In 2016, Italy’s most renowned mafia journalist, Roberto Saviano, proclaimed Britain “the most corrupt place on Earth,” thanks to the ease with which the proceeds of crime can be washed clean through its capital city. “The City of London is a far more important center for laundering criminal money than the Cayman Islands,” he said in an interview with the Guardian, referring to an offshore financial haven in the Caribbean.
The EU wanted to tighten up on money laundering and the UK was the only country who voted against it. In 2016 Italian journalist Roberto Saviano, who has spent most of his career investigating the mafia, claimed Britain was the most corrupt country in the world. Saviano told an audience at the Hay-on-Wye Book Festival: “If I asked you what is the most corrupt place on Earth you might tell me well it’s Afghanistan, maybe Greece, Nigeria, the South of Italy and I will tell you it’s the UK. It’s not the bureaucracy, it’s not the police, it’s not the politics but what is corrupt is the financial capital. 90 percent of the owners of capital in London have their headquarters offshore.”
Nicholas Wilson, a financial services whistleblower who was fired by UK law firm, Weightmans, after exposing millions of pounds in unfair customer charges, claims the City of London relies on "dirty money" and says the world economy would collapse if the City stopped laundering it. London has long attracted corrupt foreign money, especially from Russia, Nigeria, Pakistan, former Soviet states and Asia, and the police estimate that around 100 billion pounds of dirty money is moved through or into Britain each year.
The UK is still considered a global haven for money laundering. Laundered Russian money was channelled to individuals in the BREXIT leave campaign and the Trump presidential campaign. President Putin was delighted about the British Brexit decision and likes to see Europe feckless and weak. Russia clearly intervened in American politics, and the Russians intervened in the Brexit vote in June 2016. Russia was delighted with the idea of Brexit, not least because of the potential weakening effect on the western alliance.
According to a Home Affairs Committee report on the proceeds of crime, it was estimated that more than £100 billion is laundered through London’s financial systems every year. Despite more than 380,000 suspicious activity reports being filed each year, by 2016 the National Crime Agency had only 27 investigations open, with approximately £170 million frozen. By contrast, in Switzerland, some £5 billion-worth of Swiss francs were currently frozen.
People who are not entitled to vote in British elections may still donate large sums of money to political parties. Labour leader Jeremy Corbyn’s attack on the Conservative Party’s ability to extract cash from Russian donors provoked howls of disapproval in the Commons. "We are all familiar with the way in which huge fortunes, often acquired in the most dubious circumstances in Russia and sometimes connected with criminal elements, have ended up sheltering in London and trying to buy political influence in British party politics — “meddling in elections”, as the Prime Minister put it. There have been more than £800,000 of donations to the Conservative party from Russian oligarchs and their associates." The Russian money sitting in the Conservative Party’s bank accounts is there legally; that does not make it seemly. Britain has taken an indulgent attitude towards Russian cash.
In 2015, the National Crime Agency said that foreign criminals — it highlighted Russian criminals — are laundering billions of pounds of corrupt Russian money in London, pricing average Londoners out of being able to buy or even rent in central London. The National Crime Agency [NCA] estimated that the amount of money laundered in the UK could be up to £90 billion. In June 2015 Transparency International reported on how corrupt capital is used to buy property in the UK.
A Transparency International report on the conditions for local government corruption found that the following were present: low-level transparency, poor external scrutiny, networks of cronyism, lack of resources to investigate, outsourcing of public services, significant sums of money in play, a decline in the robustness to resist corruption and the reduced capacity of the local press.
The capacity to carry out UK company formation from outside the UK is a real lacuna in the current money laundering regime. Monitoring within the UK is difficult enough, as is evidenced by the use of, for example, Scottish limited partnerships in Russian and former eastern-bloc bank fraud and money laundering of gigantic proportions. This vulnerability is of course magnified when the company information provider eludes the UK’s money laundering oversight.
British law provides criminal penalties for official corruption, and the government generally implemented these laws effectively. The Prevention of Corruption Act makes bribery of domestic or foreign public officials a criminal offense. The maximum penalty under this act is imprisonment for up to seven years, and/or a fine not exceeding GBP 5,000 ($8,000). Corrupt payments are not deductible for UK tax purposes. Although isolated instances of bribery and corruption have occurred in the UK, U.S. investors have not identified corruption of public officials as a factor in doing business in the UK.
The Bribery Act is a UK statute that is similar to the FCPA but with some key differences. Unlike some other anti-corruption laws, this UK law contains criminal offenses that apply to commercial bribery as well as to bribery involving public officials. The UK law makes it a crime to offer or pay bribes to any person in the public or private-sector. An offense can arise where someone offers any financial or other advantage with the intention that a person will perform their functions or an activity improperly (or, in other words, misuse their position) or as a reward for a person for doing so.
Similarly, it is a crime to request or accept bribes. An offense can arise where someone requests any financial or other advantage with the intention that they will perform their functions or an activity improperly. These offenses can also be committed where the offer or request of a financial or other advantage is in itself improper (in other words, without anyone performing anything else improperly as a consequence).There is also a separate offense of bribing a foreign public official, where a financial or other advantage is offered with the intention of influencing the official and of obtaining or retaining a business advantage.
The UK formally ratified the OECD Convention on Combating Bribery in December 1998. Part 12 of the Anti-terrorism, Crime and Security (ATCS) Act of 2001, which came into force on February 14, 2002, includes legislation on bribery and corruption to deter UK companies and nationals from committing acts of bribery overseas. The act gives UK courts jurisdiction over crimes of corruption committed wholly overseas by UK nationals and by bodies incorporated under UK law. In addition to the OECD Convention, the UK is also actively involved in the Council of Europe's Group of States Against Corruption (GRECO), which helps its members develop effective anti-corruption systems. The UK also signed the UN Convention Against Corruption in December 2003 and ratified it on February 8, 2006. The UK has launched a number of initiatives to reduce corruption overseas.
The OECD Working Group on Bribery (WGB) has criticized the UK's implementation of the Anti-Bribery convention. In March 2007, the WGB decided to, "conduct a further examination of the UK's efforts to fight bribery," and "reaffirmed its serious concerns about the United Kingdom's discontinuance of the BAE Al Yamamah investigation and outlined continued shortcomings in UK Anti-Bribery legislation." Following this out-of-cycle review of UK practices, in October 2008, the WBG said it was, "disappointed and seriously concerned with the unsatisfactory implementation of the [OECD Anti-Bribery] Convention by the UK."
In 2007, the UK Law Commission began a consultation process to draft a Bribery Bill that met OECD standards. A report was published in October 2008 and consultations with experts from the OECD were held in early 2009. A draft bill was published in March 2009 and was announced as one of the government's priorities in the Queen's speech, November 18, at the State Opening of Parliament. The bill has received support from the Conservative opposition party and is currently being examined in the House of Lords. Secretary of State for Justice, Jack Straw, has repeatedly and publicly stated his personal commitment to see the Bribery Bill passed into law before the end of his term in office.
In December 2006, the UK's Serious Fraud Office (SFO) abandoned the bribery investigation into BAE Systems Plc and its 20-year, GBP 40 billion ($64bn) defense contract with Saudi Arabia opened the government up to questions regarding its credibility with respect to foreign corrupt practices. Two UK non-governmental organizations challenged the decision in UK courts. In April 2008, the High Court ruled the decision to abandon the investigation unlawful, but in July 2008, the House of Lords, the UK's highest body of judicial review, overturned this ruling on appeal, ending the judicial challenge on BAE's deals with Saudi Arabia. However, investigations into BAE contracts with six other countries - Chile, the Czech Republic, Romania, South Africa and Tanzania - also opened in 2005, continued. On October 14, 2009, the SFO announced it had failed to come to a negotiated settlement with BAE over these allegations. The SFO is currently conducting further investigations.
There was continued corruption-related controversy involving the UK's largest defense contractor, BAE Systems. In 2008 the government terminated its investigation into BAE's involvement in possible bribery connected to a sale in Saudi Arabia. However, on 01 October 2009, the Serious Fraud Office announced that it would seek the attorney general's consent to prosecute BAE for involvement in illegal payments in connection with military sales in Eastern Europe and Africa.
On 01 March 2010 BAE Systems plc (BAES) pled guilty in U.S. District Court in the District of Columbia to conspiring to defraud the United States by impairing and impeding its lawful functions, to make false statements about its Foreign Corrupt Practices Act (FCPA) compliance program, and to violate the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR). BAES was sentenced today by U.S. District Court Judge John D. Bates to pay a $400 million criminal fine, one of the largest criminal fines in the history of DOJ's ongoing effort to combat overseas corruption in international business and enforce U.S. export control laws.
BAES made a series of substantial payments to shell companies and third party intermediaries that were not subjected to the degree of scrutiny and review to which BAES told the U.S. government the payments would be subjected. BAES admitted it regularly retained what it referred to as "marketing advisors" to assist in securing sales of defense items without scrutinizing those relationships. In fact, BAES took steps to conceal from the U.S. government and others its relationships with some of these advisors and its undisclosed payments to them.
BAES began serving as the prime contractor to the U.K. government in the mid-1980s, after the U.K. and the Kingdom of Saudi Arabia (KSA) entered into a formal understanding. According to court documents, the "support services" that BAES provided according to the formal understanding resulted, in part, in BAES providing substantial benefits to a foreign public official of KSA, who was in a position of influence regarding sales of fighter jets, other defense materials and related support services.
During 2009 there was a major scandal over whether members of Parliament had been abusing their expense privileges. In 2008 the courts ordered Parliament to release allowances claimed by its members. This was delayed by Parliament until July. However, the Daily Telegraph obtained a leaked copy of the reports and published their findings before Parliament did. When Parliament did publish the expense reports, it blacked out some information, leading to accusations of cover-up. In the wake of the scandal more than a dozen Members of Parliament declared they would not stand for reelection at the next elections. The speaker of the House of Commons resigned in the face of pressure resulting from his perceived support for the expenses system and his reaction to the scandal.
In September 2009 the Serious Fraud Office succeeded in prosecuting a UK construction company for bribing foreign officials to win contracts and for violating UN sanctions against Saddam Hussein's regime in Iraq. The court levied fines of approximately five million pounds ($8 million). Many observers considered the ruling important because it set a precedent by establishing that UK companies could be prosecuted for bribery outside of the UK.
The UK Bribery Bill became an official Act of Parliament on 8 April 2010, significantly reforming the UK’s anti-corruption laws, and making the subject of business ethics a top priority for many companies across the country. The Bribery Act 2010 came into force later in the year, giving companies a relatively short period in the interim to revise their corporate codes of ethics and implement procedures to ensure that they comply with the new law.
US and UK investigations into companies including BAE Systems, Mabey & Johnson and Siemens in recent years, earmarking a global movement in the enforcement of strict anti-corruption laws. The US led the way in this area with the Foreign Corrupt Practices Act (FCPA) 1977, and the UK has been criticised internationally for having out-of-date and ill-enforced bribery and corruption laws. That all changed when the Act was in force. Notwithstanding the Bribery Act itself, the Serious Fraud Office and the anticorruption unit within the City of London Police had collectively increased the number of investigations relating to bribery and corruption in recent years.
The Bribery Act 2010 set out four new categories of offences, which Industry must note: 1. Giving or receiving of a bribe; 2. Requesting, agreeing to receive or accepting a bribe; 3. Bribing a foreign public official; and 4. Failure of a commercial organisation to prevent bribery by a third party or an associated person (an organisation can be liable for not having “adequate procedures” in place to prevent bribery). Under the new law, business malpractice is considered a criminal offence. However, the Bribery Act states that it is a defence for an organisation to prove that it has in place “adequate procedures” to prevent bribery.
Both an individual (be it a direct employee, third party consultant, or agent) and a company are capable of committing the offences above, except for number 4, which applies to a company only. Grounds for investigation and prosecution are much broader than previous laws have dictated and companies which have not actively implemented a standard code of ethics within their corporate framework are particularly vulnerable. The implications for the Aerospace and Defence Industry are wide-ranging, given the scope and size of single projects. The investigation of one company alone has the potential to disrupt a whole supply chain. Companies must, therefore, ensure that they are taking the necessary steps to minimise risk; and that means ALL companies, including SMEs.
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