TT Talk - Considering bribery and corruption


Further international moves against economic crime are exemplified by the UK’s Bribery Act, which is probably the most comprehensive and stringent anti-bribery legislation in the world today. The Act goes significantly further than the existing US Foreign Corrupt Practices Act (FCPA), in particular covering all bribery, whether or not it involves a public official. The Act received Royal Assent in April 2010 and is now due to come into force on 1 July 2011. The delay in implementation has been caused mainly by difficulties experienced by the Ministry of Justice in framing Guidance (summarised below) for implementation following complaints that the legislation was overly broad and ambiguous.

The impact of this legislation will be broad; it impacts any company with operations in the UK, regardless of the domicile of the company or the locus of the offence. And there is no limit to the amount of fine levied against a company found to be guilty. The Bribery Act contains four offences of bribery: two general (one ‘active’ and one ‘passive’) and two ‘commercial’:

  • offering or giving a bribe (active)
  • requesting or accepting a bribe (passive)
  • bribing a foreign official in order to obtain a business advantage (commercial)
  • failing to prevent bribery (commercial)

The last one of these is particular note, since it includes the activities of any person acting on behalf of a company, including not just employees but also agents and subsidiaries. There is a defence to “failing to prevent bribery” if an organisation to prove that it is ‘policing itself’ through adequate procedures. This imposes a clear requirement for all companies to make a risk assessment.

The other commercial offence, ‘bribing a foreign official’ may affect certain geographical areas of an international business, particularly where payments have previously been regarded as an essential lubricant of the wheels of business and to ensure government action. The UK Act does not follow the US Foreign Corrupt Practices Act in allowing a defence that payment is legal in the jurisdiction concerned or is bona fide and/or reasonable. Nevertheless, the framers of the Guidance are at pains to emphasise that they live in the real world and the public interest will be considered before taking action under this head.

The Guidance has now been issued that, for example, pays some attention to corporate hospitality, analysing degrees of motive, commercial necessity and luxury emanating, for example, from visits to the Six Nations at Twickenham (UK - the example sports event given in the Guidance) and conferences in New York. A few more general things leap out, for example enforcement will depend on reasonableness and there must be a proved connection between an offered advantage and an intention to influence.

The Guidance provide six high-level and principles-based pointers as to what will be necessary for ‘adequate procedures’. These can be summarised as:

1. Procedures should be proportionate to the risks faced and the size and complexity of the business. They also need to be ‘clear, practical, accessible, effectively implemented and enforced’.

2. Top-level management commitment should be demonstrable, including fostering a zero-tolerance culture towards bribery.

3. Initial and periodic risk assessment should be performed and documented, considering both internal and external risks. Five common external risks are identified as ‘country, sectoral, transaction, business opportunity and business partnership’.

4. Proportionate and risk-based due diligence should be carried out on any party performing services for or on behalf of a company to ensure effective mitigation.

5. Bribery prevention policies and procedures need to be embedded throughout a company through communication, both internally and externally, and training. While again on a risk-based approach, training may need to extend to agents and other associates.

6. Regular monitoring and review should be in place to evaluate the effectiveness of bribery prevention procedures and make improvements where necessary.

The Guidance also contains 11 case studies that may assist implementation. Please refer to:

http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf

While the Guidance helps in clarifying the nature of a well defined compliance programme that is required to mitigate the risk of violation and minimise penalties should one occur, the need is clearly there for every company with UK-based operations to re-examine carefully its approach to managing the bribery risk and ensuring that its procedures are robust.

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Through Transport Mutual Insurance Association Limited and TT Club Mutual Insurance Limited, trading as the TT Club. TT Club Mutual Insurance Limited, registered in the UK (Company number: 02657093) is authorised by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and Prudential Regulation Authority. In Hong Kong, TT Club Mutual Insurance Limited is authorised and regulated by the Hong Kong Insurance Authority, in Singapore by the Monetary Authority of Singapore and in Australia by the Australian Prudential Regulation Authority. In the United States, TT Club Mutual Insurance Limited is approved as a surplus lines insurer in all states and is accessible through properly licensed surplus lines brokers. The registered offices are: 90 Fenchurch Street, London, EC3M 4ST.

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