With borders being more difficult to negotiate following Brexit, Lloyd Firth from law firm WilmerHale warns against the temptation of facilitation payments.
Where once there was Brexit, now there is coronavirus. In these troubled times it is difficult to look beyond the next day, but from 1 January, 2021, when the post-Brexit transition period ends and the United Kingdom leaves the European Union customs union and single market, the UK government has confirmed that it will introduce import controls and customs declarations requirements on EU goods, making the UK border a more burdensome and riskier place for businesses who rely on or orchestrate the movement of goods across it. Affected companies should be taking steps now to strengthen their internal controls and policies designed to guard against the risk, however remote it may seem, of improper payments being made at the border.
From 1 January next year, customs officials on both sides of the UK/EU border will be obliged to collect VAT and excise duties, customs duties, and conduct other regulatory checks on goods flowing in both directions. Not only is this likely to cause delay and frustration to businesses, but the combination of the key roles played by specialist third parties (such as freight forwarders and customs clearance agents) and government officials (customs agents) and inherently complex customs laws and import/export regulations which govern the successful cross-border transit of goods, results in an increased corruption risk compared with what was formerly a largely frictionless border.
One of the main risks is that companies, or third parties acting on their behalf, seek to ease the anticipated border friction by making a ‘grease’ or facilitation payment, typically being a small payment made to a government official to facilitate or expedite the performance of a routine action. Whether made to leapfrog lengthy port queues or secure faster export clearance, regardless of their size or frequency, facilitation payments are illegal in the UK.
This contrasts with the position under US law where such payments are lawful in tightly prescribed circumstances. Notwithstanding the US legal framework governing the making of such payments, logistics companies and those providing freight forwarding and customs clearance services, have historically been the subject of significant criminal enforcement actions on both sides of the Atlantic, by the UK Serious Fraud Office, and US Department of Justice and Securities and Exchange Commission, including high-profile cases against Panalpina and F.H. Bertling.
All this is not to say that starting 1 January, 2021 we will see a flurry of criminal enforcement activity against companies involved in the movement of goods across the UK/EU border, but rather that the world, and with it the risk matrix governing their European businesses, will have shifted and they would be well-advised to review and update their policies and controls around facilitation payments accordingly.
Photo: Lloyd Firth
Lloyd Firth focusses on white collar criminal defence work, regulatory and internal investigations and corporate compliance. He is a member of the Young Fraud Lawyers Association and the Proceeds of Crime Lawyers’ Association.