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Understanding the Root Causes of Money Laundering: A Comprehensive Guide

Author: Azizur Rahman  7 December 2012
4 min read

Rahman Ravelli explain how potatoes have proved a strong reminder of the risks of cooking the books to fund bribery.

Where there’s muck there’s brass, as the old saying goes. And one court case has proved the saying to be true.

Potatoes may not seem, at first glance, the typical area where fraud thrives. From digging them out of the ground to selling them does not seem to offer many opportunities for corruption. Yet the case against potato supplier Greenvale’s two employees showed that there is always scope for illegal behaviour if two parties want it to happen. Greenvale supplied potatoes to the supermarket giant Sainsbury’s. Not just the odd bag but millions of pounds worth. And by using a complex set of financial arrangements, two Greenvale staff and John Maylam – who was in charge of buying spuds for Sainsbury’s – were able to overcharge the supermarket giant by £8.7M over three years. Maylam inflated the price that Sainsbury’s paid for the potatoes without his bosses knowing while Greenvale’s Andrew Behagg and David Baxter laundered the excess that Sainsbury’s paid through bogus companies so that Maylam could then use it to live the high life. He received a total of £4.9M and ran up £20,000 a month expenses. Maylam bought a £93,000 Aston Martin V8 Vantage, took his wife to the world’s best hotels, drank fine wines and enjoyed extravagant yachting trips, a £200,000 stay at Claridge’s and a £350,000 trip to watch the Monaco Grand Prix.

Unfortunately, the good life came to an abrupt end for him, Baxter and Behagg. Irregular payments were discovered during an audit by accountants working for Greenvale’s parent company. It led to Behagg, a Greenvale director, being jailed for three years while accounts manager Baxter received a two-and-a-half-year sentence. Maylam was forced to swap his expensive tastes for four years in a prison cell. Sentencing the trio, the trail judge referred to Sainsbury’s as having been “bribed with its own money’’.

Such a case is a clear-cut example of bribery. Yet because it happened before the Bribery Act came into force it was not prosecuted under that piece of legislation. The case, however, is a stark reminder of not only the potential for bribery and its consequences but also the scope of the Bribery Act. It is worth considering that if this illegal behaviour had been conducted while the Bribery Act was in force then Greenvale could have found itself facing charges for failing to prevent bribery carried out by its employees. It is conceivable that Greenvale senior staff other than the two convicted could have been liable for prosecution under the Bribery Act as it could be argued that they had not taken all possible steps to prevent such corruption being carried out by its staff.

The Bribery Act makes it clear that a company with UK connections can be prosecuted if any of its staff, agents, trading partners or other third parties are found to have been involved in bribery anywhere in the world to further its business interests. Greenvale would then have faced the daunting task of having to prove it had taken all possible steps to prevent anyone acting on its behalf being involved in bribery and corruption. At present, the number of prosecutions brought under the Act is low. But this should not lead to companies being dismissive of its power. Bribery and corruption investigations may be lengthy, protracted affairs so any charges to be brought under the Bribery Act may take some time to be brought. So the fact that the number of prosecutions under the Act is currently very low should not lull companies into a false sense of security.

A case like Greenvale can act as a strong reminder to companies of the need to get their house on order when it comes to bribery and corruption. It is also a warning to potential victims. After all, if a huge corporation like Sainsbury’s can fall foul of such practices, who can truly feel immune from such risks?

But it is the companies who need to prevent bribery being carried out in their name that should really need no reminding of the current legal situation. The Bribery Act is a far-reaching, powerful piece of legislation. All firms should have been made fully aware of it and, perhaps most importantly, should have taken steps to make sure they comply with it. The Bribery Act carries punishments of up to 10 years in prison, unlimited fines, seizure of assets and debarment from taking on public contracts. Punishments will be especially high if the bribery appears to be repeated or premeditated. It is important for companies to instigate their own anti-corruption polices. And these policies have to be strongly enforced and regularly reviewed and – if necessary – amended.

It would be all too easy for companies to come up against the Bribery Act because they did nothing or too little to ensure they did not fall foul of it. We do not know everything about the Greenvale case but the fact that a regular audit showed up these huge irregular payments suggests that, had the case been brought under the Bribery Act, Greenvale may have found itself liable for the actions of Behagg and Baxter. When it comes to the Bribery Act, companies cannot afford to do the bare minimum to comply. Compliance has to mean making sure every possible opportunity a company’s staff have for bribery has been eliminated. Paying lip service to the Act will undoubtedly mean that the potential for bribery within a company has not been eliminated – and that means it is still liable under the Act if such activity is detected.

Legal advice is crucial in drawing up anti-corruption measures to make sure any company complies with the Act. In-house company lawyers may be ideal for many situations but the scope and sheer punitive power of the Bribery Act make it essential for companies to seek advice from experts well versed in its provisions. Only then can a company draw up the right anti-corruption measures and instil in its staff a culture of being aware of both the risks of bribery and the right action to take if they suspect it is going on. With the Serious Fraud Office (SFO) and Financial Services Authority (FSA) pledging to work together closely to enforce the Act, companies have to respond to it to avoid falling foul of it. Unfortunately, a recent survey showed that only 15% of middle managers have received any training about the Act – a statistic that suggests worrying times ahead for many companies.

Greenvale may not have fallen foul of the Bribery Act, simply through the timing of its employees’ wrongdoing in the potato market. But many other companies will soon find that they are digging themselves deeper into trouble if they do not act to comply with the Act.

Azizur Rahman C 09369

Azizur Rahman

Senior Partner

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Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.

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