Gifts – assets or liabilities?

Accepting a gift from a client is no longer as easy as it used to be, according to RIAA Barker Gillette’s regulatory specialist, Susan Humble, who explains anti-bribery and corruption regulations.

In olden times, the practice of the law (and not only the law) was awash with client jollies. Every sporting activity came with a corporate entertainment opportunity, even ten-pin bowling. And there were the freebies: bottles of wine, baskets of chocolate, and Christmas hampers. However, times have changed, and bribery and corruption have become closely associated with money laundering. And then, in July 2011 came the Bribery Act 2010 (the Act). Commit an offence under the Act and face imprisonment or fine, not to mention potentially career-ending action by the regulator.

The National Crime Agency publishes a glossary of codes for use when submitting anti-money laundering Suspicious Activity Reports; the most recent edition hit the press in June 2022. For example, the code for reporting knowledge or suspicion that the proceeds of bribery and corruption are funding a transaction is ‘XXD9XX’ and classified as a ‘specific predicate economic crime offence’. In addition, the UK Anti-Corruption Strategy 2017-2022 states that: ‘there is no universally accepted definition of corruption, but it is generally understood to involve the abuse of office and position to benefit a third party (an individual, business, or other organisation), in return for payment or other reward.’

A politically exposed person (PEP) generally presents a higher risk for potential involvement in bribery and corruption because of their position and influence. This summary, combined with the 2020 Nationwide Risk Assessment’s statement describing the UK as ‘…a prime destination for investment from foreign corrupt PEPS’, explains why PEPs are treated differently from the rest of us for anti-money laundering purposes.

All UK businesses are required to comply with the Act. They must be aware of bribery and corruption risks and be committed to communicating awareness to employees and business partners.

On 20 May 2022, the government published guidance on reducing the risk of bribery and corruption in trade. The headline points are:

• Assess risks in your country, your sector, and among your suppliers and employees
• Research potential trading partners
• Train your people
• Keep records of your avoidance, training, and mitigation procedures as evidence of action.

Practice managers should ensure that their firms:

• Put an anti-bribery and corruption policy in place
• Communicate the existence and content of the Policy to owners, officers, managers, and all employees
• Provide anti-bribery and corruption training to everyone at the firm
• Record the provision and content of training in case of an audit
• Lead from the top
• Enforce the Policy if the need arises.

Leading from the top is essential. Everyone must commit to compliance, particularly when accepting corporate hospitality and gifts. The basis upon which an individual or business accepts hospitality and gifts must be crystal clear ­– for instance, never in cash and above, say, £100, must be disclosed and recorded transparently in a central register. Firms must act, no matter how unpopular and difficult that action may prove if staff do not follow the policy. If management is seen not to comply, it’s a challenging task to require others too.

That said, most corporate hospitality and gifts will be entirely innocent and genuinely reflect a client’s appreciation of a business relationship or a piece of work well completed. The takeaway from this article and the following story is that firms must have a bribery and corruption policy, and all concerned must follow it and the rules. It’s an area that must be approached with caution and with an eye firmly on managing the risk of getting it wrong.

On 30 May 2022, the Solicitors Disciplinary Tribunal (SDT) approved an outcome agreed between the Solicitors Regulation Authority (SRA) and Dean Copley – who was admitted as a solicitor in 1988 and was a partner and director at the well-known law firm Gateley. The facts, according to the SDT’s published judgment, are these:

• In January 2016, Copley accepted £2,500 from a company client into his personal bank account
• He failed to declare the gift to his employers
• In December 2016, he emailed the client requesting a benefit for introducing the company to his business partner
• The client expressed dismay at the prospect of having to make a further payment
• Representatives of the client complained to the SRA.

The SRA alleged that Copley had breached principles 2 (act with integrity) and 6 (behave in a way that maintains the trust the public places in you and in the provision of legal services) of the 2011 principles. Copley ultimately admitted the allegations. He said that he genuinely believed the £2,500 to be a gift and did not know that he had to disclose it to his employer. He blamed the wording of his email to the client for giving the impression that he was seeking a financial benefit for himself. The SRA disputed DC’s representation of the facts but decided it would not be in the public interest to fight it out.

In its decision, the SDT said: ‘the public are entitled to expect that members of the legal profession handle gifts from clients in accordance with any internal policies created by their employer’.

Gateley sent a bribery and corruption code of conduct to all staff in 2011 and again in 2015. The code was also available on the firm’s intranet, set out the importance of compliance, and required all individuals to record hospitality offered/received, gifts received/declined, and sponsorship exceeding £100 (employees) or £250 (partners). Compliance was a contractual term of employment – a breach would attract disciplinary action. It was clear from the code that businesses and staff must never use hospitality and gifts to secure an improper advantage. Cash gifts were explicitly prohibited. The firm had provided training on anti-bribery and corruption and recorded its attendance.

What was the outcome? By agreement approved by the SDT, Copley was suspended from practice for 12 months and had to pay costs of £12,000.

The firm had done all it reasonably could to ensure compliance with its published and communicated policy.

In conclusion: get a policy in place and ensure everyone knows it exists and how to follow it. If you need a bribery and corruption policy or any kind of regulatory advice, contact regulatory specialist Susan Humble today.