23rd February 2021
UK Anti-Corruption Sanctions
Bribery and corruption pose a significant threat to financial systems in every part of the world and facilitate a range of criminal activities such as fraud, embezzlement, money laundering and the financing of terrorism. In 2018, UN research revealed that the global cost of corruption was over 5% of the world’s gross GDP, equating to around $3.6 trillion per year. In response to the threat, national governments develop and implement anti-bribery and corruption policies in order to deter criminal activity and facilitate sanctions against persons, such as public and government officials, that are found guilty of wrongdoing.
In the United Kingdom, a range of protections and measures have been implemented to manage the bribery and corruption threat. These measures impose important compliance obligations on firms operating within the UK’s jurisdiction and carry significant penalties for noncompliance. Accordingly, UK firms should understand the UK anti-corruption policy and how to integrate it effectively as part of a compliance program.
The UK is working to position itself as a global anti-corruption leader. In 2014, the UK government published its Anti-Corruption Plan, outlining the UK’s goal to ‘build a better picture of the threat from corruption’ and strengthen law enforcement responses. In 2016, the UK hosted the Anti-Corruption Summit, emphasizing the need for collective global action against bribery and corruption. Following the summit, the UK passed the Criminal Finances Act (2017): the legislation gave UK law enforcement authorities greater powers to investigate and recover the proceeds of corruption and to combat associated activities including money laundering and the financing of terrorism.
The UK uses the OECD’ Convention on Combating Bribery of Foreign Public Officials in International Business Transactions to establish the standards by which to judge criminal bribery of foreign officials. The convention focuses on criminalizing the actions of the parties supplying the bribes as part of the business relationship.
UK Anti-Corruption Strategy: Details of the UK’s governmental approach to anti-corruption are set out in the UK Anti-Corruption Strategy document published in December 2017. The strategy is a framework for the UK’s anti-corruption efforts up to 2022 and establishes the following specific priorities:
- Reducing the threat to the UK’s borders and ports and other high-risk domestic sectors.
- Strengthening the UK’s status as a global financial destination.
- Increasing confidence in the UK’s public and private sectors.
- Reducing the corruption threat to public procurement and grants processes.
- Strengthening the global business environment against corruption.
- Coordinating with the governments of other countries to combat corruption.
The main legislation establishing the criminality of bribery and corruption in the UK is the Bribery Act (2010). The act defines bribery as a criminal offence that involves giving (or promising) money to another person in exchange for that person performing their job, function, or an activity, improperly. The criminal offence of bribery applies to both individual and corporate entities, and applies regardless of whether the person receiving the bribe subsequently delivers the improper performance,
The UK Bribery Act has extraterritorial jurisdiction which means that it applies both domestically and abroad and covers bribery offences that involve foreign officials.
The UK’s Anti-Corruption penalties are substantial and vary depending on the severity of the offence. Individuals that are found guilty of a corruption offence face a maximum sentence of up to 10 years in prison along with a potential unlimited fine. Corporate entities that are found guilty face an unlimited fine.
Corruption offences may carry further legal consequences including a prohibition on tendering for international contracts, confiscation of assets, and a requirement to submit to external monitoring.
Sanctions: When the UK government determines that corruption and bribery offences are sponsored or performed on the behalf of state-level actors, it may seek to impose economic sanctions against the persons and governments responsible. Sanctions involve asset freezes and the prohibition of trade and business relationships with designated persons, and function as a way to punish and deter criminal activity and to achieve the UK’s anti-corruption objectives.
When dealing with new customers, firms in the UK must perform suitable checks to ensure they are not doing business with a client that has been designated under the UK sanctions regime.
UK firms must ensure they operate in compliance with corruption and bribery legislation in order to avoid facilitating criminal activity and unwittingly aiding money laundering or terrorism financing schemes. In practice, this means putting an effective AML/CFT program in place that is capable of detecting customers that may be engaged in corrupt activities. Following FATF recommendations, UK firms are required to implement risk-based AML programs that feature the following measures and controls:
- Customer due diligence: Firms must establish and verify the identities of their customers in order to understand who they are doing business with and the risk of corruption that they face. Customers that present a higher corruption risk (and therefore a higher money laundering risk) should be subject to enhanced due diligence.
- Transaction monitoring: Transactional behavior may indicate that a customer is attempting to launder the proceeds of corruption. Firms should monitor their customers’ transactions for suspicious behavior, including unusual transaction patterns, or transactions involving high risk countries.
- Sanctions screening: UK firms should screen their customers against the relevant sanctions lists, including the UK sanctions list and the UNSC Consolidated List to ensure they are not doing business with persons that have been sanctioned for corruption.
- PEP screening: Politically exposed persons (PEP) often present a higher risk of corruption and money laundering because of their proximity to government funds and other sources of revenue. Accordingly, firms should screen and monitor their customers’ PEP status regularly.
Adverse Media: Corruption is often revealed in adverse media reports, which may also indicate that a customer presents an elevated risk of money laundering. Firms should monitor for adverse and negative news media involving their customers on an ongoing basis.