In January 2016 the first UK company to be prosecuted for corruption was sentenced to a fine of just over £1.3m, had over £800k confiscated and was ordered to pay £25k in prosecution costs; with two directors being convicted and sentenced (in 2015):
- Christopher Smith received an 18-monthimprisonment sentence (suspended for two years) for two counts of corruptly agreeing to make payments, contrary to section 1(1) of the Prevention of Corruption Act 1906 and ordered to carry out 250 hours of unpaid work. Further, he received a three-month curfew.
- Nicholas Smith, the company’s sales and marketing director, received a three-year imprisonment sentencefor three counts of corruptly agreeing to make payments.
Further, both men received six-year bans on acting as company directors.
In his sentencing, the Judge stated, “Corruption of foreign officials is damaging to the country in which the corruption occurs is damaging to the reputation of UK business and, of course, in the market in which a business operates. It is anti-competitive.”
The conviction follows an SFO investigation into corrupt payments made to the company in return for the award of contracts.
The company was convicted under the old legislation as the offences pre-dated the Bribery Act 2010 (2010 Act).
To outline the offences introduced by the 2010 Act and the penalties for committing them. To highlight the practical steps a business can take to avoid breaching the legislation.
What is bribery?
Anti-corruption organisation Transparency International defines bribery as “the offering, promising, giving, accepting or soliciting of an advantage as an inducement for an action which is illegal or a breach of trust.”
Who can receive a bribe?
It is a common misconception that the 2010 Act only outlaws the bribery of public officials. In fact, the 2010 Act is much wider, and applies to all entities that carry on business or parts of it business in the UK.
The reasons for introducing the 2010 Act
To strengthen the existing bribery and corruption laws in the UK.
The Organisation of Economic Co-operation and Development (OECD) had repeatedly criticised the UK system for being weak and ineffective compared with the more robust regimes in other countries, such as the US Foreign and Corrupt Practices Act.
The offences under the 2010 Act
Bribing another person
A person is guilty of this offence if they offer, promise or give a financial advantage or other advantage, to another person.In other words:
- to bring about improper performance of a relevant function or activity; or
- to reward a person for the improper performance of a relevant function or activity.
The types of function or activity that can be improperly performed include:
- all functions of a public nature;
- all activities connected with a business;
- any activity performed in the course of a person’s employment; and
- any activity performed by or on behalf of a body of persons.
The person performing such function or activity must be in a position of trust, and the expectation is that they carry out that function or activity impartiallyand in good faith.
It may not matter whether the person who offered the bribe is the same person that actually performs, or performed, the function or activity concerned.
The advantage can be offered, promised or given by the person themselves or by a third party.
The recipient or potential recipient of a bribe is guilty of this offence if they request, agree to receive or accept a financial or other advantage to perform a relevant function or activity improperly.
It does not matter whether it is the recipient or someone else through whom the recipient, who requests, agrees to receive or accepts the advantage. In addition, the advantage can be for the benefit of the recipient or another person.
Bribing a foreign public official
A person is guilty of this offence if they intend to influence an official in their capacity as a foreign public official.
The offence does not cover accepting bribes, only offering, promising or giving bribes.
Making the offer, promise or gift directly to the official, or via a third party, does not in fact matter.
Failing to prevent bribery
A commercial organisation is guilty of this offence if a person associated with it bribes another person, with the intention of obtaining or retaining business, or a business advantage, for the commercial organisation. The offence can be committed in the UK or overseas.
A business can avoid conviction if it can demonstrate that it had adequate procedures in place designed to prevent bribery.
What are the penalties for committing an offence?
The offences of bribing another person, receiving bribes and bribing a foreign public official are punishable on indictment either by an unlimited fine, imprisonment of up to ten years or both.
Note: Both a company and its directors could be subject to criminal penalties.
The offence of failure to prevent bribery is punishable on indictment by an unlimited fine.
Businesses convicted of corruption could find themselves permanently debarred from tendering for public sector contracts.
Receiving adverse publicity, if prosecuted for an offence, could damage your business’ reputation.
Practical steps to help avoid liability under the 2010 Act
Top level commitment
All senior managers and directors must understand they could be personally liable under the 2010 Act for offences committed by the business.
It is important that senior management lead the anti-bribery culture of a business, especially if the business wants to take advantage of the “adequate procedures” defence to the offence of failing to prevent bribery.
Which potential risks could affect your business. For example, certain industry sectors (such as construction, energy, oil and gas, defence and aerospace, mining and financial services) and countries are associated with a greater risk of bribery. Think about:
- what transactions you engage in;
- who you transact with; and
- how you conduct those transactions.
High-risk transactions include:
- procurement and supply chain management;
- involvement with regulatory relationships (e.g. licences or permits); and
- charitable and political contributions.
Review how the business entertains potential customers, especially those from government agencies, state-owned enterprises or charitable organisations.
Routine or inexpensive corporate hospitality is unlikely to be a problem, but put clear guidelines in place.
If the business operates in foreign jurisdictions, always check local laws.
Implementing and communicating an anti-corruption code of conduct
Implement a code of conduct setting out clear, practical and accessible policies and procedures that apply to the entire business. Make sure you communicate the code effectively to all parts of the organisation.
Carry out background checks when dealing with third parties
A business will be liable if a person associated with it commits an offence on its behalf. Businesses should therefore review all of their relationships with any partners, suppliers and customers. For example, if an agent or distributor uses a bribe to win a contract for a business, that business could be liable.
Ensure you carry out background checks on any agents or distributors before you engage them.
Policies and procedures
Review any existing policies and procedures and update them if necessary. If the business does not have any policies or procedures in place, consider preparing them as a matter of urgency.
Effective implementation and monitoring
Consider introducing a compulsory training programme for all staff. If only a few employees operate in a high-risk area, consider targeting training at those employees.
Ensure you continually monitor anti-corruption policies and procedures are for compliance and effectiveness, both internally and externally.
Prevention is far better than cure
This is particularly so with the 2010 Act. Introducing and implementing effective policies, procedures and training is the best way to avoid problems in this area, and the best defence if the SFO come knocking at the door.
If you would like further advice or assistance on any of the matters raised in this note, please feel free to contact us.