The Bribery Act 2010 represents arguably the toughest legal regime against bribery anywhere in the world. It will require a thorough review of internal control frameworks and crucially, creates a strict liability offence for companies and individuals who negligently fail to prevent bribery within the business.

The official Ministry of Justice (MoJ) guidance was published back in March with the intention of helping commercial organisations understand what sort of procedures they can put in place to prevent persons associated with them from bribing or being bribed.

The BBA guidance should not be regarded as law or as a substitute for the MoJ guidance: it should be read in conjunction with the Act and other relevant guidance issued by government, the prosecutorial bodies and the financial services sector regulator.

Commenting on the release of the BBA guidance, chief executive Angela Knight thanked the BBA Bribery Act Working Party, which has advised on its production, and the Serious Fraud Office, the Crown Prosecution Service, the Financial Services Authority and the Ministry of Justice, all of whom helped “develop our thinking in this area”.

She said: “The Bribery Act 2010, the Ministry of Justice guidance and the publication of this guidance form the beginning of a collaborative process; there will be a continuing need for our sector to collaborate closely and share best practice and experiences as the legislation is tested in a legal and practical sense.

“The BBA remains committed to supporting its members in their ongoing efforts to comply with the Act and is mindful that the anti-bribery responsibilities of banks do not stop with the implementation of the UK Bribery Act alone. This guidance focuses on the very important area of helping banks assess the policies and procedures they need to put in place to meet the requirements of the Act, and also considers the links with other requirements such as FSA regulations. “

“The guidance does not seek to provide a detailed analysis of pre-existing regulatory obligations to identify and assess bribery and corruption risks, but we are nonetheless active in this area. “

She said that next year the BBA will be undertaking separate work in relation to wider bribery and corruption risks, including the issue surrounding corrupt Politically Exposed Persons.

Also in the New Year, the BBA will hold an anti-corruption compliance workshop that will provide practical advice for assessing the risks faced by corruption and how to design an effective compliance programme in compliance with the Bribery Act 2010.

Following on from his conviction, the first sentence involving the Bribery Act 2010 has not been handed to an ambitious and aggressive CEO, or some exiled mining magnate, but an administrative worker in the public sector who has been sentenced to six years’ imprisonment after being found guilty of accepting bribes.

When we started talking with SME owners and managers over a year ago about the potential impact of the Act, most thought we were barking when we warned that an individual could face up to 10 years’ imprisonment.

“It will never happen” was many people’s response. Well it has.

Munir Yakub Patel, who was employed as an administrative clerk at Redbridge Magistrates’ Court, has been sentenced to six years in prison after he influenced the course of criminal proceedings in relation to individuals charged with motoring offences, in exchange for payments. The maximum sentence was only saved via a one-third discount due to an early guilty plea.

As well as being the first conviction under the Act, what is also key is that Mr Patel was not the party making the bribe. Many directors who we talk to still think that it is the offering of bribes that is the offence.

That used to be the case. But it was an offence under section 2 of the new Act – requesting and receiving a bribe, with the intention that it would result in the improper performance of his functions – which Mr Patel pleaded guilty to.

So before you enjoy that festive hamper of that case of fine wine from a supplier this Xmas, then make your New Year’s resolution that you will spend the time to make yourself aware of the implications of the Act on you and your business.

When we examine some of the activity alleged, there is little doubt that corruption has been central to the success of the dubious practices, that have caused so much outrage, to politicians, celebrities and sickeningly, to the families of the victims already devastated by divers catastrophes. The kind of information required to facilitate these crimes is often held by those paid from the public purse, whether in the police, the employ of the Royal Family, or in one on the many public organisations holding a massive amount of personnel data on people. Offering some financial advantage to obtain this data, and accepting some favour, could, post July 1st, be captured by the Bribery Act. A media company, by offering such an advantage to a public servant to get them to perform their function improperly, stands to be prosecuted for offering a bribe, whilst any senior manager who ‘connived’ with such a payment could face prosecution and up to ten years imprisonment, which would make an appearance before a select committee pale into insignificance. Then follows the inquisition into the ‘adequate procedures’ the media company had in place to avail itself of the defence against the offence of failing to prevent the bribery.

Now to the public servants.

Remember, the act applies to all UK companies, public organisations ,citizens and individuals ordinarily resident here, wherever the offending takes place. Therefore it naturally follows that the public sector is subject to the same requirements as private commercial organisations. In fact, the Joint Prosecution Guidance issued by the SFO and DPP, states that although a robust approach to tackling commercial bribery is one of the Act’s principal objectives, there may be many examples outside this sphere where individuals attempt to influence the application of rules, regulations and normal procedures, which will fall within scope.

Individuals within the public sector will obviously be susceptible to the passive bribery offence, necessitating anti-corruption measures to protect the public purse. However, public organisations will also need to risk assess the likelihood of people acting on their behalf committing the active bribery offence, and if identified, have adequate procedures in place to prevent it. This is particularly relevant in view of proposed spending cuts, where public sector organisations find themselves fighting for survival, and keen to promote their own ‘business’ areas. It may be necessary to ensure that employees know and understand the nature of bribery and how it can be committed. Failure to have adequate procedures in place raises the embarrassing prospect of a public sector organisation facing prosecution for the corporate offence of failing to prevent bribery.

Stuart Melhuish
Stuart Melhuish is a Director of Venalitas a specialist anti corruption consultancy, training and consulting company.

Rebekah Brooks’ one line admission in 2009 of “we have paid police for information in the past” may just create the perfect storm to test the powers of the new Act.

We have heard, and will continue to hear at next week’s parliamentary committee hearing, that the senior management of the business did not know what was happening and they will claim that they have been let down, even betrayed, by those they trusted.

The act simply does not provide for that defence. It asks that as a corporate entity News International can show that they had adequate procedures in place to prevent bribery.

As the additional information that News International have at this point voluntarily passed over to the police becomes apparent, either by increased arrests and further press revelations or indeed trails and prosecutions, will we be able to see the depth and scale of any wrongdoing.

That is the point at which UK prosecutors must address the issue of whether or not News International, and the directors who under this legislation can be personally liable for prosecution, have a case to answer.

Stuart Brown
Stuart is Managing Director of Ten Alps Publishing, publishers of The Bribery Centre.

I was at a charity dinner the other night, when after a rather boring but well meaning speech to philanthropic intentions, the toast was proposed “to our charitable causes, may we never need them”. How then, did my mind switch to the Bribery Act?

My train of thought was thus: Perhaps at the next next board function you attend, the toast might be “to adequate procedures – may we never need them”. This brings home the reality of the “adequate procedures” defence under the Bribery Act 2010. The strict liability offence under the Act of failing to prevent bribery means that if someone “associated” with your organisation (which, by the way, has quite a broad scope, encompassing not only employees, but agents, intermediaries, contractors, consultants, and even joint venture partners, suppliers etc if they perform services on your behalf) bribes someone, then you are guilty of an offence unless you can show that you had those self same “adequate procedures” in place.

The Ministry of Justice Guidance on the procedures requirement is deliberately “not prescriptive”, but an assessment of bribery risks is seen as an essential for all organisations. This will in turn determine not only the proportionate procedures that need to be put in place, but also the amount of due diligence required and the level of “tone from the top” commitment required from the board and senior management team.

So here is the real risk assessment – will it happen to us? This is a genuine question you need to ask yourself. Unlike some other areas of compliance, don’t expect a regulatory visit, action plan, and time to put things right. If the law enforcement authorities come knocking, it’s because bribery has happened, and you, as an organisation, has liability for failing to prevent it. No good taking the dust covered folder off the shelf an asserting ” we have a policy “, you will need to prove an informed, periodic and documented risk assessment, the the correct procedures emanating from it. In these circumstances, a light approach is unlikely to succeed, in fact, if it’s not done properly it’s a complete waste of time. So back to the real risk assessment, and should we or shouldn’t we?

There is also a commercial incentive to get your act together in respect of this. We are already seeing major building projects stipulating that potential contractors will have to show compliance with the provisions of the Bribery Act 2010.

By the way, a corporate body faces unlimited fines for offences under the Act, and directors or senior managers who can be seen to have connived in the payment or receipt of bribes can face up to ten years imprisonment.

Stuart Melhuish

Stuart Melhuish is a Director of Venalitas a specialist consulting, training and software company, created to assist companies to manage their risks from the Bribery Act.

The long-awaited UK Bribery Act affects not only UK companies, but also all non UK-firms that have subsidiaries or other business relationships in the UK or with UK companies.

Under the Act, a company can face liability if its executives commit crimes of bribery and even if it’s judged to have inadequate anti-bribery procedures in place.

George Dallas, director of governance at F&C Asset Management in London, has said that failure to adapt could not only mean hefty fines, blacklisting from bidding on contracts and significant reputational damage, but also the prospect of having top management tied up in endless investigations and prosecutions.

“The big question now is whether overseas companies are sufficiently aware of their potential liability to the UK Act. They will have to adapt to this new framework by implementing internal control mechanisms, risk management and transparent information flows,” he said.

This Act will affect companies from all countries across many different sectors, from those in the German car industry to Swiss banks with strong business relationships with the UK.

“Corruption will now swiftly move from being the tempting but morally-wrong thing to do to win lucrative contracts, to career and corporate suicide for any company or board that is foolish enough to indulge in it,” he added.

Justice secretary Kenneth Clarke said: “Bribery and corruption has a direct impact on the ability of honest businessmen and women to export and to make their living.

“The guidance that is already available should reassure companies that the prevention of bribery is commonsense and does not require unduly expensive or onerous procedures for legitimate businesses.”

Upon the launch of the Act, foreign secretary William Hague called bribery a “modern day scourge on international trade”.

Statistics show that corruption adds up to ten per cent to the total cost of doing business globally, and up to 25 per cent of the cost of procurement contracts in developing countries.

“I call on other countries to look hard at their own laws and regulations on bribery and to take tough action against it. The more that join with us to fight this scourge the quicker we will beat it. Many countries already have tough laws on bribery but there is no doubt more can be done to make them stronger and also enforce them fully,” Hague said.

The Commencement Order confirms that the Act will come into force on 1 July 2011, as the UK looks to reinforce its reputation as a leader in the global fight against corruption.

After receiving Royal Assent on 8 April 2010, the Act was rushed through both Houses in the so-called wash-up of Parliamentary business before the pre-election recess last year. However, the modernising of outdated anti-corruption legislation has since been hit by delays and was originally due to come into force in October 2010.

The looming Bribery Act will:

• Introduce a corporate offence of failure to prevent bribery by persons working on behalf of a business. A business can avoid conviction if it can show that it has adequate procedures in place to prevent bribery.
• Make it a criminal offence to give, promise or offer a bribe and to request, agree to receive or accept a bribe either at home or abroad. The measures cover bribery of a foreign public official.
• Increase the maximum penalty for bribery from seven to ten years’ imprisonment, with an unlimited fine.

Guidance on the safeguards businesses can put in place to prevent bribery were published in late March and followed extensive consultations with non-governmental organisations and business to ensure that companies of all shapes and sizes can deal with the threat of bribery simply and effectively.

Commenting on the Act recently, Clarke said: “I have listened carefully to business representatives to ensure the Bribery Act is implemented fully and in a workable, commonsense way – this is particularly important for small firms that have limited resources.

“Some have asked whether business can afford this legislation – especially at a time of economic recovery. But the choice is a false one. We don’t have to decide between tackling corruption and supporting growth. Addressing bribery is good for business because it creates the conditions for free markets to flourish.”

Dr Adam Marshall, director of policy and external affairs at the British Chambers of Commerce, said: “Business needs real clarity and certainty when it comes to implementing the Bribery Act.

We are encouraged by the government’s recent efforts to make the Act clearer, especially for SMEs. The guidance highlights that common sense, rather than bureaucratic procedures, should lie at the heart of smaller companies’ approach.

“We must avoid creating a situation where companies choose not to trade in fast-growing overseas markets because they are afraid it of getting it wrong.

“Legitimate businesses must be able to operate in foreign markets, engage agents, and entertain potential clients without fear of falling foul of the law. Meanwhile, the full force of the law should be brought to bear on the unscrupulous.”

James Dingemans QC is appointed to look into the claims made against four members of Fifa’s executive committee, who were named under parliamentary privilege, and speak to those people who could provide corroboration.

For some this is merely sour grapes, for others this is another opportunity to open up the dark secrets of football.

The Bribery Centre recently held a roundtable debate discussing bribery in football. You can view it here.

The content in itself was self explanatory, and as you would expect factual. KPMG spoke of how firms should be well into the risk assessment stage of preparing to meet the 1 July implementation date and E&Y, in the FT, commented on the increased risk of the Act to the oil and gas sector. Nothing particularly new or controversial.

What was interesting, however, was both organisations referring to court actions.

KPMG commented that: “Ultimately whatever goes through court will be played out in court and that is going to set the standard of how the Act is interpreted and applied by the prosecutors”.

Whilst E&Y had the more sobering fact that, if we are to learn from our US counterparts, then we cannot afford to take this lightly. Of 118 US cases “only 3 per cent of investigations have resulted in no action”.

I sense that many UK directors are assuming that as it is the Serious Fraud Office behind this in the UK then their history of successful prosecutions is somewhat limited. Well, gentlemen be warned … this could be the very weapon they need in their arsenal.

Stuart Brown
Stuart is Managing Director of Ten Alps Publishing, publishers of The Bribery Centre.

I have previously spoken in particular about procurement and how suppliers, especially those to public sector, should prepare their own organisations to deal with the requirements to comply with the act appearing within tender documentation. Well here we are …

http://www.theconstructionindex.co.uk/tenders/index/view/ref/2011%7CS%2079-129796/previous/

The University of Birmingham is seeking to appoint a main contractor to undertake the new build construction of four new student residential buildings each to accommodate approximately 35 students in self contained flats with common room and laundry.

Alongside the usual requirements for Professional/Indemnity Insurance and Health and Safety compliance, the tender Appraisal Questionnaire Section D stipulates that: “Tenderers will be required confirm that they will observe and comply with their statutory obligations under the Bribery Act 2010”.

This is certainly a change, and brings the commercial departments into the debate.

Not having your own adequate procedures and anti-bribery programme in place now widens the risk to your business of a sales/commercial risk in terms of bidding and new business acquisition.

Stuart Brown
Stuart is Managing Director of Ten Alps Publishing, publishers of The Bribery Centre.