The enforcers are coming

The enforcers are coming

The planned new anti-bribery laws are something businesses in Yorkshire should be sitting up and taking notice of, says Fran Marwood.

At the start of December last year the UK’s Serious Fraud Office launched its first ever prosecution of a British businessman for allegedly taking part in corruption overseas. What readers may find surprising is that the business in question is a Yorkshire-based company. This case highlights the fact that the UK authorities are now clamping down hard on allegations of bribery and corruption and that local businesses need to be vigilant.

This increase in enforcement activity coincides with the inclusion of the Bribery Bill in the recent Queen’s speech and Justice Minister Jack Straw has said that he wants to see the Bill enacted before the next election. Under the new proposals, firms with UK operations will become criminally liable for corruption in their business, supply chain or sales channels, as will management who consent or connive with the offence.

So company directors who fail to act now risk severely damaging the reputation of their businesses – and possible prison sentences.

Other penalties under the new act are likely to include unlimited fines, disqualification of directors, and disbarment from tendering for foreign government contracts.

Yet many companies and business leaders appear to be generally unaware of the new responsibilities and potential penalties that could be heading their way.

The new law will see a strict regime introduced that in some instances goes further than the US Foreign Corrupt Practices Act (FCPA).

Existing UK laws have been criticised for many years, based as they are on a patchwork of 19th and early 20th Century rules, unsuited to the realities of doing business in today’s global markets. The Bill also introduces an offence relating specifically to bribery of foreign public officials. And steps have to be taken to avoid any bribery by third parties working on a company’s behalf.

Facilitation payments (for example, paying for goods to be processed by customs more quickly) will remain illegal but are subject to prosecution discretion. Another key change to the legislation is a new corporate offence of failure to prevent bribery. To avoid this liability, companies will have to provide evidence that their anti-bribery procedures are working in practice, not just established in theory.

The changes really are far reaching and will, for the first time for many UK businesses, require detailed evidence of operational anti-bribery procedures to be retained.

Yet figures PricewaterhouseCoopers recently gathered indicate that the level of preparedness and awareness is far from high.

Only one in 10 businesses appear to have discussed the implications of the UK Bribery Bill at board or audit committee level.

And half of the 40 non-executive directors and senior managers polled were unaware of any preparations that might have been made within their organisation at all. UK businesses should be doing more to address the risks. The limited action thus far may well stem from a belief that the business environment in the UK is relatively free of bribery. Figures from our fifth Global Economic Crime Survey (GECS) launched in November, shed some light on this issue.

Only 9 per cent of respondents to the survey from the UK reported cases of bribery, compared with 27 per cent of respondents overseas. But at the same time two thirds of those respondents were operating overseas - in other words, in the same markets as the overseas respondents. One explanation for this anomaly is that UK companies are not paying bribes to the extent of overseas competitiors.

But another may be that they are not looking hard enough at the bribery issue. In my work I have advised companies extensively on bribery matters, including the US FCPA. Local companies with US connections, where the anti bribery regulations have been in place for years, are more likely to have considered the risks.

But these represent only a small fraction of local businesses. Most will be starting from scratch when the new UK rules come into force. This is relevant, as implementing a robust internal system takes time and often requires considerable behavioural change, which isn’t something which can be achieved in a few weeks. Effective safeguards will take time and resource to design, implement and operate, so businesses, particularly those operating in riskier parts of the world, should start now to identify any risks of bribery within their organisation and put measures in place to address these risks.

As part of this approach, businesses should have clear principles regarding anti-bribery that are communicated throughout the organisation as part of the “tone from the top”.

The choice of anti-bribery procedures available to businesses is widespread and includes measures such as staff training, having and communicating appropriate policies, whistleblowing channels and helpdesks, and monitoring risky transactions, for example gifts and hospitality.

Even if businesses already have anti-bribery measures in place, it also makes good sense to revisit these regularly and undertake a “health check” to ensure measures are working in practice. The Serious Fraud Office has also published guidance for firms that wish to self-report instances of bribery and corruption within their business.

This represents a move towards the US system of self-reporting and plea bargaining. While businesses face significant pressure to control costs in the current recession, not addressing this issue effectively could prove a false economy and could make all the difference between survival and failure over the longer term. Doing the bare minimum is not an option. Once the new law is in effect it will not be enough just to have an anti-bribery policy in place, however well crafted, without proof of other measures to ensure the policy is properly applied.

n Fran Marwood is a director and head of forensic services at the Leeds office of PricewaterhouseCoopers LLP