Bribery Act 2010 Guidance on Implementation

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1 Bribery Act 2010 Guidance on Implementation Introduction The 2010 UK Bribery Act (the Act) first became law on 1 July 2011 and is amongst the toughest anti-corruption legislation in the world. In March 2011 the Ministry of Justice published guidance (the Guidance) on procedures companies can put in place to prevent bribery. The Guidance sets out six principles to help companies decide on the bribery prevention procedures that they need to have in place. These are, however, general in their application and do not constitute specific procedures. Thus companies need to form their own view on the practical issues that they face and the specific risks applicable to their own business sector or territory. A notable feature of the Act is that it takes a zero tolerance approach to bribery and it has meant that many companies have had to grapple with the handling of issues such as facilitation ( grease ) payments, which are prohibited by the Act. It is this zero tolerance approach which has made the Act more extensive in its application than other equivalent legislation such as the FCPA in the USA. This Briefing therefore sets out the background to the act and recommends practical pointers for boards of directors wishing to adopt anti bribery procedures for the first time or for those wishing to review those procedures already in place. Summary of the Key Provisions of the Act The Act sets out four offences: 1. A general offence covering offering, promising or giving a bribe. 2. A general offence covering requesting, agreeing to receive or accepting a bribe. 3. Bribing a foreign public official to obtain or retain business. 4. A strict liability offence for companies where they fail to prevent bribery by those acting on their behalf. The first two of these offences were already incorporated into current law before the 2010 Bribery Act; the second two were new. Assuming that companies have robust systems in place prohibiting the giving or receiving of bribes, the last of these is likely to be the one to consider in most detail. The only defence available to companies found to have failed to prevent bribery being carried out by those acting on their behalf is to show that adequate procedures designed to prevent bribery were in place.

2 Adequate Procedures As noted above, the guidance on what constitutes adequate procedures is general and companies will therefore need to develop their own approach as experience of complying with the spirit as well as the letter of the law is interpreted by the UK courts. The Guidance sets out six principles intended to aid companies in establishing a bribery free culture. These are: 1. Proportionate procedures: Procedures should be proportionate to the bribery risks a company faces and the nature, scale and complexity of the organization. 2. Top level commitment: Successful implementation and ongoing compliance will depend upon the extent to which the underlying policies and procedures have the support of the board of directors and senior management team. They are responsible for establishing a zero tolerance attitude to bribery and must ensure that appropriate policies and procedures are developed and rolled out. This requirement for an effective cascade of the tone at the top attitude towards bribery, links to the s176 requirement of the Companies Act relating to the duty of directors not to accept benefits from third parties. The 2016 FRC report, Developments in Corporate Governance and Stewardship emphasises the Board of Director s responsibility to shape culture within organisations. 3. Risk Assessment: The company, country and sector-specific risks should be identified using a variety of methods. Those suggested in the Guidance include references to internal and external sources, customer feedback as well as publicly available information. In addition, transactions involving, for example, public procurement and/or multiple partners present opportunities for bribery as do crossborder transactions. 4. Due diligence: Companies are expected to know who they are doing business with and the territories in which they are proposing to trade. For example, making enquiries locally, i.e. via an embassy or trade mission, to determine whether proposed business partners, including joint ventures, suppliers and contractors have a reputation for bribery. Also, ascertaining whether local written law permits the type of transaction envisaged. 5. Communication: Recognising that meeting the requirements on paper will be insufficient, the Guidance anticipates that companies will need to consider how they communicate and reinforce the policies and practices by creating effective training programmes. Training should be continuous and regularly monitored and evaluated. 6. Monitoring and review: Policies and procedures will need to be systematically monitored and adapted to changing circumstances as companies move into new sectors and markets. The extent of such monitoring will depend upon the size of the organisation from using financial and internal audit

3 controls to isolate irregularities in smaller companies to larger companies using their audit committees to review the results of reviews. Transparency International, an international organisation focussed on fighting corruption, has published some useful material including more detailed guidance on the Bribery Act and a Checklist which provides a useful starting point ( In addition the British Standards Institute published in December 2011 a standard aimed at helping companies judge whether they have adequate procedures in place ( Serious Fraud Office The Serious Fraud Office (the SFO) is the main prosecutor with responsibility for enforcing the Bribery Act. It has published guidance on various aspects of its approach in relation to the Bribery Act. The SFO also has prosecutorial discretion over cases. In order to operate its discretion the SFO must firstly determine whether there is enough evidence to provide a realistic chance of conviction. If there is sufficient evidence, then the SFO must consider whether a prosecution is in the public interest. The SFO issued revised policy statements in October 2012 on facilitation payments, business expenditure (covering hospitality and gifts) and self-reporting. Facilitation payments: The SFO confirmed that facilitation payments are bribes and are illegal under the Bribery Act Business expenditure: The SFO has stated that genuine hospitality or promotional or other legitimate business expenditure is an established and important part of doing business. However, the SFO notes that bribes can be disguised as legitimate business expenditure. Self-reporting: The published Guidance on Corporate Prosecutions sets out the extent to which self-reporting by a corporate body is relevant to the decision to prosecute. It states that self-reporting in itself will not automatically avert prosecution and a self-report must form part of a "genuinely proactive approach of the management team. The SFO website publishes a list of, non-exhaustive, corruption indicators that companies should beware of if they are encountered during the course of business. These include: Abnormal cash payments. Pressure exerted for payments to be made urgently or ahead of schedule. Payments being made through a third party country for example, goods or services supplied to country 'A' but payment is being made, usually to a shell company in country 'B'. An abnormally high commission percentage being paid to a particular agency. This may be split into two accounts for the same agent, often in different jurisdictions. Private meetings with public contractors or companies hoping to tender for contracts.

4 Lavish gifts being received. Making unexpected or illogical decisions accepting projects or contracts. Bypassing normal tendering/contractors procedure. Company procedures or guidelines not being followed. Prosecutions The 2010 Bribery Act cannot be applied retrospectively to conduct prior to July However, there have been an increasing number of successful prosecutions to date under the 2010 Bribery Act and the SFO (Serious Fraud Office) reported that 14 new investigations opened in 2017 with 43 defendants (both corporate and individuals) awaiting trial. The most high profile prosecutions have been brought by the SFO using its powers to investigate and prosecute in this field. The SFO secured its first convictions against individuals accused of breaching the 2010 Bribery Act in December 2014 in connection with a 23m fraud at Sustainable AgroEnergy plc. In February 2016 Sweet Group plc (Sweet), a UK based construction and professional services company was convicted for the offence of failing to prevent its subsidiary from paying bribes on its behalf, the first successful conviction for the SFO under section 7 of the 2010 Bribery Act. This prosecution was a reminder to UK organisations with subsidiaries and operations overseas that they can be liable for the acts of those performing services on their behalf and the importance of exercising oversight on all third parties who are performing services for or on an organisation s behalf. In January 2017, following a four year investigation and the largest ever single investigation carried out by the SFO, the SFO and Rolls-Royce entered into a Deferred Prosecution Agreement (DPA). The key components of the bribery involved agreements to make corrupt payments to intermediaries, and the failure by Rolls-Royce to prevent bribery. Under the terms of the DPA, Rolls-Royce has to pay a total sum of 497m plus the SFO s costs of 13m as well as complying with a specific compliance programme. The investigation into the conduct of individuals continues to this date. Prism Perspective The Act essentially covers all operations of UK companies and is, therefore, broad in its coverage. Furthermore the zero tolerance approach it promotes requires companies to consider how they do business particularly in emerging markets. Whilst professional service firms are keen to offer help, the bottom line is that the ultimate responsibility for the decision on the adequacy of procedures to prevent bribery rests with the board of directors and no-one else. There is still not enough case law to date to determine what criteria that the UK courts will adopt in the future and so, therefore, it is still difficult to judge the adequacy or otherwise of procedures that companies have in place. However two things are clear; those companies who choose to ignore the Act and therefore do nothing are going to be the ones at the greatest risk.

5 Conclusion The nature of this topic is such that guidance on what constitutes adequate procedures can only be generic and there is still not enough case law to assist companies. The Guidance is designed to assist companies construct a suite of policies and procedures, backed by the board, which will provide the basis for a robust defence should the need arise. At the same time, boards of directors should recognise that this is work in progress and that it is incumbent upon them to understand the risks to their business arising from bribery and anti-corruption, ensure board commitment to dealing with those risks, ensure that appropriate policies and procedures are in place and make sure that they are implemented and monitored. Useful Sources Ministry of Justice: Transparency International: British Standards Institute: Content/General/Antibribery-controls-top-of-corporate-agenda/ Prism Cosec May 2018