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More cases of corruption are likely as a result of the recession, according to the Director of Public Prosecutions. “It is likely that the economic downturn will have an effect on the pattern of crime,” Keir Starmer QC predicted.
He disclosed that the Crown Prosecution Service was making arrangements to deal with a possible rise in economic crimes. “You would expect the CPS to take on board what is happening, to assess the effect on crime patterns and to make sure that we are equipped to deal with it,” he added. “And that's what we're doing.”
Starmer was speaking after his counterpart at the Serious Fraud Office, Richard Alderman, had announced an investigation into the British operations of Bernard Madoff, the disgraced US investment adviser. No longer waiting for the police to conduct enquiries, Alderman is now inviting anyone who wants to report a fraud worth more than £1 million to fill in an online form. Meanwhile, City law firms are alerting their corporate clients to the risks of bribery and corruption.
Lovells, for example, has just launched a public website warning executives that corruption charges could lead to five years in a US prison, even if their company's links with the US are as tenuous as clearing funds through a New York bank. Corporates and individuals face greater exposure for malpractice than ever before, the firm adds, because of growing assertiveness by national authorities, vigorous enforcement regimes and stronger legislation — including a planned Bribery Bill based on Law Commission recommendations.
German electronics group Siemens was recently ordered to pay about €1 billion (£890 million) in fines to the US and German authorities for bribing foreign government officials. In London last week, the Financial Services Authority announced that Aon, the leading risk and insurance firm, had been fined a record £5.25 million because of failings in its foreign anti-bribery controls.
“As a result of Aon Ltd's weak control environment,” said the FSA, “the firm made various suspicious payments, amounting to approximately $7 million, to a number of overseas firms and individuals.”
Aon's fine was reduced by 30% because the company had co-operated. Even so, FSA officials hoped the penalty would make businesses realise that operating abroad without an effective anti-corruption system was “completely unacceptable”.
Aon said it recognised and regretted its past failings, while pointing out that its behaviour had been neither deliberate nor reckless. It had put in controls which the FSA regarded as a “model of best practice for other firms to adopt”.
It's not just the fine, of course. Aon had to pay accountants and lawyers to investigate its foreign payments and design a new anti-corruption programme. And another cost of corruption is adverse publicity. That might be seen as a serious disincentive to owning up. But I would be surprised if Aon loses business as a result of the fine.
Even a financial institution that deals directly with consumers — such as Lloyds TSB — may not lose too many accounts after admitting at the weekend that it had violated the US International Emergency Economic Powers Act. The bank agreed to pay the US authorities a penalty of $350 million (£230 million) for helping customers to evade US economic sanctions on Iran and Sudan.
But so long as there are companies willing to pay bribes, surely those who take a principled view of compliance are bound to lose business?
Jeremy Cole, who heads what Lovells calls its bribery and corruption task force, accepts that principled companies will lose out in some areas.
“But in others, if they are big enough, then people will want to do business with them,” he adds. “The consequences of not taking a principled approach are far greater now — if you get found out.”
