by Martin Bell
28 October 2010
IThe Bribery Act strengthens UK corporate liability laws. Non-compliant businesses now face unlimited fines, so make sure you fully understand the risk implications
The Bribery Act is a new piece of legislation due to come into force in April 2011. It creates three potential offences for UK registered organisations, namely:
A general offence of offering or receiving bribes
A specific offence of bribing a foreign public official
An offence of failing to prevent bribery on the corporate’s behalf
These offences (for corporates and individuals) apply regardless of where in the world the bribes are offered or received, and regardless of whether the bribery is direct or indirect via a subsidiary or third party (eg, associated persons). This offence by association raises due diligence requirements to ensure organisations clearly understand who they are in business with and how they conduct their business.
If a corporate body is guilty of a bribery offence then directors or senior managers will also be guilty if they have “consented to or connived” in the offence, ie, they were aware of it but have not done anything about it.
A defence to the corporate failure offence to prevent bribery can be shown if “adequate procedures” were in place at the time of the alleged bribery offence. The burden of proof rests with the organisation, and procedures need to be evidenced.
The involvement of the organisation’s top management in the failure (eg, through creating clear policies, or allocating sufficient resources) will be taken into account when assessing the adequacy of the procedures.
Although this could be seen as an issue most relevant to global FM suppliers, the impact of association with this Act also raises questions of clients and their supplier selection and relationship management.
International FM suppliers have a residual risk as:
Clients will often be government institutions
The FM industry is dependent on subcontractors for service delivery
The industry involves large projects, tenders or long-term contracts
Territory operations will often operate with light-touch central monitoring to keep costs down and allow greater autonomy
If an FM supplier is exposed under the act it would have a knock-on effect for their client.
What are the penalties?
Corporate bodies found to have committed any bribery offence could face unlimited fines. In addition, they may be disbarred from tendering for government contracts. Individuals could face a maximum 10-year prison sentence and/or unlimited fine.
This is a new measure in the way senior officers (eg, directors, managers or secretaries who are UK residents) of companies can be held liable through their “consent or connivance” with a general or foreign public official offence by their company.
The Serious Fraud Office is expected to embrace this in the search for high-profile corporate failings.
Do I have an issue?
Use the following ten questions to answer this question. The more that are answered ‘no’, the higher the potential risk.
Has there been a formal review of third parties ‘associated’ with the commercial organisation, together with detailed and regular audits of those third parties?
Has there been a comprehensive global risk assessment focusing on identifying the geographic areas of higher risk (eg, China, south-east Asia, India, Russia, Africa, Middle East, South and Central America, central, eastern and Southern Europe) in terms of exposure to bribery and corruption?
Are there regular anti-bribery training programmes for employees that highlight the risks associated with specific roles?
Is there a clear and documented anti-bribery policy that is adequately published internally and overseen by a designated person at board level?
Are there clear policies on staff receiving corporate gifts and hospitality and are integrity and compliance requirements built into all business processes?
Are anti-bribery clauses written into all commercial contracts?
Is there a whistleblower facility to provide clear channels for staff to raise concerns in a safe and confidential manner?
Is there a documented procedure for investigating and resolving any anti-bribery related problems and has the effectiveness of the procedure been tested?
Is there any adequate governance structure with appropriate stakeholder representation from specific compliance functions (eg, legal department, internal audit, finance and HR), and is there an oversight arrangement with reporting into a non-executive committee with a compliance remit?
Are management key performance indicators created on compliance and is there a specifically designed internal control framework to address all the issues associated with the above.
Martin Bell is a strategic facilities management consultant at PricewaterhouseCoopers
Balfour Beatty reached a £2.25m settlement with the Serious Fraud Office in October 2008 after payment irregularities associated with a construction JV in Egypt. Balfour Beatty itself identified the irregularity, and already had compliance systems in place. This included robust controls with payments to agents, commitment from the board, investment in training and documented compliance procedures. Nevertheless, this example shows that even organisations with a culture of compliance can be at risk.