Revamped Bribery Act retains its teeth
The UK Bribery Act comes into force on 1 July 2011, and has expanded the bribery offence to include a new corporate offence of “failing to prevent” bribery activity1 . The UK Ministry of Justice2 and, jointly, the Director of the Serious Fraud Office and the Director of Public Prosecutions3 have each recently issued guidance to clarify the scope of the Bribery Act(the Guidance and the Prosecutorial Guidance, respectively); however, there is still no clarity about which organisations will be within the jurisdiction of the legislation and what organisations must do to protect against the actions of “associated persons”.
Failure to prevent bribery – the corporate offence
Organisations may now be prosecuted for bribes paid by “associated” persons on the organisation’s behalf. The only defence to the corporate offence is to have had “adequate procedures” in place.
The guidance: emphasises proportionality as a core principle for understanding businesses’ obligations; encourages a risk-based approach to compliance; and makes clear that assessments of adequacy of preventative procedures will depend on specific bribery risks faced by organisations.
The guidance also outlines six principles to guide organisations in the development of “adequate preventative procedures”:
1 | Proportionate procedures
Organisations should adopt procedures that are proportionate to the specific bribery risks faced by the organisation.
2 | Top-level commitment
Organisations should ensure senior management visibly supports anti-bribery measures.
3 | Risk Assessment
Organisations should consider their bribery risk exposure based on key external and internal operating factors, including jurisdiction, sector of operation, transaction type, business partnership and remuneration and bonus structure.
4 | Due diligence
Bribery risk should be incorporated into due diligence assessment frameworks for third party intermediaries It may also be necessary to extend due diligence procedures to recruitment, acquisition and partnership processes in circumstances where the risk of bribery is evident.
5 | Communication/training
Organisations should raise awareness of anti-bribery obligations through internal and external communication and training.
6 | Monitoring/review
Anti-bribery procedures should be continually reviewed and updated in line with the organisation’s bribery risk profile.
The above-listed principles are meant to encourage organisations to develop anti-bribery procedures proportionate to their risk profiles. Accordingly, meeting the “adequate procedures” test is unlikely to be achievable without undertaking a risk assessment.
The Guidance recognises that a robust anti-bribery regime cannot always prevent bribery and that employees may disregard procedures, as such,the Guidance states that a single act of bribery by an associated person will not automatically determine that procedures were inadequate.
Hospitality and promotional expenditure
Many organisations feared the Act would criminalise legitimate promotional activity.
The guidance clarifies that bona fide hospitality and promotional activity, with the intention to improve an organisation’s image or to establish relationships with prospective clients is not intended to be criminalised by the legislation, but emphasises that such activity may be employed as bribes in certain circumstances. Whether or not an offence is committed in this context will depend upon factors such as the lavishness of the advantage provided, and requires that there be a “sufficient connection” between the advantage and the intention to influence and secure a business advantage.
Although exempted in limited circumstances in the U.S., facilitation payments (i.e. a payment designed to speed up or influence a decision of an official) will be illegal in the UK.
Extensive jurisdiction – but a UK listing is in itself not enough
The Bribery Act applies to any “relevant commercial organisation” carrying on a business or part of a business in the UK. Regarding foreign organisations, the Guidance clarifies only that a “common sense” interpretation of this is likely to require an organisation to have a “demonstrable business presence” in the UK and that mere admission to the London Stock Exchange will not of itself be sufficient to establish jurisdiction. Similarly, a UK subsidiary will not automatically qualify a parent organisation as a “relevant commercial organisation”.
Australian organisations with business in the UK should take a cautious approach and review their bribery prevention measures.
Recognising the success of the U.S. “plea-bargaining” approach, both the Guidance and the Prosecutorial Guidance note that a “genuinely proactive approach to anti-bribery involving self-reporting of breaches and remedial action” will be viewed as a factors against prosecution4. Experience from recent FCPA bribery investigations shows that organisations opting for self-reporting and cooperation have benefitted from significantly reduced penalties. However, any benefits arising from the self-reporting of breaches are lost if the organisation did not adequately promote or implement bribery prevention procedures prior to the incident. Steps should be taken by organisations operating in the UK before the Act comes into effect on 1 July 2011 to ensure policies, procedures, processes and controls are in line with the principles set out in the Guidance.
¹ Section 7, Bribery Act 2010 (UK)
2 The Bribery Act 2010, Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing (30 March 2011)
3 30 March 2011
4 Bribery Act 2010: Joint Prosecution Guidance of the Director of the Serious Fraud Office and the Director of Public Prosecutions, p7; see also The Bribery Act 2010 Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing, para 12.
Lisa Dobbin, Account Director - Forensic