The courtroom dramas of Kavanagh QC and Silk rarely feature a business owner in the dock. For many entrepreneurs the world of criminal law barely registers within their risk assessment, but it should.
This article looks at how recently introduced bribery legislation is being pursued in the courts and how business owners can take simple steps, to help avoid any late night knocks on the door.
The Bribery Act 2010
The Bribery Act was introduced to bring together different strands of legislation under the one roof. This legislative change provides the two prosecuting authorities, The Crown Prosecution Service and the Serious Fraud Office, with four potential charges for companies and individuals contravening the laws:
- Being bribed
- The bribery of foreign public officials
- The failure of a commercial organisation to prevent bribery on its behalf
So What’s the Latest?
To date, the CPS has achieved two high profile convictions both relating to the bribery of public officials. From the SFO there have been none and it’s noticeable in particular, that there have been no prosecutions of big business, around whom this kind of legislation was surely the focus?
Whilst it would appear that this piece of legislation has had limited effect on business practice since the time it’s been introduced, it’s worth keeping your finger on the pulse of legal activity as this could be about to change.
September 2014 is scheduled to see the first ‘substantial’ case brought to court by the SFO with the prosecution of a bio fuel investment company and its key managers. They have been charged with offenses pertaining to making and accepting financial advantage and claims of up to £23m.
This case will be a key test of whether the Bribery Act has real teeth and is one to watch.
Deferred Prosecution Agreements
A signal that perhaps the original legislation is being ‘watered down’ was the recent Crime & Courts Act 2013 and from that, the creation of ‘deferred prosecution agreements’. Within this process, prosecutors can charge a company with offenses but then automatically suspend any further action subject to an agreement between parties.
What Impact for the SME?
When the Bribery Act was launched there was little idea of the potential impact on businesses. With many business owners, that remains the case today.
Whilst impact has been considered to be minimal, the one area of concern regarding the Bribery Act and small business operation has always been corporate hospitality. It was feared that all corporate hospitality would fall within the grasp of prosecutors but the evidence so far is that the prosecuting authorities have a lack of appetite (or funds) to pursue more than the very high profile cases. As ever, just because the current lack of interest by prosecutors hasn’t sparked huge fallout, that’s not say this will always be the case. Knowing how to keep your company and teams safe from the perils of potential bribery allegations is an important tool in keeping your operation safe.
It’s all about ‘Proportionality’
If you are hosting clients or prospects to a day at the races or treating them to that rather luxurious food hamper, the over arching principle to remember is ‘why you’re doing something’. As long as the event or benefit you’re providing someone is viewed as general hospitality and part of an overall marketing process then fine but, if those tickets to the test match are directly linked to a specific piece of work or tender or outcome then it could be viewed in a much dimmer light by the prosecuting authorities.
Remember the 6 Principles
But the general lack of prosecuting activity shouldn’t mean complacency on behalf of business owners and managers, particularly if your business operates abroad and in countries where bribery is a more common issue.
A good basis for testing whether you and your business are compliant is to understand and apply the 6 guideline principles contained within the original legislation.
The Six Principles are, in summary:
1. Proportionate Procedures – any procedures implemented by a business need to be “proportionate to the bribery risks it faces and the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced”. Essentially a business needs to have procedures in place that show an awareness of the risk and reflect those areas of the business which might be viewed as ‘higher risk’ than others of being caught within this legislation
2. Top-level commitment – executive and senior managers must show a visible commitment to preventing bribery and to ensure that those working on their behalf are made aware of this commitment and the procedures in place. The court will look at the actions and communications of senior management as an assessment of whether that business was taking suitable precautions.
3. Risk assessment – the business needs to conduct a periodical risk assessment about their risk of exposure to bribery. Key individuals should be nominated to ensure that a risk assessment across all areas of the business be conducted within the standard risk assessment procedures of a company.
4. Due Diligence – importantly a business should also be conducting due diligence on those who conduct business on their behalf. This includes employees but importantly, includes agents and representatives elsewhere. This is of particular importance if using agents from countries with potentially a higher risk of bribery. The business must show that adequate due diligence procedures of people and organisations was in place to help mitigate the risk.
5. Communication & Training – the business must ensure that procedures are “embedded and understood throughout the organisation”, and include these procedures within appropriate training programmes. Communication procedures should include establishing “a secure, confidential and accessible means for internal or external parties to raise concerns” and to request advice.
6. Monitoring & Review – the business monitors and reviews its policies and procedures over time to improve as appropriate and ensure they remain adequate to the changing risks faced by the business. All such reviews must be conducted with the evidenced approval of senior management. These reviews are particularly important for regulated firms with the FSA cracking down in recent years on firms who fail to have adequate controls and procedures in place.
If any of these principles seem daunting to your business then seek legal advice from legal experts. Direct access barristers and solicitors can provide appropriate guidance.
The key factor to remember is proportionality. Make sure your corporate hospitality is related to general marketing initiatives. Link your corporate hospitality to a specific piece of work or future contract then be prepared for that late night knock on the door.
Andrew Weaver, CEO of Lawyerfair