The Ministry of Justice has recently announced that the long awaited Bribery Act 2010 will come into force on 1 July this year. This far reaching piece of legislation affects all Registered Providers. The Act has not been far from the headlines in recent months, with some commentators claiming that the Act is bad for business and the death knell for corporate hospitality. Those adverse headlines led to a delay implementing the Act while a review was undertaken. That review has now been completed and this article seeks to summarise the main issues for Registered Providers arising from the Act.
The Act creates two general offences of (a) giving, promising, or offering a bribe and (b) requesting or receiving a bribe. It also sets out two further corporate offences aimed at commercial bribery which are (c) bribery of a foreign public official and (d) failure of a commercial organisation to prevent bribery ('the corporate offence'). The definition of 'commercial organisation' is given a wide meaning in the Act and although it is yet to be tested in the courts, it will almost certainly include Registered Providers. If any of the offences (apart from the corporate offence) under the Act are committed with the 'consent or connivance' of a senior employee, that employee may be criminally liable, and on conviction may be imprisoned for a period of up to ten years.
Registered Providers should pay particular attention to the corporate offence. An organisation that fails to prevent bribery, which includes failing to prevent its employees or agents from engaging in bribery, can lead to an unlimited fine. The offence can be committed if a person associated with the organisation bribes another person with the intention of gaining a commercial advantage. The term 'associated person' is given a broad definition in the Act and includes agents and joint venture partners.
An organisation may avoid the corporate offence where it can prove, despite a bribery offence having been committed, that it had 'adequate procedures' in place to prevent bribery. The Ministry of Justice has published a guidance document based on six general principles, to help organisations implement adequate procedures to prevent bribery. These principles are briefly summarised below.
The guidance and the 'Six Principles for Bribery Prevention'
- Proportionate procedures
'A commercial organisation's procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation's activities. They are also clear, practical, accessible, effectively implemented and in force.'
Adequate bribery prevention procedures ought to be proportionate to the bribery risks that the organisation faces. An initial assessment of risk across the organisation is therefore a necessary first step. The procedures may be stand alone or form part of a wider guidance, for example managing a tender process in public procurement.
- Top level commitment
'The top level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery. They establish a culture within the organisation in which bribery is never acceptable. They take steps to ensure that the organisation’s policy to operate without bribery is clearly communicated to all levels of management, the workforce and any relevant external factors.'
This principle is about creating a zero tolerance bribery culture throughout an organisation. The guidance recommends having a public statement of commitment to counter bribery in all parts of an organisation's operation and to appoint a senior manager to oversee the development of the anti-bribery programme. Senior officers should be personally involved in developing and implementing bribery prevention procedures.
- Risk assessment
'The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its part by persons associated with it. The assessment is periodic, informed and documented.'
An organisation should identify key bribery risks relevant to its business and sector. Relevant 'bribery risks' for Registered Providers include deficiencies in employee knowledge, training or skills; a lack of clarity in the organisation's policy on gifts, entertaining and travel expenses; tender process; licences and permits; high value projects with many contractors and involvement of intermediaries or agents.
- Due diligence
'The commercial organisation applies due diligence procedures, taking a proportionate and risk-based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.'
The guidance states that due diligence is both a form of bribery risk assessment and a means of mitigating risk. The level of due diligence required is dependent on level of risk of the situation. As Registered Providers already operate in a heavily regulated sector, the due diligence required for most, if not all situations, is likely to be low level.
- Communication (including trading)
'The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.'
This principle is about communicating bribery prevention polices to staff and to others who will perform your services. Registered Providers should consider providing training to staff. A general training session for all staff on the particular threats in the housing sector is likely to suffice. Training should be continuous and regularly monitored and evaluated.
- Monitoring and review
'The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.'
The guidance suggests that organisations should consider what internal monitoring and review mechanisms are required in order to ensure policies are effective. Monitoring should include internal checks and balances as well as effective financial and auditing controls to pick up any irregularities.
Adequate procedures - compliance tips
Registered Providers should be taking steps to review existing bribery prevention polices and procedures to determine whether they have adequate procedures in place to prevent bribery. From the six principles outlined in the guidance above, the following compliance tips should be considered:
- implement a 'zero tolerance' bribery prevention policy which is communicated to staff on induction and regularly as part of training sessions;
- designate a responsible person to oversee bribery prevention matters;
- ensure that monitoring systems are in place at all levels, adopting a clear policy on gifts, expenses and corporate hospitality and keeping records of gifts and centrally monitoring payments;
- ensure that senior officers take responsibility for the bribery prevention programme;
- carry out sufficient due diligence on any potential business partners and agents used to identify the possible risk of bribery;
- include anti-bribery terms in contracts entered into between the Registered Provider and its business partners, particularly where agents are being used;
- include express contractual obligations and penalties in relation to bribery and corruption in employment contracts and put in place appropriate disciplinary procedures; and
- develop and implement 'whistle-blowing' and reporting investigation procedures.
It should be noted that proportionate corporate hospitality will not be caught by the Act. It is only offers of disproportionate or lavish corporate hospitality that registered providers should be wary of. As Kenneth Clarke, the Secretary of State for Justice, states in the guidance, 'No one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix.'
Most Registered Providers will already have a bribery prevention framework in place because of the old Schedule 1 of the Housing Act 1996. It is important for Registered Providers to now make use of the lead time before the Act is brought into force to ensure existing policies comply with the new Act.