10 TIPS TO HELP YOU MANAGE YOUR BUSINESS UNDER THE NEW BRIBERY ACT 2010

December 2010 – Be aware of the implications of the New Bribery Act and new responsibilities for Directors & Officers

The new Bribery Act 2010 comes into force on the 1st April 2011, after it received Royal Assent on the 8th April 2010.

This new piece of legislation is seen as an attempt by the authorities to increase the success of the UK Serious Fraud Office (SFO) in corruption cases. The Lord Chancellor said “if bribery is left unchecked it destroys integrity and ethical foundations of businesses”.

Crucially, everyone is now responsible, not just companies but the individual directors, officers and employees too.

This act replaces the previous common law offences relating to bribery and creates four types of offence:

  1. Offering, promising or giving a bribe to another person
  2. Requesting, agreeing to receive or accepting a bribe from another person
  3. Bribing a foreign public official
  4. Failure to prevent bribery

Items c) & d) are new offences. The ‘failure to prevent bribery` offence has significant potential consequences as it does not just apply to the company, it also applies to individual directors, officers, employees as well as other persons undertaking activities on their behalf – this could extend not just to other entities within the group (and their directors, officers, employees etc) but also consultants and agents etc.

The Bribery Act 2010 simplifies the language used to describe an ‘offence`, but also widens their scope quite significantly. In summary:

  • It is an offence of active bribery to induce or reward the improper performance of almost any business or public sector function that is expected to be performed impartially or in good faith. There is no need for the offender to have a dishonest or corrupt state of mind.
  • It is an offence of passive bribery merely to receive such an inducement or reward.
  • It is an offence to seek to influence foreign public officials so as to obtain or retain business or a business advantage. There is no need for the offender to have a corrupt state of mind. An exception exists where the written law of the foreign country in question specifically permits officials to be influenced.
  • Directors who consent to or connive at the commission of a bribery offence commit a further offence themselves. There is no guidance as to how much knowledge is needed before such an offence is committed.
  • A company is guilty of an offence (failure to prevent bribery) if any employee, agent or subsidiary pays a bribe anywhere in the world to obtain or retain business or a business advantage for the company, unless it can show that is has in place adequate procedures to prevent bribery.

Also, the burden of proof has been effectively reversed so that anyone against whom evidence of bribery can be shown will have to disprove the offence, and there is no minimum amount.

The worst case scenario for being found guilty is an unlimited fine and/or 10 years in prison.

Here are 10 tips to help you prepare and manage your business for the Bribery Act 2010:

  1. Undertake a full risk assessment of your company’s business, especially if it operates internationally, and think about any potential exposures linked to the Act.  If necessary, commission a risk consultant to undertake a formal risk review of your business.
  2. The Act is very broad and outlaws ‘facilitation payments’ and excessive promotional activities, which could include lavish corporate entertainment.  We recommend that all policies and procedures are reviewed to make sure they comply with the Act.  In addition, the Act relies heavily on ‘whistle blowing’ so you need to make sure that your company culture encourages and protects employees and contacts who report suspicious activity.
  3. Establish and embed a zero tolerance culture to bribery at the top of the organisation.  If your company’s board does not actively support the anti-bribery procedures, they risk becoming a dusty manual on the shelf. This will not impress the SFO.  Anti-bribery compliance will need to become a regular board agenda item.
  4. Put effective compliance processes in place. If you operate in emerging markets you should consider employing a compliance officer, who has access to the Board, and the Board’s full support.
  5. Train all your staff, associates, agents and associated third parties on any new anti-bribery policies and procedures, endorsing a zero tolerance stance to corruption.  Records should be kept on the training undertaken and the attendees. All new recruits should be trained as part of their induction programme.
  6. Examine your corporate relationships with any agents or third parties. The Act makes it an offence to bribe any foreign public officials, including ‘door opening’ and ‘facilitation’ payments, which up until April 2011 may not have been deemed illegal and, in certain countries, may be regarded as standard business practice. All your agents, and associated companies must be made aware of your company’s anti-corruption policies and you should document all meetings and conversations on the topic.  Check that your company’s anti bribery policies and code of conducts are clearly set out in any contractual agreements that you have with agents and other third parties.
  7. Create a bribery reporting mechanism, and make sure that all staff are aware of what to do, and how it will be handled, should they suspect illicit activities.
  8. If you suspect any corruption has taken place, you must immediately instigate a full investigation, which is undertaken by properly trained personnel.  They should provide a written report.  If the report determines that illegal activity has been undertaken then disciplinary action must be taken immediately.
  9. Check that your Directors and Officers’ (D&O) liability insurance will provide effective cover for the directors of the company, and that it does not exclude legal costs associated with claims arising from the Act. Although bribery is a corporate crime, if the company is charged under the Act, then the Directors are likely to be charged for failing in their corporate governance duties.  D&O cover will help cover the costs associated with providing a legal defence (although it will obviously not cover any fines if the directors are found guilty). 
  10. Consider this as part any expansion or merger or acquisition plans, as any associated companies’ anti-bribery policies and procedures will need to be reviewed.

For more information please contact Mark Dutton at W Denis Insurance Brokers Plc on 0113 243 7209.