Research recently published by Ernst & Young shows that approximately 64% of mid-market companies do not understand what the Act means. Their study also reveals that of the companies which have heard of the Act, only 52 % of them actually vet their suppliers as part of their compliance initiatives.
Given that the Act represents one of the most significant legislative developments in the UK in recent times, the statistics are shocking.
Implemented in July 2011, the Act replaced and codified the historic plethora of laws on bribery and introduced a new “strict liability” corporate offence. For the first time, companies incorporated in the UK or which carry on business in the UK which fail to prevent bribery by an “associated person” who performs services for or on their behalf in any capacity in any jurisdiction, will be held criminally liable. The scope of this offence is cast very wide indeed as the concept of an associated person will include employees, agents, suppliers, distributors or even joint venture parties.
The only defence available to companies is to have in place “adequate procedures” to prevent bribery. These are to include proportionate procedures, top level commitment, risk assessments, due diligence, communication and regular monitoring and review, both as time passes and as a company develops it’s business.
Given the hysteria that the introduction of this offence created, the apparent lack of awareness and response highlighted by the Ernst & Young study is surprising. Some argue that this may, at least in part, be due to the fact that to date no case of significance has been bought under the Act
It would be misguided however to assume that this lack of prosecution is an indication of a lack of appetite on the part of the UK regulators.
The Serious Fraud Office (“SFO”), now with David Green at the helm, has been keen to clarify that the SFO will be taking a hard line approach, in favour of prosecution rather than providing informal guidance. If there is sufficient evidence for a realistic prospect of conviction, and it is in the public interest, a prosecution will follow. This hard line approach is codified in the recent guidance published by the SFO relating to Gifts and Hospitality; Facilitation Payments; and Self Reporting.
Of primary importance is the new policy on Self Reporting. In the past the SFO was keen to encourage businesses to come forward by offering the “carrot” of civil settlements. Now, the SFO is retreating from this position; self reporting will only be considered as one of the factors to be taken into account if it is part of a “genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice”.
With reports last year that the SFO had 11 active bribery cases and a further 18 under consideration, it is only a matter of time before a case of significance is bought under the Act and businesses will have some clarity as to its true scope.
At the same time, the Financial Services Authority (“FSA”) is also taking a closer look at bribery and corruption within authorised firms. The FSA is currently conducting a thematic review of firms in the asset management industry and we expect its findings to be reported in Q3 of 2013.
In the light of the above, its now more important than ever to ensure that you are live to the bribery and corruption risks faced by your business, in particular through your supply chain, and have a robust compliance programme in place. If you have any questions arising out of this update, our Business Crime and Regulation partner James Carlton and senior associate Sona Ganatra would be happy to sit down with you and discuss these developments in further detail.