Failing to Prevent Bribery - Are You at Risk?

The Bribery Act 2010 came into force on 1 July 2011. It created a new offence which can be committed by a commercial organisation if it fails to prevent persons associated with it from committing bribery on its behalf. A business can provide a defence by showing that it had ‘adequate procedures’ to prevent bribery by such persons from taking place, however. Organisations that have not already done so should ensure they have the necessary prevention procedures in place.

What is deemed to be adequate will depend on the nature, size and complexity of your business. The key point is that to rely on the defence, the measures you adopt must be proportionate in view of the likelihood of bribery occurring – for example, a large firm which operates in overseas markets is likely to be more at risk than a small organisation undertaking business primarily in the UK. You should therefore carry out a risk assessment of the potential that exists for bribery offences to be committed, especially when entering into new business arrangements and new overseas markets.

Where appropriate, due diligence should be carried out so that you know exactly whom you are dealing with, especially when engaging others to represent you in business dealings.

Whatever anti-bribery procedures you do decide are necessary should be seen to have the backing of those at the top of the organisation and the policy should be communicated to staff and others who will perform services for you, with training provided where appropriate, so that it is clear that the business culture is one in which bribery is not tolerated. If the risks you face change, your procedures may cease to be effective, so it is important to make sure these are kept up to date.

Concern has been expressed that spending on hospitality could cause a business to fall foul of the Bribery Act. The position is that you can continue to provide bona fide hospitality and spend money on promotional or other business initiatives provided the expenditure is reasonable and proportionate given the sort of business you are engaged in. The expenditure should be made in order to promote your products or services, improve the image of your business or establish good relations with clients, with no intention of corrupting the independence of the recipient.

The Serious Fraud Office advises that when considering whether expenditure on corporate hospitality can be considered to be a bribe, it will look at five factors:

1. Whether or not the organisation has issued a clear policy regarding gifts and hospitality;
2. Whether the expenditure in question was compliant with the policy and, if not, whether or not it had been sanctioned at the appropriate level within the organisation;
3. Whether or not the expenditure was proportionate with regard to the status of the recipient;
4. Whether or not the expenditure had been entered in the organisation’s books of account; and
5. The lawfulness of the receipt by the recipient under the laws of his or her own country.

Where an offence under the Act is committed with the consent or connivance of a senior officer of an organisation, that person (as well as the body corporate or partnership) is guilty of the offence and liable to be proceeded against and punished accordingly. The maximum penalty for individuals is 10 years’ imprisonment or an unlimited fine, or both. The maximum penalty for commercial organisations is an unlimited fine.

The Ministry of Justice has published guidance on the Act, including case studies illustrating what approach businesses might take in certain situations.