United Kingdom

United Kingdom Corruption Report

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Snapshot

United_Kingdom_249x124.jpgCorruption does not represent a constraint to business in the United Kingdom, and companies are very unlikely to be put in a situation where bribery is needed. Despite some isolated instances of abuse of administrative power, the UK promotes high ethical standards in public services. The UK Bribery Act establishes liability for corruption offences committed anywhere in the world, including bribery between businesses and of foreign public officials. It also introduces a liability offence for companies that fail to prevent bribery committed by representatives; this can be avoided only by implementing preventive anti-corruption policies and procedures. There is no distinction made between bribery and facilitation payments, and these practices rarely occur in the UK. Gifts and hospitality can be considered illegal depending on the intent and benefit obtained. The UK has a strong legal framework for fighting bribery at home and abroad, and the agencies tasked with fighting corruption are efficient and independent.

December 2015
GAN Integrity Solutions

UK Bribery Act Summary
UK Bribery Act Compliance Guide 

 
Judicial System

European_Commission.svg.pngThere is a very low risk of corruption in the British judicial system. With its long tradition of independence, accountability and openness, the judiciary is perceived to be among the strongest institutions in the United Kingdom (NISA 2011). The court system is efficient, and the rule of law is well established. Private property rights, contracts and intellectual property rights are secure and protected, and companies consider the judiciary highly independent and effective in settling commercial disputes (GCR 2015-2016). Judges and prosecutors have been commended by GRECO for effectively preventing corruption, and the government is continuously implementing anti-corruption training in the form of new-material and e-learning for judges. Judges have been trained with a 'Judicial Conduct and Ethics' module containing in-and-out-of-court filmed scenarios and raising ethical and conduct dilemmas (GRECO, Jan. 2015). The United Kingdom is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police

The British security sector does not pose any corruption risk for businesses. Companies perceive the police services effective in protecting them from crime (GCR 2015-2016), and the government has effective mechanisms to investigate and punish police abuse and corruption (HRR 2014). Over the past decade, the occurrence of police corruption has been narrowed down to isolated cases due to a more focused and proactive approach to tackling the problem; all police forces now have specialised anti-corruption units which investigate allegations and provide annual monitoring of incidents and progress (NISA 2011). The Independent Police Complaints Commission (IPCC) and Her Majesty’s Inspectorate of Constabulary (HMIC) have found and confirmed that the overwhelming majority of police officials operate with integrity and honesty (UKACP, Dec. 2014). Although public polls reveal that citizens have relatively low confidence in police integrity, none report paying bribes to police officers (European Commission, Feb. 2014).

Public Services

Companies do not contend with high corruption risks when dealing with public services in Britain. Government bureaucracy is considered burdensome but irregular payments and bribes very rarely occur (GCR 2015-2016). Businesses almost never report being asked to pay bribes to obtain business permits, licences and other related services (European Commission, Feb. 2014). The time required to get electricity is more time-consuming, yet less costly on average compared to other OECD countries (DB 2016).

Land Administration

Corruption in the land administration is not a constraint to doing business in the United Kingdom. Companies report that bribery almost never occurs when obtaining building permits (European Commission, Feb. 2014), however, money laundering through the property market is a growing problem. The report Corruption On Your Doorstep: How Corrupt Capital is Used to Buy Property in the UK, addresses the issue of secret offshore companies laundering money through the buying property in the UK, rendering the UK property market a safe haven for corrupt money (TI, Mar. 2015). Despite domestic legislation being considered exemplary in guaranteeing beneficial ownership transparency for UK companies, secret company ownership in UK Overseas Territories are the main obstacle to investigating money laundering. In fact, more than 35,000 property titles in London are held by companies in the British Overseas Territories and Crown Dependencies (TI, Nov. 2015).

Tax Administration

Corruption in the tax administration does not constitute a high risk for companies operating in the United Kingdom. The British tax system is transparent, and local and foreign-owned companies are similarly taxed (ICS 2015). Companies should be aware that the Income Act and the Corporation Tax Act forbid any tax deduction of payments that constitute a criminal offence, including foreign bribery. Paying taxes is less time-consuming on average compared with other OECD countries and were made less costly for companies by reducing the income tax rate (DB 2016). Municipal and environment taxes have increased (DB 2016).

Customs Administration

Corruption at British borders is not considered a problem when importing and exporting, and companies evaluate the efficiency and transparency of the border administration as being very high (GETR 2014). Isolated cases involving abuse of power and bribery among officials at the Border Agency have surfaced over the years (The Guardian, Mar. 2013). An assessment of organised crime within the UK found that the smuggling of illegal commodities was in some cases facilitated by corruption at the ports (NCA, June 2015). The Border Force has put together a team dedicated to fighting corruption at the borders (UKACP, Dec. 2014).

Public Procurement

Public procurement corruption is not considered a significant obstacle to doing business in the United Kingdom; however, the now defunct National Fraud Authority estimated that approximately GBP 2.3 billion is annually lost due to procurement fraud throughout the UK public sector (NFI 2013). Around a quarter of companies have reportedly experienced procurement fraud (PwC 2014). Nearly a fifth of business respondents believe that corruption has prevented their company from winning a public tender in past years (European Commission, Feb. 2014), but almost none report it being common practice to use bribery in their sector to win contracts (EMEIA 2013). The extent to which procurement officials show favouritism to well-connected firms and individuals when awarding contracts is evaluated by companies as moderate (GCR 2015-2016).

UK procurement regulations follow the EU public procurement directives. Regardless of where the act was committed, a company can be debarred from participating in public procurement if it has been previously convicted of a criminal offence or if it has committed an act of grave misconduct. See the UK Public Contracts Regulations 2015. The government has recently abolished the audit commission, thus devolving the functions of the commission to independent auditors, a step that, according to critics, jeopardises the effective detection of fraud and corruption in local procurement. Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in the procurement process.

Natural Resources

Corruption is not an obstacle to business in the UK's natural resources sector. As Europe’s second largest oil and gas producer, Britain was successfully admitted as a candidate country to the Extractive Industries Transparency Initiative (EITI), which aims to ensure the transparent publication and accountability of extractive industry revenues and expenses. The UK is perceived as a leader in international efforts to increase transparency in the extractive industries. As the first EU member state, the country has implemented Chapter 10 of the EU Accounting Directive, which stipulates that extractive companies have to disclose payments made to governments from the start of 2015 (UKACP, Dec. 2014). The UK has also included its commitment to setting a global standard of financial transparency and accountability in its Open Global Partnership National Action Plan (UKACP, Dec. 2014). A third action plan for 2016-2018 is being developed. No companies report being asked or expected to pay a bribe for environmental permits (European Commission, Feb. 2014).

Legislation

The UK Bribery Act establishes criminal offences for bribing (giving, promising and accepting) foreign public officials and bribery between businesses, and the offences are enforceable against acts committed around the globe. Criminal offences apply to companies and to persons, and it is an offence when companies fail to prevent corruption. Businesses can be held responsible of persons acting on their behalf, including employees and third parties. The Bribery Act provides companies with a full defence if a company can document 'adequate procedures' to prevent corruption prior to an offence. The Ministry of Justice has published the Quick start guide, which references the Portal, and the more detailed Guidance to the Bribery Act, which can assist companies in adopting ‘adequate procedures’ to prevent bribery. There is no exception for facilitation payments, and small-value payments, gifts and hospitality may be illegal depending on their intent and benefit obtained. Sanctions for violating the Bribery Act include unlimited fines, imprisonment of up to ten years and debarment from public contracts. The Civil Service Code prohibits the acceptance of gifts or hospitality by civil servants which compromise their personal judgement or integrity. The Proceeds of Crime Act (POCA) allows authorities to confiscate the proceeds of crimes, including corruption offences. Related UK legislation includes the Fraud Act and Money Laundering Regulations, which apply to a number of business sectors, including financial and credit businesses, accountants and estate agents. Whistleblowers are protected by the Public Interest Disclosure Act, which covers public and private sector employees. A study identifies that the corruption risks that lay with lobbying include the absence of requirements on lobbyists to report their expenditures on lobbying, including gifts and hospitality to public officials, the lack of limits set on political party donations, the permission of legislators to retain conflicts of interest as long as these are declared, and the allowing of legislators and civil service officials to meet with lobbyists without needing to report the meetings (TI, Feb. 2015). 

The UK is a signatory to the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (UNCAC), the Council of Europe’s Civil and Criminal Law Conventions against Corruption and is a member of the Group of States Against Corruption (GRECO). The UK Anti-Corruption plan cites the Business Anti-Corruption Portal and outlines current and future UK anti-corruption activities, indicating continued focus on corruption enforcement in the country.

Civil Society

Freedom of the press is legally guaranteed, and British media is independent, diverse, competitive and aggressive in reporting corruption. This has occasionally led to policy changes and criminal investigations (NISA 2011). Concerns regarding press accountability have been raised in light of the News of the World case, in which the telephones of hundreds of public figures and crime victims had been illegally hacked by journalists. Editors involved in the scandal were accused of repeatedly bribing public officials and the police, leading to multiple arrests and the creation of a new press regulatory system, which makes it easier to file complaints about press intrusion (FitW 2015). The media argued that the process in which the new press regulatory was created was not transparent and the newspaper industry has launched its own regulator, the Independent Press Standards Organisation (IPSO) (FotP 2015). Cases against the media have led citizens to perceive them as the country's most corrupt sector (GCB 2013). The UK’s media environment is considered 'free' (FotP 2015).

The Human Rights Act ensures the right to freedom of association and assembly. Civil society groups are generally well-resourced and enjoy strong legal protection and independence. A number of civil organisations work with anti-corruption, and some have substantial impact on anti-corruption policy-making (NISA 2011).

Sources

Topics: Europe & Central Asia