The 2010 Bribery Act – Notes for Investors

Effects on businesses

The updated UK Bribery Act which took effect on 1 July 2011 is likely to have a substantial impact on the way in which companies conduct their business activities abroad, including in Africa and in the Middle East. Unlike earlier legislation, the new Act extends "jurisdiction" to include all organisations with a UK presence, no matter where in the world the alleged bribery takes place. The Act includes new offences. Alongside the traditional offences of bribery, being bribed and bribery of foreign officials, there is a section making it an offence for a commercial organisation not to prevent persons associated with them from committing bribery on their behalf. This is a much more stringent requirement than in previous UK legislation or in the USA's Foreign Corrupt Practices Act (FCPA).

Companies are now much more likely to be made liable for the actions of their employees, facing severe penalties for non-compliance. The Act sets no upper limit on fines. A serious breach may result in a custodial sentence of up to ten years in prison. 'Whereas in the past companies could plead ignorance of the actions of their employees, this is now no longer an option', comments George Nicholls, CEO of Pasco, adding that 'a worrying number of UK companies are still unaware of the tough penalties they face if they do not comply with the new regulations.' What's more, as mentioned above, the reach of the Act has been extended to cover not only UK nationals and companies, but also their associates, including foreign subsidiaries or individuals committing bribery on behalf of a UK firm or individual covered by the Act, regardless of whether the crime was committed within the UK itself.

Focus on guidance – what companies should do

There are undoubtedly challenges for companies seeking to comply with the new requirements, but these are by no means insurmountable. The Ministry of Justice (MOJ) guidance seeks to to ensure that the Act is workable and well understood by all parties it may affect. The guidance is aimed at explaining how commercial organisations should operate to ensure compliance with the Act. It lays out six principles to help organisations ensure that bribery is not committed on their behalf. This includes proportionate, clear and enforced procedures to prevent bribery which are consistent with the size and complexity of the organisation and the risks it faces; a firm commitment by top level management to prevent corrupt practices; appropriate risk assessments and due diligence procedures when dealing with foreign partners; and sufficient staff training and monitoring.

It is important that all companies take these requirements extremely seriously. Enforcement of the Act will be stepped up from current levels. Companies already in the public eye are especially at risk: 'There will be a number of high profile cases in future, involving companies, their directors, employees and associates. Huge fines will be imposed, as happened under the FCPA. But custodial sentences are also possible in serious cases' remarks David Middleton, Pasco's UK Director. Particularly in the early stages of its implementation, prosecutors may seek to crack down severely on those in breach of the Act.

The UK Bribery Act - working with intelligence

How can you ensure you and your organisation are compliant with the Bribery Act? Clear direction and support from senior management are important. Effective leadership is essential. The best protection is 'review and prevention', which are already standard in the US following the implementation of the FCPA: 'Many US companies now automatically assess every foreign business partner to ensure there is no history of corruption', says George Nicholls. Detailed and thorough risk assessment, professional due diligences and strong policies and procedures, properly implemented and regularly monitored, are your best defence. Showing that you have adequate procedures in place will help your company defend itself against charges of having failed to prevent bribery.

This is where Pasco can assist your business. We can provide risk assessment, due diligence and the training and guidance required to give you and your staff the means to comply with the Act and the reassurance that you are doing so. Since 1996, we have operated in over 85 countries and built our reputation on professional services and advice to our clients, particularly in the areas of risk management and due diligence in emerging markets. We have also worked extensively to help US clients seeking to comply with the requirements of the FCPA.

In preparation for the Act and since its introduction this year we have worked with independent legal advisers to ensure our own compliance and to prepare ourselves to help our clients. We are well placed to help you to understand and adopt the six guidance principles from a theoretical and a practical and business perspective. Working with you we can advise on how your organisation can develop in regions across the world in a lawful and compliant manner.

For those wishing to expand operations into unfamiliar and challenging markets we provide a wide range of training, guidance and other services, drawing on our extensive regional experience and expertise in the design and implementation of anti-bribery systems. We also offer advice on supply chain integrity and screening systems and vendor compliance evaluations. Our advisory work is supported by specialist barristers. This allows you to focus on the future of your organisation whilst we help you move forward successfully in emerging markets with peace of mind.