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Are your ready for The Bribery Act?

May 19, 2011

By now you’ll have already heard a bit about the Bribery Act but you’re probably wondering what it really means for your business. In this article, Helen Besant-Roberts, business services partner at accountancy firm, Hurst provides some background to the Act, and what what you need to be aware of when conducting business.

The Ministry of Justice (MoJ) has finally published its long-awaited guidance on the Bribery Act and it’s good news and bad for businesses.

After several delays, the Bribery Act, is now due to come into force on the 1 July 2011. The Act itself has had much criticism due to its rigid approach to bribery offences, unclear terminology and general lack of clarity. Although the guidance does address many of the concerns raised, there are still a number of areas to be wary of.

It is important to note that, whilst the guidance does provide clarity and appears to include an element of pragmatism on how the Act should be interpreted and adopted, the Act itself remains unchanged.

The Bribery Act includes three key bribery offences:

  • Bribing another person
  • Bribing of a foreign official
  • Failure of a commercial organisation to prevent bribery

Hospitality and promotional expenditure

Under the strict rules of the act, hospitality and promotional expenditure could be deemed to be bribery offences. This is because the definition of what constitutes a bribery offence is extremely broad.

The MoJ guidance has attempted to address concerns emphasising that they do not intend bona fide, proportionate and reasonable hospitality and promotional expenditure to be treated as offences, a response welcomed by all. However, the MoJ has made it clear that “hospitality and promotional or other similar business expenditure can be employed as bribes”.

Failure to prevent bribery

The Act introduces a new offence of failure to prevent bribery by a commercial organisation. This provision has been debated at length and has given many organisations significant cause for concern. This is because, not only is the definition of a bribery offence broad, a company will be liable if any associated person acting on its behalf commits a bribery offence, even if it is done without the knowledge or agreement of officers of the company. So if, for example, a manager of an overseas branch bribes a supplier, the directors of the business will be held accountable.

The only defence available to companies if a bribery offence is committed on their behalf is that they have ‘adequate procedures’ in place. Although, this is an area that is open to interpretation, it’s vital that all businesses have systems in place to prove they’ve done all they can to illustrate anti-bribery measures have been put in place.

Revised guidance makes it clear that adequate procedures should be proportionate to the organisation’s bribery risks. So a big business employing 500 people with four overseas outlets would have to make more provisions than a self-employed photographer, for example..

The guidance also provides more clarity on the definition of associated persons. However, despite pressure to soften the provisions on associated persons, the MoJ makes it clear that this does include employees, agents and subsidiaries. It may also include contractors and suppliers if they are performing services for the organisation rather than merely acting as the seller of goods.

Start-ups involved in supply chain commerce rely on the procedures of the organisation they are directly contracted with, so that due diligence does not have to be undertaken on all organisations along the supply chain. This will cut out a lot of time and expense.

In addition, there is recognition that the presence of a joint venture entity does not automatically make that joint venture an associated party.

Facilitation payments

The Bribery Act does not include any exemption for grease payments. Despite many objections about this, the revised guidance makes it clear that no exemption will be granted. However, it does recognise that small facilitation payments are a standard means of doing business in some areas of the world and emphasises that the eradication of facilitation payments is a longer term goal. It confirms that discretion will be applied in the prosecution of organisations which have made facilitation payments.

Proportionate procedures

Organisations should introduce procedures which are proportionate to the bribery risks they face. In order to do this a risk assessment should be undertaken by all start-ups.

What action should you take?

All commercial organisations in the UK are affected by the Bribery Act, albeit to a greater or lesser extent. Although your response should be proportionate to your risks, doing nothing is not an option. If you have not already started to address this, I’d recommend a few first steps:

  • Review the MoJ guidance and related ‘Quick start guide’ available here.
  • Attend a seminar or training course
  • Perform a risk assessment of your bribery risks
  • Develop a proportionate anti-bribery implementation plan