Just prior to the three year anniversary of the UK Bribery Act (“Bribery Act”), the UK division of Transparency International (“TI”), a leading non-governmental anti-corruption organisation, released new guidance for companies setting out “principles and good practice” for dealing with requests for small bribes, including facilitation payments (also known as “speed” or “grease” payments).
Dealing with requests for small bribes and facilitation payments is a difficult and complex challenge for companies. According to TI research, globally, more than 1 in 4 people have admitted to paying a bribe in a recent 12-month period. The scale of the problem facing some companies is potentially enormous, and in certain difficult jurisdictions or sectors the payment of bribes is pervasive and culturally entrenched. Moreover, as TI notes, demands for small bribes are often made at times of vulnerability – whether individual or operational – as demands often occur where employees may be travelling alone overseas or the company needs to release critical goods from customs.
The TI Guidance offers practical advice for businesses addressing these challenges. In light of the extra-territorial reach of the Bribery Act, this guidance will be relevant not only to UK companies, but also to any overseas company that has a presence in the UK or is carrying on any part of its business in the UK. Although the guidance is not governmental or regulatory guidance, TI has said it is designed to be of assistance to regulators, law-makers, prosecuting agencies and professional advisers.
Summary of TI’s Principles for Countering Small Bribes:
The TI Guidance contains a section on assessing risk, practical examples and case studies, model negotiation steps for resisting demands and a self-assessment checklist. It lists 10 principles for countering small bribes, as follows:
- The company has a supporting culture of integrity (i.e. a corporate commitment to ethics and integrity; “tone from top”, policy of prohibition of bribery, and an effective overarching anti-bribery programme)
- The company commits to eliminating small bribes (e.g. a policy of prohibition, and internal systems and controls)
- The company conducts risk assessment as the basis for the company strategy and programme for eliminating bribes
- The company implements a programme (internal systems and controls) to counter small bribes
- Communication and training is provided to employees
- The company has in place appropriate procedures to counter third party risks (i.e. due diligence, contract terms, communication, training in and monitoring).
- The company’s internal accounting controls are designed specifically to counter small bribes
- The company has a procedure to deal with incidents if small bribes are detected (including investigation, disciplinary action and consideration of reporting to relevant authorities)
- The company monitors the effectiveness of its programme
- The company acts strategically to influence the corruption environment in which it operates
Although the TI Guidance is aimed principally at issues under the Bribery Act, it also contains information on the US Foreign Corrupt Practices Act (“FCPA”). This is helpful as there are critical differences between the FCPA and the Bribery Act, which means the risk assessments companies need to undertake and systems that they need to implement to avoid breaching the Acts, though similar, are not the same.
In particular, the Bribery Act has a much wider scope than the FCPA in that it prohibits all bribes (whether paid to foreign officials or to private individuals) and unlike the FCPA, the Bribery Act does not provide any exemption for facilitation payments. The Bribery Act also contains a strict liability offence for companies that fail to prevent bribery by associated persons working on behalf of their businesses.
This strict liability offence further complicates risks for companies, as increasingly contractual counter-parties, wary of their own potential liability for conduct of third-parties, require the parties they do business with to commit to codes of conduct or to sign up to contractual terms or warranties that sometimes include absolute obligations not to make facilitation payments. This can be very difficult for companies such as service providers to agree to in absolute terms, especially with respect to difficult jurisdictions or sectors and in such areas as freight forwarding and customs clearance.
Small to medium enterprises in particular can find it harder to resist payment of small bribes as, for example, they have less market power and less available resources for risk assessments and training of staff in these matters. Indeed, some companies have noted that the cost of avoiding bribery and corruption can be prohibitive to remaining in operation in certain industries within certain jurisdictions.
The UK’s Ministry of Justice (“MOJ”) has recognised that the eradication of facilitation payments will take time and collaboration on several levels. This is reflected in the MOJ Guidance on adequate procedures for preventing bribery by associated persons, which provides at follows:
The Government does, however, recognise the problems that commercial organisations face in some parts of the world and in certain sectors [with respect to facilitation payments]. The eradication of facilitation payments is recognised at the national and international level as a long term objective that will require economic and social progress and sustained commitment to the rule of law in those parts of the world where the problem is most prevalent. It will also require collaboration between international bodies, governments, the anti-bribery lobby, business representative bodies and sectoral organisations.
Early guidance by the UK’s Serious Fraud Office (“SFO”) on this issue indicated that as long as companies were working towards eliminating facilitation payments (listing 6 factors) prosecutors would consider exercising prosecutorial discretion not to prosecute in the case of facilitation payments. That guidance has been withdrawn, though prosecutorial discretion still remains (see the Joint Prosecution Guidance of the Director of the SFO and Director of Public Prosecutions).
The TI Guidance should be helpful to companies in approaching these difficult issues, but it is clear that collective efforts from companies and industry and efforts at government levels internationally will be required if this pervasive problem is to be addressed in any meaningful way.
The Transparency International Countering Small Bribes Guidance can be viewed in full here: http://www.bryancave.com/gact/ (see “Related Publications” in the right hand panel).