How do businesses ensure they do the right thing, even in difficult economic times, when the drive to win work can overcome ethical considerations? For Paul Marshall, who leads the Corporate Crime and Investigations team at law firm Brodies LLP the answer is that regulators and prosecutors need to act to keep ethics at the top of the agenda.

The UK’s record in combating economic crime has recently come under attack. Anti-corruption watchdog Corruption Watch reported earlier this month that Britain’s record in fighting economic crime over the past decade showed up badly beside that of the US, because of a combination of weak laws and a failure by regulators to impose heavy fines.

Marshall comments “Business leaders must understand the risk of doing the wrong thing, no matter how strong the temptation”.

In Scotland, with our often-rehearsed record of prudence and probity there may have been a tendency to think that bribery and fraud were things that happened in other countries, not here. 

The introduction of the Bribery Act 2010, Marshall points out, was a significant moment.

“The Bribery Act put ethics firmly at the top of the agenda in the boardroom and gave prosecutors a new tool to prosecute bribery both in the public and private sector,” he says.

“In response to the Act business leaders started to look more closely at where the risks of economic crime existed for them and then took steps to protect against those risks coming to pass.  In practice, that has meant not only training your own people on the standards you expect, but also delivering that message to your supply chain.  This has been a positive step towards improving the ethics of corporate Scotland,” he says.

The operation of the Bribery Act, which came into force on 1 July 2011, has recently been reviewed by a Select Committee of the House of Lords. The Committee found that, although the Act is “an excellent piece of legislation” and “an example to other countries”, the number of prosecutions under the Act has been relatively low. Part of that may be the length of time it takes to conduct investigations into bribery, which often involve multiple witnesses and numerous documents.

Nevertheless, the consequences of breaching the Act, Marshall stresses, are serious. A business convicted of a corporate crime offence will face a significant financial penalty and seizure of the proceeds of crime.  Senior individuals in the business may also face prosecution and the potential of a custodial sentence.  For the business the harm caused to reputation and brand is long term and often even more damaging than the immediate impact of the court sentence.

Some sectors are likely to be more at risk than others and Marshall highlights the oil and gas sector (which often works with overseas jurisdictions assessed by Transparency International as high risk ), construction and manufacturing.

Before the introduction of the Bribery Act he adds, it was more difficult to convict a company for economic crime unless the prosecutor could show that the offence had been committed by individuals at the top level of the company. The Bribery Act sought to overcome that challenge by creating a new offence, commonly called the corporate offence, in which a business can be prosecuted for failing to prevent bribery by connected persons.

Marshall explains: “Even if a company was entirely unaware of bribery on its behalf by these connected persons it would still be guilty of the corporate offence unless it had adequate procedures in place to prevent bribery.”

 “The corporate offence put a clear onus on responsible business leaders to tackle corruption both in their business and in their supply chain.  The UK Government has noted the positive response from business, and is considering extending this approach to other areas of economic crime.” 

The SME sector, he adds, is particularly at risk. “Plcs and large nationals tend to have in-house expertise constantly developing and improving compliance procedures


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“However we see more problems arising in the SME sector, especially when businesses are experiencing a period of growth. If the business grows significantly in a financial year that’s a good news story, but more activity means more risk.  In those circumstances you often find that the approach to compliance and ethics falls behind the commercial growth, exposing the business to investigation and prosecution.

“It’s not that ethics and compliance are unimportant to these companies; but there are so many things happening at the top of the business that these factors are, unfortunately, not always at the top of the agenda, until it’s too late.”

Companies who discover a problem in their business have the option, with the assistance of their legal advisers, to voluntarily approach the authorities and self-report.

Marshall explains “Now you are encouraged by the prosecutor to be proactive if you discover something is wrong in your business or supply chain.  If you provide a full account of what has happened and cooperate with the prosecutor’s investigation, you open up the prospect of agreeing a civil settlement and penalty, rather than face prosecution. The important thing is that if you identify a problem, do not hesitate; be proactive,” he says.


So how effective is Scotland and the UK within the international community in fighting corporate crime? “There’s still some work to be done,” Marshall concedes. Both the House of Lords Select Committee and the OECD have voiced concern over the transparency of civil settlements reached with companies. In England, the equivalent Deferred Prosecution Agreements are sanctioned by the court. In Scotland, in contrast, the civil settlement regime involves an engagement between the reporting company and the Crown and there is no court involvement. The Scottish Government is being encouraged to legislate for a Scottish equivalent to DPAs and the Lord Advocate has indicated that Scottish Ministers intend to give consideration to the recommendations of the OECD and the House of Lords Select Committee.

“But there has been a sea change in leadership awareness about the need to take economic crime seriously.  You must drive a commitment to integrity and good practices – and you can control what happens within the four walls of your business. It’s also about working with the businesses in your supply chain, to encourage them to do business in the right way. That’s one of the key challenges.”

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