Just 19 months after former justice secretary Jack Straw introduced the Bribery Bill into UK Parliament, the Bribery Act will be coming into force on 1 July 2011 across the country. Companies and employers should be readying themselves now to ensure that they comply with the legislation, as having adequate procedures in place can provide a defence if the worst should happen.
Bribery, backhanders and kickbacks can land those involved in jail, if they are convicted.
In February 2011, following a lengthy investigation by the Serious Fraud Office (SFO), two former directors of engineering firm Mabey & Johnson were sent to jail for paying kickbacks to the Iraqi Government of Saddam Hussein. This followed the company’s conviction – in September 2009 – for breaching UN sanctions on Iraq and bribing officials in Jamaica, Ghana and elsewhere. It was fined £3.5 million and ordered to make reparations payments of more than £1.4 million to Jamaica, Ghana and Iraq.
The Bribery Act 2010 will make it a criminal offence for an individual or commercial organisation to offer or receive a bribe to bring about or reward the improper performance of a function or activity. Official guidance explains that this includes bribing a foreign public official – even if that person has demanded a bribe.
UK companies and partnerships may be liable no matter where alleged acts of bribery take place. Non-UK companies can also face prosecution if they operate in the UK, regardless of where the alleged bribery has taken place. But an exception may be made if the suspect activities in question are permitted locally.
According to the 2010 Corruption Perceptions Index, which scores how corrupt countries are on a scale of zero to 10, Somalia is the most corrupt country with a score of 1.1. Saudi Arabia scores 4.7; the UK and US score 7.6 and 7.1 respectively. New Zealand, Singapore and Denmark are rated the least corrupt countries.
To minimise the risk of falling foul of the Act, companies should put in place:
- prevention policies to cover whistleblowing procedures;
- prevention policies to cover financial and commercial controls, for example, on invoices, remuneration, etc;
- prevention policies to cover rules on gifts, hospitality and promotional spend;
- procedures on recruitment and discipline that include anti-bribery measures; and
- details on how anti-bribery measures will be enforced.
Other measures that may militate against the risk of prosecution should address the six principles in the Act, which advise employers on their anti-bribery procedures. These include: top-level commitment to ensuring a company is unified in fighting bribery; the undertaking of occasional risk assessments; checking out persons, such as intermediaries, to ensure that they are honest; communicating policies to staff; embedding anti-bribery procedures; and putting in place training.
Aron Pope and Donna Goldsworthy of legal firm Fox Williams say that the four biggest pitfalls facing companies are:
“As a minimum, employers should review their disciplinary, grievance and whistleblowing policies, their company handbooks and any ethics/conduct codes,” says Jo Tindall, associate, and Rachel Dineley, partner, at Beachcroft. “Policies on charitable donations, work placements, corporate hospitality, gifts, sponsorship and on any other aspect of a business which may be open to abuse should either be put in place or reviewed and amended where necessary to address bribery and corruption risks.”
Employers may also consider amending contracts of employment for those staff whose work is more likely to lead them into temptation. Emily Mott, associate at Jones Day, says: “Employers operating in high-risk sectors/countries should consider incorporating anti-bribery policies and procedures into contracts of employment and contracts for services enabling the employer to terminate employment or engagement in the case of breach.”
Sound whistleblowing procedures will also strengthen an organisation’s anti-bribery credentials.
Harriet Territt, counsel, Jones Day, says: “All employers should establish a simple, secure, confidential and accessible means for staff to raise concerns about bribery and to request advice and support. This should be set out in a comprehensive whistleblowing policy, a copy of which should be available to all staff.
“It is important to note that employees are likely to be an organisation’s first line of defence for anti-bribery/anti-corruption issues. Their cooperation with voluntary internal reporting is essential if corruption is to be stopped at the earliest opportunity. Where employees are actively engaged in identifying potential corrupt conduct, it will make a significant contribution towards a company meeting the adequate procedures test.”
As for training, it should address, initially, key staff such as senior employees and those working in sales.
Tindall and Dineley say: “It is crucial that senior managers are aware of the corporate responsibility to prevent bribery and what they need to do about it. They will play a key role in monitoring compliance with policies and procedures and in spotting risks.
“Training for senior employees should cover, as a minimum, what constitutes bribery, the areas of risk for the business, the potential corporate and individual liability, the relevant policies and procedures and what part they play in ensuring that bribery does not take place in their organisation. They should also be encouraged to identify any bribery risks that the business may have missed, and to report any bribery or attempts at bribery that they encounter in the future.”
According to Ernst & Young’s 2011 European fraud survey, of those who took part in the poll, one employee in seven at large companies said that they would be prepared to offer bribes to win business. Around one in six said they would offer personal gifts and/or services to win a deal.
Little more than 26% of UK respondents said they are aware of an anti-bribery policy at their organisation, while 26% said they had undergone anti-bribery training, compared with 17% and 15% of respondents in France and Germany respectively. Some 72% of UK managers polled said that they would not, under any circumstances, resort to bribery to win business, leaving 38% who just might.
John Smart, Ernst & Young’s leader on fraud investigation, says: “Our survey findings should cause concern among company directors in the UK. A lack of understanding about fraud, bribery and corruption among all employees, combined with intense cost-cutting initiatives at many companies, will no doubt create additional exposure to bribery and fraud risks.”
Some 2,300 employees – from shopfloor workers to senior directors – across 26 countries were surveyed. There were 104 UK respondents.
New recruits should be made aware of anti-bribery procedures and risks but the training they receive will depend on their seniority and role. When acquiring other businesses, organisations should ensure that the personnel they have taken on have had relevant training.
Companies should also assess so-called associated persons as they will be liable for failure to prevent bribery by such people. These may include recruitment firms, commercial agents, joint venture partners, consultants and sub-contractors, especially in construction.
Tindall and Dineley add: “Employers need to remember that they will be responsible for bribery committed on their behalf, anywhere in the world, even if they are not aware of it or have done nothing to encourage it. For this reason, it is very important that employers carry out due diligence before contracting with any third parties that will act on their behalf and that they have measures in place to allow them to monitor third-party activities.”
What would be seen as bribery in the UK – for example, lavish entertainment or gifts – may well be the cultural norm in some countries. This may not necessarily land companies in hot water with the SFO.
Aron Pope, senior associate, and Donna Goldsworthy, partner, at Fox Williams say: “To commit the offence of bribing foreign officials would involve something more serious than gifts and lavish entertainment, which may well comply with local laws – usually it will involve payment of some kind of facilitation fee.
“Some organisations seem to think that because the SFO is having its budgets cut significantly that it will not have the resources to deal with incidents involving foreign officials and will instead focus on low-hanging fruit in the UK. However, this ignores the risk of others, such as your competitors, discovering the bribe and reporting it to the SFO so that it is under pressure to take action.”
The Bribery Act also talks about proportionate and adequate procedures in relation to measures taken to stay on the right side of the Act. How can employers decide what is proportionate?
Pope and Goldsworthy say: “Proportionality will depend on the risks faced by employers, as well as their size and resources. It may be necessary to do more to prevent bribery if you are a large employer, or if you are operating in an overseas market where bribery is known to be commonplace, compared to what you might be required to do if your organisation is small or is operating in markets where bribery is not prevalent.”