCA v K [2018] EWHC 3531, per Ouseley J and supported by the Explanatory Notes to PoCA, §517.  Had Parliament intended that a fresh application be made each time the officer wanted to question a person not named in the DO, it would have said so.

Martin Evans QC
33 Chancery Lane

Noticeable Increase in the use of NCA Powers to Recover Tax

In addition to UWOs and AFOs, the NCA has in its armoury a procedure for collecting taxes under the provisions of Part 6 of the Proceeds of Crime Act 2002.

 

If the qualifying conditions set out In S.317 of Proceeds of Crime Act 2002 are met the NCA will step into the shoes of HMRC (following the service of notice on HMRC to vest such powers in the NCA) to adopt its general revenue functions and seek to recover taxes. These conditions will be met where the NCA has reasonable grounds to suspect that:

 

•               undisclosed income, profits or gains have arisen or accrued in a chargeable period; and,

 

•                the income, profits or gains are chargeable to income tax or capital gains tax; and,

 

•               All or part of the income, profits or gains have arisen or accrued (directly or indirectly) as a result of criminal conduct (including the conduct of a third party).

 

If the NCA are satisfied that the qualifying conditions have been met, then notice is sent to the individual tax payer (R) to commence the process.

 

The NCA’s letter will:

(1) notify R of its decision to adopt the general revenue functions of HMRC in respect for example of R’s Income Tax and/or Capital Gains Tax liabilities and Class 4 National Insurance Contributions in relation to the stated years.

 

(2) advise R that the NCA will be responsible for assessing and recovering Income Tax, Capital Gains Tax and Class 4 National Insurance contributions owed in relation to the years stated.

 

(3) Inform R that interest is due upon any unpaid Income Tax, Capital Gains Tax and Class 4 National Insurance contributions owed In relation to the years stated and will continue to accrue.

 

(4) Inform R that he may be liable for penalties of up to 100 % of the Income Tax, Capital Gains Tax and Class 4 National Insurance contributions owed in relation to the stated years.

 

This will be a challenge for R to respond to – particularly when the burden is on R to disprove allegations implying criminality.  

We can expect, just like account freezing order applications, a rise in these types of proceedings by the NCA.

 

Barry Stancombe
33 Chancery Lane

Koza Ltd v Akcil [2019] EWCA Civ 891

This recent authority from the Court of Appeal Civil Division may well provide the basis for hitherto unsuccessful attempts to allow companies to be permitted to pay for representation of individual defendants who are also officers of the company where the company has had its assets frozen.

The case itself did not have a background of an existing freezing order but those powers were explored in the judgment. The Court held that the payment of legal expenses incurred by a Company Director resisting extradition proceedings did fall within the parameters of disposing of funds in the ordinary and proper course of its business. The fact that the Defendant may have had personal assets from which he could have met those fees was held to be a factor that carried very little weight when considering whether the payments fell within the existing remit of the order. A distinction was to be drawn with cases where a party was actually seeking a variation to an order to release funds.

The Court also held that civil litigation funding also fell within the remit of the order even where on one view the benefit to the Company was indirect in its nature.

The case will provide potential assistance for those faced with freezing orders over business assets and despite the legislative steer of s69 PCA 2002; the author suggests that there may well be some cases where this case could be deployed to secure the release of legal fees to fund criminal defence work. What I like most about it is the very useful list of propositions for a Court to consider when deciding such cases [found at paragraph 27 if you are in a hurry!].

Penelope Small
33 Chancery Lane