ITIC IN THE NEWS: Laws that haven’t gone away - article by Andrew Jamieson in latest edition of The Baltic magazine

To see the article as it appears in The Baltic magazine, please click here. The article can be found on pages 70 - 73.

The arrival of the police is not the best time for shipbrokers and others to review their money laundering and bribery policies. Andrew Jamieson, Claims Director with the International Transport & Intermediaries Club (ITIC), explains why.

There is often a flurry of interest about new laws. Articles in trade publications will predict dire consequences for those who ignore the gathering storm. Lawyers will tender advice on how to deal with the threats, and seminar organisers will offer to educate those in ignorance. Rapidly, a little industry seems to grow up, and then the next new big thing is announced. Editors, lawyers and promoters of seminars seem to move on.

The publicity in relation to money laundering and bribery fits the above pattern. But it is important to remember that, while the publicity has died down, the laws have not ceased to exist. The steps put in place when the laws were introduced need to be reviewed periodically. 

Money laundering is simply a process intended to alter the identity of the source of illegally obtained money. The legislation applicable in England and Wales is contained in the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2007. It is unlikely that shipbrokers are normally going to be affected by the extensive obligations in the regulations that apply to the ‘regulated sector’, but provisions of the legislation apply to all individuals and companies.

ITIC was recently reminded of the obligations that all companies have in relation to financial crime. The police had contacted a broker member wanting information regarding one of its clients. The police explained that the investigation related to suspicions of money laundering, and a formal data request was sent to the member.

There was no suggestion that the broker had itself been involved in any wrongdoing, but it was not something it could discuss with its clients. Brokers will normally regard information regarding their principals as strictly confidential and want to seek instructions before releasing it. It is important, however, that brokers understand that advising their principals of the investigation would be a criminal offence.

Section 342(1) of the Proceeds of Crime Act 2002 makes it an offence to prejudice a money laundering investigation if the person making the disclosure knows or suspects that an investigation is being - or is about to be - conducted. Telling a principal, however informally, that it is being investigated could lead to a fine or prison sentence. There are similar provisions relating to interfering with material likely to be relevant to a money laundering investigation. Attempts to dispose of the evidence of a fixture or commission payment would clearly fall within these offences.

The arrival of the police is not the best time to review your money laundering and bribery policies.

The implementation of the Bribery Act 2010 created a great deal of comment especially about the need for companies to have anti-bribery policies in place. In many ways the Bribery Act 2010 simply codified existing law. Most actions illegal under the Bribery Act were already prohibited. But some new offences were created.

The UK legislation does not make exceptions for facilitation payments. Additional payments made to secure business, whether paid directly or disguised as commission, will constitute bribes. It is important to note that the Bribery Act is not restricted to payments made or received in the UK. A broker cannot avoid liability because the ‘dirty deed’ was done abroad.
Before the Bribery Act, if a staff member was caught making an unlawful payment, senior management would attempt to distance the company from the illegal conduct by saying that it was the action of a rogue broker. The Bribery Act has not only prevented this reaction but has created an offence of failing to prevent bribery. If a staff member pays a bribe, the company will be guilty of an offence. That liability is strict unless the organisation can show that it had adequate procedures in place to prevent bribery.

The Bribery Act is part of a worldwide trend towards anti-corruption legislation. In many countries, corporations are liable to penalties if people acting on their behalf – for example, a broker - pay bribes. One reaction to the new legal climate has been for principals to ask their brokers to sign formal ‘ethics statements’ setting out their agreement to abide by the principal’s policies. The principals hope the agreements will demonstrate to their national authorities that they have taken steps to prevent corruption.

The need for UK companies to have such procedures in place was the subject of much legal comment when the draft legislation was published. There are guidelines available from the Ministry of Justice. The published principles include firms showing a top-level commitment to preventing bribery. The firms’ policies must be communicated throughout the organisation (including relevant training) and the procedure must be monitored and reviewed. It is clear that simply producing a copy of an email sent out when the Bribery Act came into force in July 2011 will not be adequate.

The penalty for bribery committed by an individual can be imprisonment. The maximum sentence for an offence committed by a corporate body is an unlimited fine. Clearly, it is worth taking the time to review your money laundering and bribery policies.