Monthly Archive for September, 2010

The new UK Bribery Act 2010 introduces a strict liability corporate offence of failing to prevent bribery committed by employees, agents, or any other ‘associated person’ of the company. Under Section 7, a relevant commercial organisation commits an offence if a person associated with it engages in bribery, unless it can show that it had in place “adequate procedures” designed to prevent the offence. This element of the Act is due to come into force in April 2011.

In response to much business disquiet about what all this means in practice,  the Secretary of State was required to publish guidance about procedures that commercial organisations can put in place to prevent persons associated with them from bribing people.   Although much of this is already fairly well established by compliance professionals in this space, we have waited with baited breath to see if this guidance actually contained tangible, concrete procedures which will be useful to business, or just more dishy-washy statements about the importance of tone at the top.

A consultation document has just been published to start the process.  This consultation begins on 14 September 2010 and ends on 8 November 2010. The consultation period will last 8 weeks, and is shorter than the standard 12 week period in order to allow enough time for views to be considered and for guidance to be published early in the New Year in advance of the Act coming into force in April.

The Government proposes guidance formulated around six general principles, designed to be of general applicability. The guidance states that it is not intended to be prescriptive or standard setting, or impose any direct obligation on business, however the flip side to this is that the guidance is vague and overly-generic, leaving the reader in many instances feeling: ‘This is all very good – but what should we actually DO?’.

The principles are as follows:

Principle 1 – Risk Assessment

The commercial organisation regularly and comprehensively assesses the nature and extent of the risks relating to bribery to which it is exposed.

Principle 2 – Top-Level Commitment

The top-level management of a commercial organisation is committed to preventing bribery. It establishes a culture within the organisation in which bribery is never acceptable. It takes 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 actors.

Principle 3 – Due Diligence

The commercial organisation has due diligence policies and procedures, which cover all parties to a business relationship, including the organisation’s supply chain, agents, and intermediaries, all forms of joint venture and similar relationships, and all markets in which the commercial organisation does business.

Principle 4 – Clear, Practical, Accessible, and Enforceable Policies and Procedures

The commercial organisation’s policies and procedures to prevent bribery being committed on its behalf are clear, practical, accessible, and enforceable. Policies and procedures take account of the roles of the whole work force, from the owners or board of directors to all employees, and all people and entities over which the commercial organisation has control.

Principle 5 – Effective Implementation

The commercial organisation effectively implements its anti-bribery policies and procedures and ensures that they are embedded throughout the organisation. This process ensures that the development of policies and procedures reflects the practical business issues that an organisation’s management and workforce face when seeking to conduct business without bribery.

Principle 6 – Monitoring and Review

The commercial organisation institutes monitoring and review mechanisms to ensure compliance with relevant policies and procedures and identifies any issues as they arise. The organisation implements improvements where appropriate.

Some of the guidance is as expected, not really very guiding, such as the several statements of the obvious ….

What constitutes adequate risk assessment procedures will vary enormously depending on the size of an organisation, its activities, its customers and the markets in which it operates…

The case studies at the end are well worth a read though. They deal with:

• Intermediaries and agents
• Hospitality and promotional expenditure
• Business partners – joint ventures, consortia, etc.
• Facilitation payments
• Political and charitable donations

I’ll take the liberty of quoting the one that deals with facilitation payments in its entirety.

You are a medium sized UK IT installation company that is under contract to a large US consortium to install an IT system in a new hospital in the capital of Beneficia, where corruption is rife. In compliance with a contractual requirement you supplied the consortium with information about your existing anti-bribery regime, which is approved on the basis that it meets US Foreign Corrupt Practices Act (FCPA) standards. These standards exempt facilitation payments. Your installation project is a highly technical process requiring time sensitive management of component importation, storage and on site delivery. At an early stage your staff in Beneficia consider that, in light of the FCPA standards of the consortium and despite the prohibition of facilitation payments in the company’s anti-bribery code, they have no choice but to commence payment of local “customs fees” and “transport taxes” in order to facilitate reasonably efficient on site delivery of their components. After a few weeks your local managers strike a deal with local union leaders in which Benefician transport workers and customs officials agree to stop their demands for facilitation payments in return for free IT services for local union run educational centres. Shortly afterwards the Benefician Government supplies a dossier to the US and UK authorities detailing payments paid by your employees to customs officials and the gratis IT services for the union-based political opposition, alleging that these payments breach Benefician law.

Principle 1 – Risk Assessment

• Did you undertake a risk assessment for the Benefician project informed by the political, social and media environment in Beneficia?
• Was your Benefician project risk assessment informed by an objective analysis of the consortium’s contractual standards, their relationship to both the FCPA defence for payments of facilitation payments, the relevant UK law and the law regulatory environment in Beneficia?

Principle 2 – Top level commitment

• Did your senior management provide leadership on developing and implementing anti-bribery policies and procedures tailored to Benefician law and regulatory environment?
• Have you offered any leadership within your Chamber of Commerce or in partnership with local anti-corruption initiatives to develop alternative options for dealing with demands for facilitation payments in Beneficia?

Principle 3 – Due diligence

• Did your enquiries extend to the political connections of the Benefician transport workers and customs officials demanding facilitation payments?
• What did you do to assess the nature of the Benefician government’s policy on facilitation payments to officials?
• Did your appraisal of the Benefician contract include any analysis of the potential impact of the local political situation?

Principle 4 – Clear Practical and Accessible Policies and Procedures

• Is your policy on facilitation payments and the applicable legal frameworks clear and accessible to all staff and in particular all staff in Beneficia and all those concerned with the Benefician contract?
• To what extent does the Benefician project solution comply with your policy on facilitation payments?
• Did you tap into the experience and expertise of your Benefician staff and management when formulating our policy on facilitation payments?

Principle 5 – Effective implementation

• Are there procedures in place for employees to feedback on local Benefician management’s solution to the facilitation payments problem in a safe and confidential manner?
• Are your procedures linked to operational concerns, such as anticipating and managing the impact of a refusal to pay facilitation payments?
• Do your procedures require management of projects such as the Benefician project to report any changes in circumstances, such as the union brokered Benefician deal on facilitation payments, to top-level management?
• Did your procedures and policies provide for full comparative training in UK law and the FCPA standard?

Principle 6 – Monitoring and reviewing bribery-free business policies

• Do you have procedures in place to provide a regular review of your risk assessment as regards facilitation payments associated with the Benefician contract?
• Do you have a means of using your experience in Beneficia to improve your procedures on facilitation payments?
• Have you considered external verification of your policy on facilitation payments with bodies other than the consortium?

The consultation document (in pdf format) can be found here.