The Bribery Act has been in force since 2011. Bribery is defined as when a person offers, gives or promises to give a "financial or other advantage" to another individual in exchange for "improperly" performing a "relevant function or activity".
A clear example of this would be a company paying a government official a sum of money to influence the granting of a tender.
This article focuses on the criminal offence contained in section 7, Bribery Act 2010, headed “Failure of commercial organisations to prevent bribery”, and will look at the steps that businesses should consider taking to assess whether their business operations are at risk of becoming involved in bribery and what steps can be taken to mitigate those risks.
How can failure to prevent bribery be a crime?
Section 7 of the Bribery Act provides that a business will be guilty of an offence if an employee, agent or associate of the business has committed the crime of bribery in order to:
- Obtain or retain business; or
- Obtain or retain an advantage for the business.
The offence in this section is a “strict liability” offence, which means that guilt is found purely by the fact it occurs and it is irrelevant whether the business knew about or supported the criminal conduct.
The only defence available to a charge under this section is for the business to prove that it had “adequate procedures” in place designed to prevent persons associated with the business from undertaking such conduct.
What is an “associated person” of the business?
The definition of an “associate” of the business for the purposes of the section 7 offence is widely drafted and includes any person who performs services for or on behalf of the company. It does not matter in which capacity those services are performed.
This may (for example) therefore include an employee, agent or subsidiary, however this list is not exhaustive, and the following factors should be noted:
- The determination of whether a person is performing services for a business must be determined by considering all relevant circumstances and not only by referencing the relationship between the business and the alleged “associate”;
- If an employment relationship exists, it is presumed (unless the contrary is proved) that the employee was rendering services to the business.
What are “adequate measures”?
The Ministry of Justice has issued formal guidelines to assist businesses in establishing “adequate measures”. These guidelines identify the following six principles for business to use to inform procedures for preventing bribery:
- Proportionality – the procedures adopted must be proportionate to the size of the organisation and the type of business they are engaged in. A large multinational corporation with interests in high-risk countries and sectors would require a detailed anti-bribery policy reduced to writing and circulated to all employees and associates of the business. It may not be proportionate for a smaller business, trading only in the UK and in a sector at a low risk of bribery, to have such a detailed formal document in place.
- Top-level Commitment – there must be a documented commitment by the senior management of the business that they are committed to the principle behind the Bribery Act, 2010 and will foster a culture within the business that bribery is never acceptable.
- Risk Assessment – there must be a periodic, informed and documented risk assessment considering all aspects of the business. The nature and extent of exposure to risk must be comprehensively assessed using the following commonly encountered risk areas:
- country – is this a country with high levels of corruption?
- sector - is this a sector where the risk of bribery is high? The guidelines specifically mention commodities and extractive industries as being particularly high-risk sectors;
- transaction – certain types of transactions are inherently risky such as contributions to political parties or so-called “facilitation payments” in license or permit applications;
- business opportunity – high-value contracts involving multiple contractors and intermediaries or projects being undertaken at a higher than market value price;
- partnership - partnering with a person or organisation in another country or employing a third party to act as an intermediary in high-value projects or transactions could increase the risk. This is particularly important if the person or company you are dealing with is politically exposed.
- Due Diligence – there must be a thorough assessment of the persons or companies who will be rendering services to your business. It is important to bear in mind that this due diligence requirement does not extend to the supplier of goods to your business.
- Communication (including training) – in line with the principle of top-level commitment there should be regular and documented communication with your employees about bribery issues. If necessary, and depending on the size of your business, direct training should be provided. Records should be kept of all communications and training.
- Monitoring and Review – there should be evidence of the monitoring and review of areas of the business which could be susceptible to becoming involved with bribery. In areas where the risk is higher, there should be detailed mechanisms for reporting and investigating cases of suspected bribery.
What about hospitality?
The guidelines state clearly that hospitality (tickets to sporting events or entertainment) are a normal and lawful part of day-to-day business. The purpose of the Act is not to reclassify lawful behaviour as unlawful. Gifts too are allowed provided that they are within reasonable limits and accord with the culture in which they are being given.
Location of the bribe can be outside of the United Kingdom
An offence will be committed by a “relevant commercial organisation” wherever the location of the bribe, whether in the UK or in another jurisdiction. Relevant commercial organisations include (i) any business (wherever incorporated) that carries on business within the UK and (ii) all UK business, no matter where they carry on their business.
What are the penalties?
A conviction under section 7 could severely harm a business. In the case of a company found not to have had adequate procedures in place to prevent bribery, some or all of the following penalties could be imposed:
- Fine – the amount of a fine is not limited in the Bribery Act. It will generally be calculated with reference to the severity of the bribery offence and the size of the corporation being fined;
- Crime Prevention Order – this would allow law enforcement authorities to monitor and audit your business on a regular basis to ensure that all payments and activities are within the law;
- Forfeiture of gains – any gains made as a result of the bribe could be forfeited in terms of the Proceeds of Crime Act 2002;
- Disqualification of Directors – top-level commitment is a key principle in the “adequate measures” framework. If the directors were deemed to have failed in this regard they could be disqualified from acting as directors for a period of up to 15 years.
In addition, a business found guilty of a bribery offence will suffer reputational fallout and possible exclusion from tendering for certain types of work. It is therefore vital for businesses to assess their risk of bribery and, using the guidelines, put appropriate measures in place.
This article is provided by Burlingtons for general information only. It is not intended to be and cannot be relied upon as legal advice or otherwise. If you would like to discuss any of the matters covered in this article, please contact Paramjit Sehmi or write to us using the contact form below.