The UK Bribery Act comes into effect in April 2011. The Act is causing a lot of concern for companies carrying out business in the UK. Complying with the law and implementing Adequate Procedures to prevent bribery for protection requires a lot of time. And that precious commodity is running out.
Last week I had the opportunity to interview Barry Vitou and Richard Kovalevsky QC of thebriberyact.com. Here’s a recap of the interview:
Q: Does the Bribery Act apply to companies doing business in the UK even if they aren’t a UK based business?
A: Yes, If a business carries on business in the UK the Bribery Act will apply to it. The boundaries of what “carrying on business” actually means in this context are not defined but messages from the Ministry of Justice and the UK Serious Fraud Office (SFO) suggest a restrained approach. However, expect the law to get tougher over time as prosecutors gain confidence and courts set precedents.
Q: What are the consequences if your business gets caught?
A: The SFO have said that in its view compliance can be summed up in one word, transparency.
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Against that backdrop there are in theory two answers.
First, if your organization has Adequate Procedures to prevent bribery in place it might not face prosecution under the Bribery Act. There is a corporate defense. If an organization has Adequate Procedures to prevent bribery then it is not guilty of the offence of failure to prevent bribery.
However, each case will turn very much on its own facts.
Given the SFO’s mantra of transparency and self reporting it remains to be seen if it would take the view that a non self reporting company “caught” bribing had Adequate Procedures. What steps the corporate took to remedy the wrong will be critical because even if no offense is committed under the Bribery Act it is possible that another offense may have been committed under the UK’s anti money laundering laws.
The second answer is that an organization guilty of bribery faces unlimited fines and confiscation (disgorgement) of the proceeds of crime. Disgorgement is not limited to profits but extends to the entire value of the contract, in other words at least all revenues under it. Following the case of Innospec this year the UK courts have warned that UK financial penalties should be on a par with US fines and penalties. This represents a significant increase on fines and penalties levied to date in the UK. An additional consequence is possible debarment from procurement contracts in the EU. This component is reportedly being reconsidered and will likely depend on the circumstances of the crime committed.
Finally, it’s worth noting that there is no defense for individuals guilty of bribery and they will run the risk of prosecution. Like the US DOJ the UK prosecution authorities have said they intend to take a hard line with individuals.
Q: Can you give us some examples of crimes punishable under the Act?
A: Bribery, grease/facilitation payments, kickbacks and lavish hospitality are all punishable under the Act. Under the FCPA in the US there is a widely discussed facilitation payments exemption but as we understand it any such payments must be recorded as such in your company’s books and records. Of course, recording the payment of any bribe in this way to comply with US laws is evidence of guilt under English law if the Bribery Act applies.
Q: What can a company do to protect itself and comply with the Act?
A: The main protection is to make sure your company establishes Adequate Procedures to prevent bribery. Guidance on the key principles that will need to feature in such Adequate Procedures should be released in January. These procedures focus on top down approach to anti-corruption. The 6 key principles identified so far in the draft Adequate Procedures guidance are:
- Risk assessment;
- Top level commitment;
- Due diligence;
- Clear, practical, accessible policies and procedures
- Effective implementation; and
- Performance and review.
(There’s more detail about the guidance on Barry and Richard’s website.)
Q: Why is compliance with the Act important?
A: On top of the draconian penalties corruption isn’t attractive to your customers or potential/existing partners. There are increasing ways of being caught too. New laws, whistleblowers, disgruntled employees, and something garnering a lot of press at the moment, WikiLeaks to name but a few.
This all reflects a growing global movement toward business ethics, pushing companies to adopt ethical practices and implement compliance programs.
Q: Why do you think it has taken so long for the UK to put a law like this in place?
A: A tough question to answer. Another question might be why now? For a lot of years, bribery was simply considered to be a fact of life in doing business in certain jurisdictions – and in a lot of countries, it still is. However, the OECD and mounting political pressure in the UK combined with the growing global movement to stamp out unethical business practices have set the stage to make the change now.
Q: Are there parts of the Act that might be confusing for companies to understand? If so, what are some of the “problem” areas that have been identified?
A: There are three main “gray areas” within the Act.
- Facilitation payments- Although these are outlawed, enforcement of them remains unclear.
- Hospitality- There is widespread concern as to where the line is drawn.
- Adequate Procedures to prevent bribery- Laws and guidance will become clearer come January/ February when the final guidance is released. However, guidance is just that, guidance and it will not be prescriptive.
Another note that both Richard and Barry shared with me was the fact that the Serious Fraud Office (SFO) is interested in talking to people and working through issues. The SFO promotes self reporting, and in return, is willing to work with organizations that bring forward crimes identified within their companies.