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US and UK anticorruption regime

US and UK anticorruption regime. By Dmitry Dementyev. WHAT IS US / UK ANTI-BRIBERY REGIME? - easy and complex at the same time. US FCPA summary. US Code / Title 15 . Commerce and Trade / Chapter 2B – Securities Exchanges. §78m . Periodical and other reports.

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US and UK anticorruption regime

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  1. US and UK anticorruption regime By Dmitry Dementyev

  2. WHAT IS US / UK ANTI-BRIBERY REGIME? - easy and complex at the same time

  3. US FCPA summary US Code / Title 15. Commerce and Trade / Chapter 2B – Securities Exchanges §78m. Periodical and other reports Bribery of Foreign Officials • §78m(а). Reports by issuer of security; contents: • issuers, registered pursuant to 78l • keep information and documents reasonably current • annual and quarterly reports §78dd-1 [Section 30A of the Securities & Exchange Act of 1934] Prohibited foreign trade practices by issuers • §78dd-1(a):general jurisdiction • issuers (78l/78j(d)) • use of the mails or any means or instrumentality of interstate commerce • §78m(b). Books, records, and internal accounting • issuers registered (78l), and filing reports (78o(d)) • in reasonable detail / accurately and fairly reflect • system of internal accounting controls • §78dd-1(g):alternative jurisdiction • U.S. domestic issuers • use of mails or any means or instrumentalities is unnecessary 2 1 §78dd-3: Prohibited foreign trade practices by persons other than issuers §78dd-2: Prohibited foreign trade practices by domestic concerns §78ff. Penalties 3

  4. UK BA summary U.K. Bribery Act 2010 Section 1: Bribing another person Section 6: Bribery of foreign public officials Section 7: Failure of commercial organizations to prevent bribery Section 14: Offenses 1, 2 and 6 by bodies corporate • Offering, promising or giving something before / after the fact • It does not matter if something is not given in return • what matters is improper performance of a relevant function or activity (reasonable expectation test) • Separate offense for bribery of foreign officials (drafted to resemble Anti-bribery Convention) • Does not require the showing of improper performance • liability for management if offense has been committed with their consent or connivance • A relevant commercial entity is guilty of an offense in this section if an associated person is guilty of an offense under Section 1 or 6 or would be guilty had the jurisdiction applied • Books and records under UK Companies Act | 4

  5. WHAT EXACTLY ARE THE THINGS THAT I MUST NOT DO? - must not bribe public officials

  6. What is a bribe? • Anything of value • Gifts • Entertainment and hospitality • “Facilitation payments”?

  7. Who are public officials? • Foreign official is any officer or employee of a foreign government or any department, agency, or instrumentality thereof” • What is “instrumentality”? • The term is loosely applied by US DoJ • Recently considered by federal district courts • ownership / financial control • actual control • privileges and obligations • financing • perception is reality

  8. CAN I “STRUCTURE” MYSELF OUT? - most likely not

  9. UK BA Jurisdiction Section 14: Offenses 1, 2 and 6 by bodies corporate Section 7: Failure of commercial organizations to prevent bribery Section 6: Bribery of foreign public officials Section 1: Bribing another person • Section 12:territorial application • act or omission which form part of the offense is committed in the UK • if outside the UK – there must be “close connection” Section 7: Carrying business or part of business in the UK Non-executive director with knowledge Executive director acting illegally

  10. UK BA Jurisdiction: uncertainty Ministry of justice: • common sense approach on a case-by-case basis • “having demonstrable business presence” • listing +? Courts: • no binding precedent / instructive only • “part of a business” under Financial Services and Markets Act 2000 SFO: • likely take an expansive view • value + competitive disadvantage for UK business

  11. US FCPA Jurisdiction • Issuers (foreign domestic) / director, employee or agent • Domestic concerns / director, employee or agent • While in the territory of the US - Use of means and instrumentalities of interstate commerce - Expansive interpretation of prong 3 - Aiding and abetting / conspiracy

  12. WILL THEY EVER KNOW WHAT I DID IN GEORGIA? - they may

  13. How will they know about a violation? • Requests for legal assistance • Competitors • SARs to UK Serious Organized Crime Agency (SOCA) • Whistleblowers (US SEC & UK SFO)

  14. CAN I CHOOSE TO STAY QUIET? - choose wisely

  15. Disclosure Obligations US: • FCPA violations are categorized as a type of fraud and trigger SOX violations • The application of SOX can affect a decision regarding disclosure • Sec. 302 of SOX (certification of financial statements by CEOs and CFOs) mandates auditors and the board of directors to disclose any fraud (material or immaterial) involving persons with a significant role in corporate internal control • Sec. 404 of SOX (internal control procedures) requires reporting on internal controls with respect to all consolidated subsidiaries, including minority-owned subsidiaries The UK: • UK Proceeds of Crime Act (POCA)

  16. WILL THEY LET BYGONES BE BYGONES? - most likely not

  17. Statute of Limitations FCPA • Tolling agreements • MLATS BA - no Statute of Limitations Giving of a bribe – crime is complete [Pendergast v. United States, 317 U.S. 412, 418 (1943)] No criminal prosecution, UNLESS 5 years No criminal prosecution Criminal conspiracy: [United States v. Milstein, 401 F.3d 53, 71 (2d Cir. 2005)] 5 years

  18. CAN I PLAY IT SAFE? - you should try

  19. Compliance Program UK BA: • Adequate procedures (UK BA, Official Guidance) • Full defense under Section 7 FCPA: • Compliance and internal controls (Sentencing Guidelines, DPAs, NPAs) • Mitigating factor

  20. Compliance: information flow • Are there rules and procedures in place? • Have the rules been properly conveyed? • Has the target audience had a chance to ask questions? • What are the consequences for breaking the rules? • Have the rules been updated?

  21. Compliance: liability pitfalls • Sec 802 of SOX – obstruction of justice • Punishable by a fine and imprisonment of up to 20 years • CCI case: • flushing down stuff • during internal investigation • US v Ray: obstruction before any federal investigation • Investigating company counsel are “deputized”

  22. FINAL THOUGHTS

  23. The laws are relevant for companies that do NOT fall within the jurisdictional reach • Transition from “compliance-curious” to “compliance-focused” • Compliance implementation requires effort • Compliance implementation must take into account local law specifics

  24. QUESTIONS?

  25. Contact information Dmitry DementyevCorporate GroupTel.: +7 495 633 70 17Fax: +7 495 644 05 99Email : DDementyev@salans.com

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