Meeting the requirements of the UK Bribery Act
Background The Bribery Act in the United Kingdom (UK), commonly referred to as the UK Bribery Act (the Act), came into effect on 1 July 2011. Prior to this, a guidance document was drafted by the UK State for Justice to assist companies comply with the Act. This guidance document is aimed at all companies affected by the Act, and includes some South African companies. The general message from the document is that no policies and procedures implemented by companies are capable of detecting and preventing all bribery. However if a bribe has taken place on behalf of a company affected by the Act, the company can avoid being held liable in terms of the Act should it be able to demonstrate that it has adequate procedures in place to prevent and detect bribery. The document sets out six guiding principles on what such adequate procedures should entail. Furthermore, if these six guiding principles are mostly complied with, it will be a complete defence against prosecution under the Act. The onus is however on the company to prove that such adequate procedures were in place at the time of the bribe. Corporate offence The Act creates an offence which can be committed by a company carrying on a business, or part of a business, in the UK, if that company fails to prevent persons associated with it from committing bribery on their behalf. Jurisdiction The distinguishing feature of this Act from other Acts is its extra territorial jurisdiction. As mentioned above, if the company carries on business, or part of a business, in the UK, then the Act is applicable and the UK courts have jurisdiction. The implication is that all companies operating in South Africa who are either listed on the London Stock Exchange (LSE), or a subsidiary of such a company, or who carry on business, or any part of a business in the UK, must comply with the Act. In deciding whether a company carries on a business, or any part of a business, in the UK, the guidance document states that courts will employ a common sense test to decide whether the UK has jurisdiction over the company. Hence, even if a South African company is not listed on the LSE (or whose parent company is listed on the LSE), the Act may still be applicable if the company carries on a business, or any part of a business, in the UK. Consequently, the Act does not only apply to large multi-national corporations who are listed on the LSE, but may also apply to smaller companies carrying on a business, or part of a business, in the UK. Has a bribe taken place? In considering whether the company has contravened the Act, the following question is posed: Has the company, an employee of the company, or a person or entity associated with the company, offered, promised, or given a financial or other advantage to another person either directly or through a third party? If yes, then there must be evidence the person making payment intended the advantage to: Induce a person to improperly perform a relevant function or activity; or Reward a person for the improper performance of such a function or activity. If such evidence exists, then the question of whether the company in question has implemented adequate procedures to prevent and detect bribery applies. 6 Guiding principles to adequate prevention procedures If a company can demonstrate that it has adequate procedures in place to prevent bribery, then the company has a defence against being held liable for contravening the Act. Adequate procedures are based on the six guiding principles listed below. Proportionate procedures An organisation s procedures to prevent bribery by persons associated 2
with it should be proportionate to the bribery risks it faces and to the nature, scale and complexity of the organisations activities. Top-level commitment The board of directors, the owners or any other equivalent body or person should be committed to preventing bribery by persons associated with it. In doing so, top level management should foster a culture within the organisation in which bribery is not acceptable. Top-level management commitment to bribery prevention is likely to include communication of the company s anti-bribery stance, and an appropriate degree of involvement in developing bribery prevention procedures. Risk assessment Companies are to assess the nature and extent of their exposure to potential external and internal risks of bribery on its behalf by persons associated with it. Commonly encountered external risks can be categorised along country risk (some countries have higher levels of corruption than others), sector (some sectors are higher risks than others), transactions (certain types of transactions give rise to higher risks), business opportunity (high value projects involving many contractors or intermediaries may give rise to a higher risk of bribery) and business partnership (certain relationships may involve higher risks). Due diligence Companies are to apply due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the company in order to mitigate identified bribery risks. Since a company s employees are presumed to be associated persons in terms of the Act, the company may wish to implement due diligence procedures in its recruitment process. Communication (including training) Companies should communicate throughout the organisation the policies and procedures which are embedded regarding the prevention of bribery. An important aspect of internal communications is the establishment of a secure, confidential and accessible means for internal and external parties to raise concerns of bribery on the part of associated persons. Furthermore, if these procedures are to be effective there must be adequate protection for those reporting their concerns. Monitoring and review The bribery risks that a commercial organisation faces may change over time, so the procedures required to mitigate those risks are also likely to change. Therefore, companies are required to monitor and review procedures designed to prevent bribery and make improvements where necessary. 3
Recommendations to South African companies either listed on the LSE or conducting business in the UK If a company operating or incorporated in South Africa is either listed on the LSE or conducts any part of a business in the UK, it is affected by the Act. The message for these companies is simple: Take steps to implement the six guiding principles. The UK government is not prescriptive of the way in which the six principles are applied, but there must be a demonstrable attempt by the company to prevent and detect corruption via the implementation of the six principles, or a combination thereof. Furthermore, it is clear from the guidance document that the UK courts will look at each case on the unique facts of the case and there will be no instances where the court would decide on the matter based only on whether all of the six principles are implemented. However, should it be the case that a bribe has taken place on behalf of the company by a person associated with the company, and the company has made no attempt to prevent and detect corruption, the penalties to be meted out in terms of the Act are severe and can include unlimited fines for individuals and companies, and individuals may be imprisoned for up to 10 years. Contact details: Bruce Thornton Associate Director: Risk Advisory bthornton@deloitte.co.za Marius Alberts Director: Risk Advisory maalberts@deloitte.co.za 4
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