The UK has published draft guidance in relation to the defense of “Adequate Procedures” under the new Bribery Act, which will enter into force in April 2011.
The Bribery Act is closely modeled on the United States Foreign & Corrupt Practices Act (“FCPA”), and organizations that carry on business or part of a business in the UK are subject to the new law.
However, there are important distinctions between the Bribery Act and the FCPA. Under the Bribery Act there is no exemption for corporate hospitality or facilitation payments; commercial bribery is outlawed and a new offense of failure to prevent bribery is introduced. Other key features include (i) a broad extra territorial reach, which captures worldwide conduct; and (ii) the extension of liability for organizations to include responsibility for the conduct of an organization’s service providers in addition to its own conduct.
Penalties are severe. Organizations face unlimited fines, debarment from EU and other government contracts and confiscation of all revenues (it is not restricted to profits) from tainted transactions. Individuals face custodial sentences and the UK’s Serious Fraud Office (SFO) is emphasizing that under the new act criminal liability is taken directly into the boardroom.
There is a defense to the new offense of failure to prevent bribery. Organizations that have “Adequate Procedures” to prevent bribery will not be guilty of failing to prevent bribery under the Bribery Act. Under the new law the government must publish guidance on what “Adequate Procedures” should be. This is anticipated in the new year. In the meantime, draft guidance has been published and is subject to a public consultation, which ends on November 8, 2010.
The draft guidance
The guidance is split into four parts.
- Summary of the law (which we’ve condensed above)
- Six key principles for ensuring bribery prevention
- Five questions about the guidance (plus general request for comments)
- Illustrations set against the backdrop of the six key principles
The six principles
1. Risk Assessment
Know and keep up to date with the bribery risks you face in your sector and market.
2. Top-level Commitment
Establish a culture across the organization in which bribery is unacceptable. If your business is small or medium-sized this may not require much sophistication, but the theme is making the message clear and unambiguous and regularly making it to all staff and business partners.
3. Due Diligence
Know who you do business with; know why, when and to whom you are releasing funds and seeking reciprocal anti-bribery agreements; and be in a position to feel confident that business relationships are transparent and ethical.
4. Clear, Practical and Accessible Policies and Procedures
Ensure that you have these and that they apply to everyone you employ and business partners under your effective control and cover all relevant risks, such as political and charitable contributions, gifts and hospitality, and promotional expenses, and ensure that you are responsive to demands for facilitation payment demands or when an allegation of bribery comes to light.
5. Effective Implementation
Go beyond “paper compliance” to embed anti-bribery in your organization’s internal controls, recruitment and remuneration policies; operations; communications; and training on practical business issues.
6. Monitoring and Review
Ensure that you have audit and financial controls that are sensitive to bribery and are transparent. Consider how regularly you need to review your policies and procedures, and whether external verification would help.
The five questions
1. Are there principles other than those set out in the draft guidance that are relevant and important to the formulation of bribery prevention in commercial organizations? If so, what are they and why do you think they are important?
2. Are there any procedures other than those set out in the draft guidance that are relevant and important to a wide range of commercial organizations? If so, what are they and why do you think they are important?
3. Are there any ways in which the format of the draft guidance could be improved in order to be of more assistance to commercial organizations in determining how to apply the guidance to their particular circumstances?
4. Are there any principles or procedures that are particularly relevant and important to small and medium-sized enterprises that are not covered by the draft guidance and which should be? If so, what are they and why do you think they are they important?
5. In what ways, if any, could the principles in the draft guidance be improved in order to provide more assistance to small and medium-sized enterprises in preventing bribery on their behalf?
We shall be participating in the consultation process and answering the specific questions posed. Would you like to contribute to our submission? If you are interested in participating in a roundtable and/or commenting on the draft guidance, please let us know.
Organizations with UK operations should prepare to be compliant with the Bribery Act now and review existing policies and practices in light of the draft guidance. To the extent that specific areas of clarity are required in relation to the guidance, then organizations should consider participating in the government consultation process or let us know so that we can include them in our response.