Photo: Daily Mail
One needn’t look beyond the steady stream of front page headlines that have appeared over the past several years to know that the U.S. has dramatically stepped up its enforcement of the Foreign Corrupt Practices Act (FCPA). While the U.S. continues to be the world leader in prosecuting companies for the payment of bribes in foreign business, the U.K. has raised the bar with its own set of provisions including several sweeping and unusual elements that have unleashed a flurry of concern in the global business communityUnlike the FCPA, the U.K. Bribery Act of 2010 is a model of brevity – the text of the legislation is a mere 13 pages long. Though succinct, the new law has prompted a great deal of scrambling, as companies work to interpret the law’s meaning and scope, assess the adequacy of their existing anti-bribery programs and develop measures that will address any perceived gaps.
But there is no need for panic – even in the face of evidence that some are doing just that. Instead, it’s important to focus on how the Act’s most relevant provisions may affect corporations orfinancial institutions with a U.K. nexus.
The most controversial provision of the Bribery Act is defined in Section 7, which establishes a new corporate offence labelled Failing to Prevent Bribery. The provision simply states, if “a person associated with” a covered “commercial organisation” bribes another person “intending to obtain or retain business or an advantage in the conduct of business for” the commercial organisation, then that company is guilty of an offence and subject to unlimited fines and other sanctions.
This provision is extraordinary, as it creates a new form of “strict” criminal liability for corporations doing business in or through the U.K. and has an extended territorial reach that did not exist before. Under the Act, any company, no matter where it is incorporated or located, is subject to prosecution if it “carries on a business, or part of a business, in any part of the United Kingdom.”
On its face, this provision establishes a low burden of proof while shifting a considerable burden to the corporate defendant. But there is a silver lining. Companies that adopt best practices programs are rewarded with an unusual defence: if a company can prove that it had “in place adequate procedures designed to prevent persons associated with the company from engaging in the bribery of foreign public officials,” they may then avoid prosecution.
Most compliance officers know that this is a double edged sword. On the one hand, it allows every firm the opportunity to build its compliance program to match the true nature and scale of its products and services in the context of geographic, industry and client risks. But it also means that their risk assessments will be critically evaluated by law enforcement or regulatory officials in the wake of a perceived failure of that assessment. Thus, care must be taken to ensure that any compliance program meets or exceeds industry standards.
With the new U.K. Bribery Act now in effect, multinational companies and financial institutions with a U.K. nexus must assess the adequacy of their anti-bribery compliance program. Particular attention should be paid to the risks associated with third party agents, vendors and suppliers as most corporate criminal prosecutions will feature corrupt acts undertaken by such third parties on behalf of a company (even without the knowledge or complicity of the company).
Any firm that does not have an identified anti-bribery compliance program should devote immediate attention to the development of one. It is an unfortunate fact that too many companies only devote resources and attention to this issue after they become the subject of an investigation or enforcement proceeding.
In the short term, businesses may want to take a number of steps to improve their compliance programs to ensure that they meet best practices standards, including:
- Existing FCPA-based policies and procedures must be reviewed to ensure they address the new standards imposed by the U.K. Bribery Act.
- All corporate gift and hospitality policies should be carefully examined and amended as necessary.
- Employees must be trained on the new legislation,and company policies and procedures should be changed as necessary to prevent and detectthe payment of bribes or facilitation payments. Particular attention must be devoted to third party entities that are too often overlooked in corporate anti-bribery programs.
- Due diligence and monitoring procedures, especially for vendors and agents, must be assessed and improved as necessary.
The bar has been raised, and failure to take any action will afford your firm no protection. his is the wrong time to panic or to seek simple, cheap solutions. Instead, the world’s newest significant anti-bribery law should serve as a useful reminder to assess your company’s anti-bribery program, and if one does not exist, take deliberate steps to develop one.
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