Implementation of the Bribery Act 2010
The Bribery Act 2010 comes into force imminently on 1 July 2011
The Government recently issued its long-awaited guidance (the “Guidance”).
The Guidance refers to the joint prosecution guidance of the Director of the Serious Fraud Office and the Director of Public Prosecutions (the “Prosecution Guidance”).
Summary of offences
As well as containing the general offences of offering, promising or giving a bribe and of requesting, agreeing to receive or accepting a bribe, the Act creates:
- a new distinct offence of bribing a foreign public official; and
- a new strict liability offence for organisations where they fail to prevent bribery by those acting on their behalf (associated persons).
An “associated person” is a person who performs services on behalf of an organisation, and includes an organisation’s employees and potentially its subsidiaries, agents, distributors and joint ventures and their employees.
The offences under the Act carry a maximum of 10 years imprisonment and/or an unlimited fine for an individual, or an unlimited fine for a company.
Defence to the “Failure to Prevent Bribery Offence” The Six Principles
It is a defence to the “failure to prevent” offence if an organisation proves that, despite the bribery, it had adequate procedures to prevent its associated persons from bribing. The Guidance is to assist organisations to develop procedures for preventing bribery by their associated persons in order that organisations can benefit from this defence. In the Guidance, as well as giving a number of case studies which organisations may find useful, the Government has set out six principles which organisations should follow.
Principle 1: Proportionate procedures
Organisations should do the following:
- Implement adequate bribery prevention procedures that are proportionate to the bribery risks that they may face. The level of risk may be determined by the size of the organisation, the nature and complexity of its business, and the type and nature of the people associated with it.
- Set out the bribery prevention procedures in their policies – some of the areas to cover include their commitment to preventing bribery, their approach to mitigating specific bribery risks (e.g. arising from intermediaries’ or agents’ behaviour or from hospitality), a policy in relation to facilitation payments (see below) and a summary of their strategies for implementing their bribery prevention policies.
Principle 2: Top level commitment
- The Government encourages those at the top of an organisation (such as its board of directors, the owners or any other equivalent body or person) to be committed to preventing bribery and to foster an anti-bribery culture. Their roles should include implementing bribery prevention procedures and making key decisions relating to bribery risk.
- The Guidance lists eight examples for the contents of formal statements that an organisation may publish for all of its members to read regularly e.g. on its intranet or website. For example, two of the requirements suggested are demonstration of “a commitment to carry out business fairly, honestly and openly” and “a commitment to zero tolerance towards bribery”. Such statements will help organisations to show that they do not turn a blind eye to bribery.
Principle 3: Risk Assessment
- It is recommended that organisations carry out assessments of their exposure to possible risks of bribery (both external and internal) by associated persons on behalf of the organisations.
- The Guidance suggests five basic characteristics for a risk assessment, being:
- Oversight of the risk assessment by top level management;
- Appropriate resourcing; l Identification of the internal and external information sources that will help risk to be assessed and monitored;
- Due diligence enquiries; and
- Documentation of the risk assessment and its conclusions.
- The Guidance also gives examples of categories of risk:
- Country risk – evidenced by perceived high levels of corruption, lack of effective implementation of anti-bribery laws and a failure of the foreign government, media, business community and society effectively to promote transparent procurement and investment policies;
- Sectoral risk – some sectors carry more risk e.g. raw material extraction and the large scale infrastructure sector;
- Transaction risk – some transactions carry higher risks e.g. charitable or political contributions, licences, permits and public procurement;
- Business opportunity risk – this may arise in high value projects or with projects involving many contractors or intermediaries, or with projects which are not apparently undertaken at market prices, or which do not have a clear legitimate objective; and
- Business partnership risk – certain relationships may entail a higher risk e.g. the use of intermediaries in transactions with foreign public officials; consortia or joint venture partners; and relationships with politically exposed persons where the proposed business relationship involves, or is linked to, a prominent public official.
Principle 4: Due diligence
- The Government urges organisations to use proportionate due diligence procedures as part of their corporate governance in order to mitigate the risk of bribery.
- The Guidance states that “in lower risk situations, commercial organisations may decide that there is no need to conduct much in the way of due diligence. In higher risk situations, due diligence may include conducting direct interrogative enquiries, indirect investigations, or general research” on proposed employees or other associated persons.
Principle 5: Communication (including training)
- An organisation must try to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation. This should be done through internal and external communication, such as training, which is tailored to, and proportionate to, the risk of bribery that the organisation faces and the specific roles of the employees or other associated persons.
Principle 6: Monitoring and review
- As with all procedures, it is vital that organisations monitor and review their anti-bribery procedures and their effectiveness and improvements should be made to existing procedures if required.
Hospitality, promotional and other business expenditure
- It is clear from the Guidance that it is not the purpose of the Bribery Act to ban reasonable and proportionate hospitality, promotional and other business expenditure, but it is important to be aware that hospitality etc could be used as a bribe and so contravene the Bribery Act.
- All the circumstances may be taken into account; for example, when deciding whether any hospitality etc has been used as a bribe, the standards or norms of the relevant sector will be considered. However, the fact that particular hospitality was in line with the sector’s standards and norms would not prevent an offence having been committed if the standards and norms are extravagant.
- The Guidance says that where the prosecution establishes that a financial or other advantage via hospitality, promotional and other business expenditure has been offered, promised or given, for there to be an offence the prosecution must also prove a sufficient connection between the advantage and the intention to influence and secure business or a business advantage.
- Facilitation payments are small bribes that are paid to facilitate routine Government action and could trigger offences under the Bribery Act.
- The Government appreciates the problems that commercial organisations face. The Guidance refers to the Prosecution Guidance, which lists the following factors tending towards prosecution for making facilitation payments:
- Large or repeated payments;
- Payments that are planned for or accepted as part of a normal method of conducting business, which may suggest that the offence was premeditated;
- Payments that may indicate active corruption of any official involved in the way that the offence was committed; and
- The organisation has a clear and suitable policy that sets out the procedures to be followed if facilitation payments are requested, but the policy has been ignored.
- The Prosecution Guidance also lists the factors tending against prosecution: l One small payment, which may result in a small penalty;
- The payment(s) were discovered as a result of a genuinely proactive approach involving self-reporting and remedial action;
- The organisation has a clear and suitable policy that sets out the procedures to be followed if facilitation payments are requested, and the policy has been followed; and
- The payer was in a vulnerable position as a result of the circumstances in which the payment was demanded.
It is vital that organisations’ anti-bribery procedures are set out clearly, are followed, and are regularly reviewed and improved.
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This briefing is for guidance purposes only. RadcliffesLeBrasseur accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.