Forewarned is forearmed

August 18, 2010

The introduction of the Bribery Act may have been put back to next April, but that does not mean that local authorities should not begin to prepare for its impact now, says Andrew Gillett.

A full year after receiving Royal Assent on the 8th April 2010 the much anticipated UK Bribery Act is finally set to come into force in April 2011. Ahead of this, a short consultation process in relation to the wide reaching new offence of “failing to prevent bribery” is due to commence this September. The consultation is backed by a government promise to publish its findings and guidance on how commercial organisations can reduce the risk of prosecution for an offence under section 7 early in the New Year.

Given the current lack of guidance from the government as promised by section 9 of the Act, which is now exacerbated by an anticipated five month delay in the publication of preventative procedures relevant organisations can take to reduce the risk of an offence, should, or indeed can, organisations within both the private and public sectors begin their preparations now ahead of the new legislation?

The question was rhetorical as the answer is a resounding yes on both counts.

Replacing much, and codifying the remainder, of the UK’s existing somewhat disparate anti-corruption laws which date as far back as 1889 and include the Prevention of Corruption Act’s of 1906 & 1916, the Bribery Act 2010 heralds a new era in the UK’s fight against corruption. It establishes among its key provisions distinct general criminal offences for those “offering” and those “accepting” bribes, a discreet offence for those who bribe foreign public officials and the infamous new section 7 offence of the failure of commercial organisations to prevent bribery by persons acting on their behalf, which is courting much concern and debate.

The new legislation has also been given the teeth to demonstrate and support the UK’s worldwide commitment to ethical business conduct providing for unlimited financial penalties and up to 10 year custodial terms, double the five year provision under the USA’s Foreign & Corrupt Practices Act deemed to date to be the current legislative benchmark, for breaches where circumstances on indictment dictate.

Despite the continuing squeeze on local government funding and resources any delay in considering, or the redistribution of resources presently allocated to, the impact of the Act is ill advised. The announcement from the Ministry of Justice on the 20th July 2010 suggesting that three months will afford those affected with an “adequate familiarisation period” ahead of the legislation does not take into consideration the necessary time, commitment and resources that will be required by government departments to:

Conduct a full review and/or audit of their current systems and processes to combat bribery and corruption and prepare an action plan or strategy for improvement and change;
Draft and implement new, or where measures already exist update, procedures to deal with the requirements of the Act;
Communicate, from Senior Management and Board to all central and support staff, an understanding and adoption of new, or changes to existing, policies and provide training on the changes.

Policies and process on paper alone will also be insufficient in their own right unless they are accepted and adopted at all levels within public sector departments, and compliance is recognised as a prerequisite for anyone wishing to work with that particular organisation or department. This may necessitate changes in culture and business planning which again requires time to determine, implement and embed.

Returning specifically to the defence of having “adequate procedures in place designed to prevent” bribery for a breach under section 7 of the Act, many respected commentators have reached broad agreement that in order to qualify for the defence organisations must demonstrate those procedures working in practice, which again draws on resources and time. Policies and training will need to be documented, records of auditing and compliance measures will be required, gift and external interests registers must be kept and a zero tolerance to bribery and corruption policy publicised both internally and externally to identify but a few of the recommended steps.

The requirement for both private and public sector compliance with the general and discreet offences of “giving” or “receiving” a bribe is beyond discussion. But in addition to the ongoing uncertainty as to what amounts to a defence of “adequate procedure”, there is also uncertainty as to whether local government departments fall strictly within the definition of a “relevant commercial organisation” in section 7. There is nothing elsewhere to suggest there has been a positive intention to exclude the public sector from potential sanction as a consequence of an employee’s, agent’s or subsidiaries’ acts of bribery intending to obtain/retain business or an advantage in their conduct of business. Local government activities in providing and procuring goods and services and their responsibilities of accountability, the protection of public funds and in upholding the rule of law are of no lesser significance than their private sector counterparts.

Sound practice and a degree of common sense dictates that rather than run the risk of an infringement, additional processes required to demonstrate that an active bribery prevention policy is in place are worthy investments for the future.

The consequences of bribery reach further than an individual perpetrator’s profit since it impairs the benefits of competition, often increases costs, distorts and under optimises a decision-making process and destroys trust and confidence.

As to what steps can be taken now in the absence of clear guidance from the secretary of state, various respected resources already exist from which a bespoke policy and process can be drawn to suit any unique set of requirements. Such guidance can be obtained from the Fraud Advisory Panel, the Serious Fraud Office and internal correspondence within the House of Lords (click on the links to access the guidance from each).

As any incident of bribery or corruption will undermine public and business confidence and trust across all sectors, the public sector cannot really afford to sit back and fail to take steps to fight corruption akin to their private sector colleagues.

Andrew Gillett is a partner and head of casualty fraud at Weightmans LLP, specialising in counter fraud strategy, claims handling and sanctions.