Lecture 10- Criminal Law Flashcards
Bribery
Bribery is a serious offense under criminal law, involving the offering, giving, receiving, or soliciting of something of value as a means of influencing the actions of an individual in a position of power or authority. Bribery laws are designed to promote ethical behavior, ensure fair competition, and combat corruption
What are the offences under the bribery act 2010
Bribing Another Person (Active Bribery):
This occurs when a person offers, promises, or gives a financial or other advantage to another person:
To induce them to perform a relevant function improperly, or
To reward them for having already done so.
Example: Offering money to a public official to expedite the approval of a business permit
Being Bribed (Passive Bribery):
This occurs when a person requests, agrees to receive, or accepts a financial or other advantage:
As an inducement to perform a relevant function improperly, or
As a reward for having performed a relevant function improperly.
Example: An employee accepting a gift from a supplier in return for securing a contract
This offence is committed where a person requests or accepts a financial or other advantage improperly, or as a reward for improper performance of a relevant function or activity or intending the improper performance should result. The offence also applies if a person receives a benefit on behalf of another person.
The person whom the advantage is offered, promised or given does not need to be the same person as the person who is to perform or has performed the relevant function or activity improperly - example a line manager
Bribery of Foreign Public Officials:
This offense involves offering or giving a financial or other advantage to a foreign public official to influence their decision-making and gain business advantages.
Example: Offering to pay for a foreign official’s travel expenses in exchange for securing a lucrative contract.
This offence is like that of bribing another person but is committed where the bribe is offered to a foreign public official. It is committed where a person offers a financial or other advantage to a FPO or third party with the intention of influencing the FPO in that capacity and to obtain or retain a business advantage.
FPO is any individual who holds a legislative, administrative or judicial position of any kind outside the UK, or who is an official or agent of a public international organisation.
Penalty
under the Bribery Act 2010:
For Individuals:
Unlimited fines.
Up to 10 years of imprisonment.
For Companies:
Unlimited fines.
Reputational damage and exclusion from public procurement contracts
Corporate failure to prevent bribery
The offence of corporate failure to prevent bribery is committed by an organisation that fails to prevent a bribery offence being committed by a person who performs services for it in any capacity – such as an agent, employee or subsidiary. Under the Act, an organisation includes companies and partnerships based in the UK or doing business in the UK.
An example of potential criminality by a legal ‘person’(Salomon principle)
Defence – failure to prevent corporate bribery
An organisation has a defence if it can prove it had in place adequate procedures designed to prevent persons associated with it from committing bribery.
The Secretary of State published guidelines on adequate procedures which is based on around 6 principles
Principles for Adequate Procedures
Proportionality:
Anti-bribery measures should match the size, nature, and bribery risks faced by the organization.
Example: A multinational company operating in high-risk jurisdictions may require robust procedures, while a small business may need less extensive measures
Top-Level Commitment:
Senior management must actively promote an anti-bribery culture and ensure transparency in operations.
Risk Assessment:
Regular evaluations to identify bribery risks in various business activities, particularly in regions or sectors prone to corruption.
Due Diligence:
Investigating the background and compliance record of partners, agents, and contractors to reduce bribery risks.
Training and Communication:
Educating employees and associated persons about bribery risks and company policies through regular training sessions.
Monitoring and Review:
Continuously updating anti-bribery procedures to reflect changes in the law, industry standards, or operational circumstances
Penalties for Corporate Failure to Prevent Bribery
Financial Penalties:
Companies found guilty may face unlimited fines, depending on the severity of the offense and the level of negligence.
Reputational Damage:
Negative publicity and loss of trust can significantly harm the company’s brand and business relationships.
Exclusion from Public Contracts:
Convicted companies may be barred from bidding for public contracts under procurement regulations
Deferred Prosecution Agreements
Deferred Prosecution Agreements (DPAs) were introduced in the UK in 2014 to encourage self-reporting by corporates of criminal wrongdoing and their numbers are steadily increasing.
No company wishes to be prosecuted, given the expense and reputational damage involved as well as the risk of being barred from tendering for public sector contracts if it is convicted. However, only those companies that offer full co-operation with the authorities will be invited to enter a DPA. These agreements are not a soft option, however, and the conditions of any DPA offered need to be considered very carefully
A Deferred Prosecution Agreement (DPA) is a legal mechanism used primarily in corporate criminal cases to resolve allegations of serious economic crimes such as bribery, corruption, fraud, and money laundering. DPAs allow companies to avoid criminal prosecution by entering into an agreement with the prosecution, subject to strict conditions.
Typically, such conditions will include payments (financial penalty, compensation, costs), continuing duties of co-operation and the satisfactory completion of a corporate reform programme – possibly involving a monitor. If, within the time period agreed, the company in question complies with those conditions then the prosecutor will discontinue criminal proceedings and the company will avoid the risk of a conviction. However, if it does not satisfy those conditions, then the prosecutor will reactivate proceedings and continue the prosecution of the company
Money Laundering
Money laundering is the term given to attempts to make the proceeds of crime appear respectable. It can refer to any process by which criminals seek to hide the source and ownership of the proceeds of criminal activities, enabling them to keep control over such proceeds, and ultimately to provide an apparently legitimate cover for their sources of income
Money laundering is an international problem which can involve drugs and people trafficking, and organised crime in general.
This ‘dirty money’ is then put through or lost through legitimate businesses or assets such as property companies/taxi companies/restaurants/candy shops
The money laundering process usually involves three phases:
Placement – the initial disposal of the proceeds of the illegal activity into apparently legitimate activity or property
Layering – the transfers of monies from business to business or place to place to conceal the original source
Integration – the culmination of placement and layering, through which the money takes on the appearance of coming from a legitimate source
Accountants and other relevant persons must report knowledge or suspicion of money laundering to a nominated officer in their workplace the Money Laundering Reporting Officer (MLRO).
The MLRO has a duty to consider the facts and if appropriate to report the matter to the National Crime Agency
Reports should be made when :
New customer reluctant to provide proof of his identity
Where the customers transaction is not of a type or size normally conducted by that customer
Where a cash transaction is unusually large
Where a customer requires a payment to be made to a third party who appears to have no connection with the transaction
Proceeds of Crime Act 2002
Proceeds of Crime Act 2002 (POCA) is a key piece of legislation in the UK designed to combat money laundering, confiscate criminal assets, and disrupt financial crimes. It plays a crucial role in ensuring that the proceeds of unlawful activities cannot be enjoyed or reinvested by criminals
Proceeds of Crime Act 2002 identifies three categories of criminal offence including money laundering:
Laundering
Failure to report
Tipping off
Laundering - Proceeds of Crime Act 2002
This involves the acquisition, possession or use of the proceeds of criminal conduct, or assisting another to retain the proceeds of criminal conduct and concealing the proceeds of criminal activity.
Under the Act, it is an offence to conceal, disguise, convert, transfer or remove criminal property from the UK
Criminal Property:
Criminal property is defined as property which the alleged offender knows or suspects to constitute or represent benefit from any criminal conduct. It includes proceeds of tax evasion, any benefit obtained through bribery and corruption and benefits obtained through operation of a criminal cartel
Penalty:
The offence of knowingly assisting in the laundering of criminal funds is punishable by imprisonment up to a maximum of 14 years and/or an unlimited fine.
Failure to Report - Proceeds of Crime Act 2002
Certain individuals and organizations have a legal duty to report suspicions of money laundering. Failure to comply with this obligation is a criminal offense. This requirement primarily applies to those operating in regulated sectors such as financial services, legal practices, and accounting
This is failure to disclose knowledge or suspicion of money laundering. Under the Act it is an offence for a person who knows or suspects… that another person is engaged in money laundering, where the information or other matter on which his knowledge or suspicion is based… came to him in the course of a business in the regulated sector… not to report the fact to the appropriate authority
This offence relates to individuals such as accountants acting in the course of business.
Disclosure should be made to the MLRO or directly to National Crime Agency.
Failure to report is assessed objectively
Defences for not making a report include reasonable excuse and inadequate training
The maximum penalty for failure to report is 5 years imprisonment and/or an unlimited fine
Tipping Off - Proceeds of Crime Act 2002
The offense of tipping off arises when a person discloses information about a Suspicious Activity Report (SAR) or an investigation that could alert the subject of the suspicion, thereby potentially compromising the investigation
This involves disclosing information to any person if disclosure may prejudice an investigation into drug trafficking, drug money laundering, terrorist related activities or laundering the proceeds of criminal conduct.
It is therefore important NOT to inform a client that a report has been submitted to MLRO/NCA
Penalty up to 5 years imprisonment and /or unlimited fine
Insider dealing
Insider dealing involves dealing in securities while in possession of inside information as an insider, the securities being price affected by the information. It is also an offence of encouraging another to deal or to disclose the information other than in the proper performance of one’s employment, office or profession.
Typical cases relate to the leaking of confidential information relating to a takeover
Insider dealing occurs when an individual uses price-sensitive, non-public information about a company or financial instrument to gain an unfair advantage in trading securities. It is illegal because it undermines the integrity of financial markets and investor confidence
Encouraging another to deal
Where a person, having information as an insider, encourages another person to deal in price–affected securities in relation to that information, knowing or having reasonable cause to believe that dealing would take place.
It is irrelevant whether the person encouraged realises that the securities are price affected or whether any dealing actually takes place
Securities must be listed or regulated on a regulated market such as the stock exchange. The Criminal Justice Act 1993 does not apply to the unlisted markets
Maximum penalties for insider dealing are seven years imprisonment and/or an unlimited fine
Insider dealing/trading - practicalities
The 1993 Criminal Justice Act (Section 57) defines who is an “insider”, in the sense that they knew they had inside information and that they had it from an inside source.
Inside sources can be direct or indirect.
They may have been party to this information through their work, or have received it from someone within the company.
It has to be shown that the defendant knew that the information was sensitive and could give them an unfair advantage.
This can prove difficult to establish, because people are party to all kinds of information which they may deem has the potential to prove financially lucrative.
However, they may not be aware that it is not public or acting on it would be illegal.
For an insider dealing prosecution to be successful it must be demonstrated that a defendant understood exactly what they were doing
