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Entrepreneurs Panel

Richard O'Sullivan
Michael Oliver
Laura Tenison
David Pollock
Debbie Pierce
Steve Purdham
Jennie Johnson
Charlie Mullins
Tony Caldeira
Julie Meyer
Jeremy Roberts
Brian Hay

The end of the innocence

With the Bribery Act set to come into force in July, has the Government’s final guide to compliance allayed fears over the legislation?

The story so far: back in November 2009, thenjustice secretary Jack Straw announced a bold plan to reform the UK’s criminal law in order to tackle bribery at home and abroad.

“Modernisation of the law is a priority in order to deal with those who offer or accept bribes and to reinforce transparency and accountability in international business,” he declared.

The bill, which would replace a fragmented mish-mash of common law and Prevention of Corruption Acts dating from 1889 to 1916, received its royal assent in April 2010.

A month or so later, when Tory grandee Ken Clarke plonked himself into Straw’s freshly vacated hot seat at the Ministry of Justice (MoJ), he found a newly minted Bribery Act awaiting implementation.

The Government originally aimed to have the law in force by April this year. Yet, on 31 January Clarke put everything on hold while the MoJ carried out another round of consultation to finalise the official guidance on complying with its provisions.

The problem, cried businesses, was that the draft guidance – and indeed the legislation itself – was just too vague and risked criminalising everyday activities. Would, for example, you get your collar felt for attempting to influence potential clients with a bit of flashy hospitality?

The final guidance was eventually published on 30 March and the date for Act coming into effect was set for 1 July.

With the clock ticking, has the guidance turned the grey areas to black and white?

One thing it has not changed is the fundamentals of the Act. There will still be two general offences of offering, promising or giving an advantage and requesting, agreeing to take or taking an advantage, as well as a specifi c offence of bribing a foreign public official.

In addition – and perhaps most importantly – there will still be a new corporate offence of failing to prevent bribery on behalf of a commercial organisation.

The aim of the guidance, Clarke said, was to outline a “workable, commonsense way” to ensure everyone from the sole trader to the multinational can address their own risk of corruption.

It is built around six common principles: proportionate procedures; top-level commitment; risk assessment; due diligence; communication and training; and monitoring and review. However, the document stresses this is not a one-size-fits-all approach and measures to prevent bribery will only have to be proportionate to the risk of it occurring.

Zia Ullah, a partner at law firm Pannone and a former head of bribery policy at Barclays, believes this represents a “sea change” from the draft guidance.

“Coming out and categorically saying there are going to be circumstances in which certain firms might not need to do anything, it’s a way away from the original documentation, which was at pains to point out that more or less anyone had a bribery risk, no matter where they were operating and no matter what sector they were in, which from a practical perspective isn’t really the case,” he says.

There is also an explicit recognition that, “No bribery prevention regime will be capable of preventing bribery at all times.”

Sally Longworth, forensic and investigations services partner at accountancy firm Grant Thornton, believes businesses can “take comfort” from this as they should be able to insulate themselves against the actions of a rogue employee if they can show that anti-corruption policies were in place, they reacted to the incident when it came to light and were and were transparent in their actions.

Richard Smyth, a partner in the litigation and regulatory group at law fi rm DLA Piper, adds, “I think it is important to remember that Government is not saying, ‘We’re trying to prevent all acts of bribery by these measures.’ This isn’t intended to have the effect of stamping out bribery; it’s intended to reduce the opportunity for it to happen.”

If there was one area where the guidance drew near-universal approval, it was corporate hospitality.

Smyth says there had been a lot of “scaremongering” about this and Ullah agrees that many businesses were worried the Bribery Act was the “death knell” for activities like taking clients out, giving gifts or even serving wine and nibbles.

The guidance says that in order to pursue an allegation that hospitality amounted to a bribe, prosecutors would have to show that it was “intended to induce conduct that amounts to a breach of an expectation that a person will act in good faith, impartially or in accordance with a position While the organisation welcomes the Act itself, it believes the delay to its implementation and subsequent “shadow consultation” that informed the final guidance may have weakened the new law.

On one level, Barrington says, the delay was “inevitably damaging” because it left people around the world exposed to graft, while honest companies lost out to corrupt rivals. It also gave the impression that the Government “didn’t have a coherent policy”.

company is classed as carrying out business in the UK and is therefore subject to the Act. “How is capital raising not doing business?” Barrington asks. “If the Government’s argument is that there needs to be a level playing field for British companies, then how on Earth does this create a level playing fi eld?”

Elsewhere, the guidance says that in cases involving long supply chains a company will probably only be expected to control its immediate counterparty.

ownership of supply chains and even raises the possibility that unscrupulous firms could “outsource” bribery by creating enough links to insulate themselves from any wrongdoing.

Ullah disagrees, arguing that the emphasis on a risk-based approach means that if there was a “glaring” risk of bribery then a company would be obliged to do some “down-the-chaininvestigation”.

Barrington acknowledges this might be the case but nevertheless warns that the guidance risks creating more confusion, not less.

“On the one hand,” he argues, “it might say don’t worry too much about too many links in your supply chain and on the other it might say take a risk-based approach. Which is it advising?” For Smyth, the guidance is Bribery Act of trust”.

In the introduction to the document, Clarke says, “Rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix.”

Even anti-corruption watchdog Transparency International (TI), which called the final guidance “deplorable” and warned it would damage the Act, is pleased the corporate hospitality issue has been “defused”.

However, as Robert Barrington of TI UK points out, it is far from ecstatic with the state of play.

Furthermore, opening up the Act to lobbying after the formal public consultation had closed means we have no idea “who the Government met, how often, what submissions were made – so that whole procedure is very worrying in itself”.

In terms of the guidance, TI has identified some “perplexing” potential loopholes. For example, the MoJ states that being listed on the London Stock Exchange is unlikely, in itself, to mean a TI believes this overlooks the “real issue” of how to take “exactly that” and cannot clear up every issue, particularly when prosecutorial discretion will have a big say in determining which cases will be pursued.

It has, though, “galvanised thinking” and each company, if it hasn’t already done so, should now be thinking about a thorough risk assessment.

Ullah notes that this process will vary from business to business but common areas could include looking at overseas agents, distributors, territories and customers.

Ensuring employees are informed of and involved in this process will help to build up a “gap analysis” of what is needed, he adds. Firms can then prioritise their risks and look at controls.

Businesses should not, however, get “too hung up” on covering every conceivable angle. “A policy at the end of the day just needs to say a few simple things about your zero-tolerance to bribery and what people need to do if they spot it,” Ullah says.

Once established, the policy has to be communicated to the workforce. Smyth believes antibribery training should focus on both people and procedures.

“If you had no system but everybody knows they shouldn’t engage in bribery, then you might ensure that nothing wrong happens but you’ll have no method of measuring or monitoring it,” he says.

“Equally, if you have procedures but your people don’t know about it and don’t operate in accordance with the procedures, you might as well not have the procedures. You’ve got to have both.

“You’ve got to be clear about your policy and procedures first, make those as simple as possible and then make sure the right people know about them.”

Barrington notes that training should cover not only the consequences of offering bribes, but also what to do when, as often happens, someone demands a backhander as the price of doing business.

He adds that top-level commitment will be “critical” to delivering this sort of training – and to the development of a wider anti-corruption culture.

“If there’s a really unambiguous message from the top, then that communicates itself,” he says.

Barrington adds that anyone who thinks they can beat the act and vacuum up business while others draw up their policies would be wise to think again.

He points out that bribery has always been illegal and this act makes its prosecution both easier and a priority for investigators Furthermore, the UK law is just one part of a broader international movement to crack down on corruption. The OECD and G20 have both made it a priority to fi ght graft, the US already has extraterritorial laws in place and back in February China introduced its fi rst ban on foreign bribes.

Make no mistake, Smyth says, the net is closing and businesses ignore that “at their peril”.

“Does anybody really want to be the test case? No one knows where the axe will fall but the SFO will be looking for their fi rst proper scalp,” he says.

“It will cost people’s reputations, it’ll cost a lot of money and it’ll probably cost them their liberty. We know it’s going to happen. The opportunity is there for everybody for it not to be them.”

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