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Bribery & corruption: demonstrate vigilance

Bribery and corruption leads to fines, sanctions and reputational damage as findings are publicised following conviction. Employers must be seen to take compliance to prevent bribery and corruption seriously. If your business can not demonstrate vigilance, directors risk criminal prosecution. 

Bribery and corruption – successful prosecution

The Bribery Act is no longer of academic interest.  The Sweett Group has been sentenced to a fine of £2.25 million following a successful prosecution by the Serious Fraud Office (SFO) for failing to prevent bribery.  The court found that active steps were required to prevent bribery and corruption. It was found that the company had not done a good enough job.  The bribery and corruption related to contracts entered into by a foreign subsidiary.  But, it was the UK directors who were prosecuted.

Calculation of the fine for bribery and corruption

The court applied a multiplier of 250% to the gross profits made from the contracts.  The court could have applied a multiplier of up to 400% which if applied would have increased the conviction to well above £2.25 million.

Bribery and corruption – landmark

The case is viewed as a landmark case for two main reasons:

  • This is the first prosecution under the Bribery Act to criminalise companies for failing to act, rather than being complicit in bribery. However, the decision does not outline the extent to which particulars are deemed to be adequate.  Lack of certainty is never helpful.
  • The SFO could have elected to conclude matters by settlement under what is known as a Deferred Prosecution Agreement rather than formal prosecution.  However, the SFO decided to prosecute with all the costs and adverse publicity that follows because of a finding of trying to conceal matters, lack of co-operation at the start of the SFO investigation and only reporting the matter when the SFO were about to go to press.

The SFO did enter into a Deferred Prosecution Agreement with a major bank – but in that case the bank could show it was co-operating fully and in a timely matter with the SFO investigation.

Bribery and corruption – what this means in law

The Bribery Act outlines obligations for businesses to prevent bribery and corruption. The Act impacts on the company, its directors and employers. The Bribery Act sets down penalties including unlimited fines and imprisonment.

Liability for employers

Employers are liable even if:

  • You didn’t sanction the illegal activity;
  • You’re a small or medium sized business;
  • A British national bribes or receives a bribe outside the UK;
  • A subsidiary or partner of your UK organisation bribes or corrupts, regardless of where the offence takes place and the nationalities involved.

Bribery and corruption includes corporate hospitality

Corporate hospitality is acceptable if it is reasonable and proportionate. So a small Christmas gift for every client is viewed differently to a weekend away or expensive tickets for a particular client.

The Bribery Act clearly states that facilitation payments amount to bribery. In some regions this causes issues. However, the Bribery Act states specific circumstances will be taken into account. So some payments may be OK where it is considered normal.

For example – the Middle East. Here facilitation payments are widely accepted. They’re part of the working culture. So such payments may not be punished. Nevertheless, a UK business cannot always confidently rely on local customs.

Four main offences under the Bribery Act

The Bribery Act creates four main offences relating to bribery and corruption as follows:

  1. Offering a bribe. An employee is guilty if he or she “offers, promises or gives a financial or other advantage to another person” with the intention that the action engenders favourable treatment.
  2. Requesting or receiving a bribe.
  3. Bribing foreign public officials: payments to a foreign official with the intention of gaining an unfair business advantage.
  4. Not preventing bribery: organisations should have procedures in place to prevent bribery.

Scope of the Bribery Act

The Bribery Act is extra territorial. Any UK organisation’s subsidiary is subject to the Bribery Act. So employees working for a UK organisation’s foreign subsidiary should know about the scope of the Bribery Act. Also, employees of foreign companies conducting business in the UK are subject to the Bribery Act.

Claiming bribery and inducements are rife elsewhere in the world, or are a prerequisite for doing business, won’t save you.

Bribery and corruption does require a test of proportionality

Employees should know where reasonable business practice stops, and where a breach begins. The problem is this is often a difficult line.  Employees and directors should have guidance from the employer on where the line between commerce and bribery and corruption starts. For example, the differences between:

  • A reasonably priced bottle of champagne at Christmas, given to numerous clients;
  • An expensive gift given to a client just when they’re selecting between tenders;
  • The employee seeks beneficial confidential information.

A bribery and corruption policy is helpful as it can be tailored to the business.  The test of proportionality will not be the same in all cases.

Penalties for employees where there is bribery and corruption

If an employee fails to comply with the Bribery Act he now runs risks apart from dismissal from employment. The Serious Fraud Office has claimed that the Bribery Act was the “toughest bribery legislation in the world”. Employees potentially face 10 year prison sentences. Certainly the Bribery Act is wide reaching legislation.  The Serious Fraud Office have the ability to investigate an employee or director’s personal affairs and they do.

Bribery and corruption training

Training is vital. For example, employees should know what to do if:

  • Offered a gift;
  • Invited to a corporate hospitality event.

And:

  • How much to spend on gifts;
  • How unusual payments should be reported. Note senior managers have responsibilities for their staff, and may be accountable.

Responsibility of directors

Company directors can be held liable for breaches of the Bribery Act, if it is shown they:

  • Contributed to any failures;
  • Did not take adequate steps to prevent the offence.    If the employer does not set out the anti bribery procedure it has adopted in a clear policy circulated to staff there will be difficulties for the employer in defending itself.   The procedure that the employer adopts needs to be comprehensive and stress the importance of prompt reporting of suspected breaches of the Bribery Act.

Even if an employer formally or informally sanctions, or encourages an action, the employee or director doesn’t necessarily have a strong defence. Employees should use common sense and their instincts to decide whether their actions are inappropriate or wrongly intentioned.

Bribery and corruption may overlap with whistleblowing

Employees should consider the whistleblowing policies and the protections provided by UK employment law legislation. We often advise employees who’ve been treated unfairly for blowing the whistle.

Besides good policies on the Bribery Act, communicated timelines and internal processes and training, employees should be comfortable discussing any area of the Bribery Act. This means ensuring employees know how and to whom they should speak.

Bribery and corruption – other areas of liability

Many employers, especially operating under a limited company, mistakenly believe that if anything goes wrong, limited liability protects the directors. This may prove to be a costly mistake.

Employers should understand criminal liability and vicarious liability. An employer can be held responsible for an employee’s actions, even if the employer was unaware of the actions or did not countenance the employee’s actions. In regulated professions these risks are especially acute.

Bribery and corruption in the financial services sector

Financial services in the UK are regulated by the Financial Conduct Authority (FCA) which has powers to bring criminal investigations and prosecutions in areas including:

  • Fraud;
  • Dishonesty;
  • Misconduct or misuse of information relating to financial markets;
  • Money laundering;
  • Carrying on a regulated activity without authorisation or exemption;
  • Failing to co-operate or falsely giving information to officials;
  • Insider dealing

Powers of the FCA

Employers are now always aware that, as with HMRC, the Financial Conduct Authority have significant powers to:

  • Force disclosure of documents;
  • Search and seize documents and materials.

Businesses regulated by the Financial Conduct Authority are required to communicate with regulators in an open and co-operative manner. This includes disclosing any activity, including employees’ activities, that the regulator would reasonably expect to be notified about.

There is a clear overlap here between regulatory / criminal proceedings and employment law. Employers need to be both seen to and then to take compliance seriously.   Directors being asked to sign off on compliance should look into the extent of the risk and be aware of the ramifications if the risk backfires.

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