United Kingdom Fraud Advisory Panel Issues Report on Domestic Corruption

On July 2, the Fraud Advisory Panel, an independent anti-fraud charity in the United Kingdom, announced its issuance of a report that calls attention to the problem of domestic corruption.  The report, entitled “Hidden in plain sight: domestic corruption, fraud and the integrity deficit,” raises concerns that while foreign corruption attracts substantial media and public attention, “data on domestic corruption are not collected systematically, let alone analysed” and “[t]here is no dedicated infrastructure or single agency in the UK responsible for taking the lead in policing domestic corruption.”

The report acknowledges that the United Kingdom Government has an Anti-Corruption Strategy that will operate until 2022.  At the same time, it notes that the Strategy “contains a number of worrying signs that the government still doesn’t fully ‘get’ the reality of domestic corruption risks.“  Those signs include (1) failure to address the question of resources and the deleterious effects of the Government’s years-long commitment to “austerity” on law enforcement: (2) the inadequacy of empirical data on domestic corruption; (3) the lack of “lead responsibility for policing domestic corruption,” and of a dedicated infrastructure or resource base; and (4) the absence of a system for the public to report corruption (although the Home Office reportedly indicated that one is “is in the pipeline”); and (5) conflicts of interest and the “revolving door” are “the fundamental flaw at the heart of our national preference for so-called ‘self-regulation’.”

The report makes five key recommendations for action:

  • In view of the ongoing £1 billion reform of the United Kingdom’s courts, the United Kingdom Government should concentrate on greater transparency and openness of its courts and proceedings (including vastly easier access to court information and documents).”
  • There should be “a strong and structured approach to policing domestic corruption risks, starting with an easy-to-use central public reporting mechanism feeding a systematic approach to recording and analysing the data.”
  • To improve the use of the Bribery Act 2010 in domestic and small-scale cases, agencies should “improve police training and reduce the bureaucracy surrounding bribery case authorisations.”
  • The Government “should bring forward firm plans to create a new offence of ‘failure to prevent economic crime’,” so that corporate executives can be held “to the same criminal standards as the rest of us.”
  • There should be a public consultation on a statutory framework for conflict-of-interest concerns.

Note: As a general matter, the Fraud Advisory Panel’s report is a useful reminder to government agencies and companies (and not just in the United Kingdom) that corruption risk extends well beyond foreign-official bribery.  In many countries, most individuals and companies face a far greater day-to-day risk of corruption from a local business owner or local official than from a senior official of a foreign government.  For that reason alone, financial-crime compliance teams should review their companies’ anti-bribery and corruption compliance programs, including their anti-corruption risk assessments, to see that they appropriately address domestic corruption risks.

Most of the report’s recommendations also identify key deficiencies in the United Kingdom’s anti-corruption program that are being remedied or can be remedied without extraordinary cost to the Government – provided that the Government is prepared to concede that continuing rigid adherence to austerity makes no sense for fundamental law enforcement functions.  On the other hand, the recommendation to extend the “failure to prevent” concept to economic crime lacks substantial justification, and in any event is of far less importance than the other recommendations for an effective response to domestic corruption.  Whether the Government, under a new Prime Minister, is prepared to modify its anti-corruption strategy to address any of these issues, remains to be seen.

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