In the last issue of Bank Notes, we looked at what the Bribery Act 2010 says and highlighted the new corporate offence of failing to prevent bribery. A commercial organisation has a defence to the offence if it can demonstrate that it has adequate anti-bribery procedures in place.

The Act requires the Secretary of State (in this case the Ministry of Justice (the MoJ)) to publish guidance (the Guidance) on procedures organisations should put in place to avoid committing this offence. On 14 September 2010, the draft Guidance was published. Brett Hillis and Emma Radmore look at the draft Guidance and what UK businesses should be doing to protect themselves.

The draft Guidance

The MoJ aims to release the final Guidance early in the New Year.

Purpose of the Guidance

Whilst the Guidance will be the determinative guidance for the purposes of the Act, the MoJ points out it should be complementary to other existing guidance rather than replacing it. The Guidance is short and high level, and comprises six principles, which organisations should assess how best to apply to their businesses, covering:

  • Risk assessment  
  • Top-level commitment  
  • Due diligence  
  • Clear, practical and accessible policies and procedures  
  • Effective implementation  
  • Monitoring and review.  

Under each principle, the draft Guidance suggests actions organisations might take. Bearing in mind each principle, organisations should devise a practical and appropriate action plan. While the Act applies to all businesses, the guidance below focuses on the likely practical impact for financially regulated institutions in the UK.

What should financial institutions do?

Review of procedures

All financial institutions should review their procedures, systems and controls, paying particular attention to how they deal, directly or through agents, with overseas officials or entities.

Senior management buy-in

Senior management must devote sufficient resources at the right level and the board must commit to the programme. Senior management must push through the message that compliance is critical and that staff must take the firm’s policies and their responsibilities seriously. It must stand behind any disciplinary actions taken if staff do not comply and support investigations into business relationships where there is a risk of bribery. For FSA-regulated firms this will be essential to assure the FSA that firms are complying with its principles.

Project team organisation

Organisations will need to set up an appropriately constituted project team comprising representatives from all relevant parts of the business. It should identify all areas of the organisation that may be susceptible to bribery. It should look at combinations of:

  • products;  
  • services;  
  • customers;  
  • distributors;  
  • joint venture or similar partners;  
  • local agents and introducers; and  
  • jurisdictions of operation.  

The project team should also analyse areas of HR, customer service and other functions that may entail bribery risks.  

Project team output

Outputs should include:  

  • a statement of corporate values;  
  • general and specific procedures and guidance tailored to the business;  
  • clear statements of the consequences of attempted bribery making clear the firm will not tolerate the behaviour;  
  • a monitoring programme committed to changing policies and procedures when necessary;
  • a reporting programme allowing safe whistleblowing;  
  • identification of agreements the organisation may enter into that may benefit from anti-bribery clauses; and  
  • a training programme ensuring the right staff are trained in matters relevant to them.  

Regulators see a clear link between the various financial crime prevention limbs of a firm’s business. The relevant teams should ensure they share information and concerns promptly.  

Ongoing compliance

There must be clear allocation of responsibility for monitoring and changes, and for giving refresher or update training.  

Common concerns

Hospitality and gifts

The Act may affect corporate hospitality. Increasingly there is a view that normal “customer service” type hospitality is probably acceptable. Firms must form a view on how far hospitality can go.  

Facilitation payments and local practice

The Act allows “grease payments”, expected in many jurisdictions, only where the law expressly requires or acknowledges them. Firms must tell employees how to react when faced with payment demands.  

Global compliance and FCPA

The Act is wider than the US Foreign Corrupt Practices Act (FCPA). Firms should not assume that FCPAcompliant practices will protect them against Bribery Act risks.  

What next?

Firms’ anti-bribery and corruption projects should be well under way by now. Firms should not expect any grace period, at least from the FSA. Getting procedures in place and training carried out will take time and firms must ensure they are ready for April 2011.  

A more detailed article on the Guidance and the impact of the Act, can be found here.