By Nomfundo Manyathi

Forensics executive at law firm ENS Steven Powell spoke about corruption risks attorneys faced in their dealings with clients and in running their practices. He started off his presentation by listing instances in which attorneys may encounter corruption-related risks. Included in the list were instances when attorneys served as intermediaries for clients, when they opened an office in a foreign jurisdiction, and through direct interaction with government officials.

Mr Powell also spoke about extraterritorial and local laws relating to anti-corruption that extended the jurisdiction of a country beyond its borders. Countries that had implemented this kind of legislation included South Africa, Chile, China, the United Kingdom (UK) and the United States (US).

Mr Powell said that there had been a ‘significant increase’ in worldwide efforts to prevent bribery and corruption in the last ten years, adding that for 20 years the US was the only country that criminalised bribery by its own citizens of government officials in other countries. Now, more than 143 countries had either adopted or agreed to adopt statutes similar to the law in the US.

He said that anti-corruption law in South Africa included:

• The Prevention of Organised Crime Act 121 of 1998, which gives authorities the ammunition to freeze and seize the proceeds of crime;
• The Protected Disclosures Act 26 of 2000, which protects citizens from discrimination in circumstances where they blow the whistle on corruption;
• The Prevention and Combating of Corrupt Activities Act 12 of 2004, which he said was the ‘major anti-corruption initiative’ in the country.
• The Financial Intelligence Centre Act 38 of 2001, which is an anti-money laundering initiative that imposes an obligation on ‘accountable institutions’ such as lawyers, brokers and estate agents to report suspicious transactions.

Mr Powell said that the UK Bribery Act of 2010 (c23), which came into effect in July 2011, was the ‘most dramatic change to the global corruption environment’ since the introduction of the United States’ Foreign Corrupt Practices Act of 1977, adding that enforcement had never been as aggressively pursued as it was now. The Act applies to UK partnerships, UK incorporated companies, as well as entities that ‘carry on business or part of a business in the UK’, regardless of where they are incorporated or registered.

Mr Powell said that under this Act South African companies may be charged with the offence of failing to prevent bribery on their behalf through their business dealings and links with the UK.

Speaking about specific risks to attorneys, Mr Powell said that many attorneys were asked to act as intermediaries and that intermediaries could be used as a conduit to commit corruption, allowing the principals to distance themselves from the criminal act.

Mr Powell added that consultants and intermediaries were frequently used in corrupt schemes as a way to pass along illicit payments by creating a charade of billing and invoicing documents.

He added that it was important for law firms to have an anti-corruption policy in place as lawyers can be one of the preferred avenues for money laundering and facilitation payments as they possess the ability and knowledge to set up a shell company or trust, and clients think that they can rely on the attorney/client privilege to shield communication and evidence.

Mr Powell warned that attorneys could be used as intermediaries in a variety of situations that may require interaction with government officials, including when –

• dealing with corporate registrations and transactions, including due diligence;
• during legal referrals and briefing local counsel;
• supporting licence and contract negotiations with state-owned entities;
• interacting with the judiciary through filings and hearings;
• assisting clients with immigration and labour disputes;
• preparing consultancy agreements for clients;
• dealing with trade disputes, customs clearance and export laws;
• assisting clients with local regulatory filings and permits.

Mr Powell said that attorneys must consider risks associated with any third party that acts as an intermediary with government officials, such as brokers, consultants, local counsel, accountants and other law firms, adding that legal professions may be at risk of encountering corruption when opening an office, in terms of occupancy permits, business and property taxes and fees, as well as with infrastructure set-up by, for example, paying people to have the job done faster. He added that adequate due diligence must be conducted on prospective employees.

Nomfundo Manyathi, nomfundo@derebus.org.za

This article was first published in De Rebus in 2012 (May) DR 18.