Rolls-Royce Says UK Serious Fraud Office Begins Formal Bribery Investigation

Rolls Royce, the world's second-largest maker of aircraft, said last December it had passed information to the SFO relating to bribery and corruption involving intermediaries in overseas markets.

Rolls-Royce said at the time that it could face prosecution over the allegations.

"We have been informed by the Serious Fraud Office that it has now commenced a formal investigation into these matters," Rolls-Royce said on Monday.

Shares in the company were down 0.1 percent at 1041 GMT (5:41 a.m. EST), lagging Britain's blue-chip index, which was up 0.4 percent.

"This is just the next step in the process," Liberum analyst Ben Bourne said of Rolls-Royce's announcement.

The SFO has been reviewing the findings of Rolls-Royce's internal probe since earlier this year.

Tommy Suharto, the youngest son of Indonesia's late president, in November denied allegations that he received bribes from Rolls-Royce.

A source familiar with the matter said last December that the allegations related to the "distant past."

That suggests the offences would not fall under the British Bribery Act, which came into effect in July 2011. This tougher law introduced an offence of failure to prevent bribery, and clamps down on "facilitation payments" and disproportionate hospitality to oil the wheels of business.

Rolls-Royce said in January that lawyer David Gold, a Conservative life peer, would lead a review of its compliance procedures after the allegations emerged.

Allegations of corruption are not new to the defense and aerospace industry, in which companies commonly use individuals or companies as intermediaries in countries where they do not have a large presence.

BAE Systems, Europe's biggest defense company, was fined $450 million by the United States and Britain in 2010, following long-running corruption investigations at home and abroad into defense deals in Saudi Arabia, Tanzania, Sweden, the Czech Republic and Hungary.

(Reporting by Paul Sandle and Sarah Young; editing by Tom Pfeiffer)