Few businesses would knowingly tolerate corruption and bribery. And yet, through unfamiliarity with the law, they might be leaving themselves open to prosecution
Given the fact that the government had been under pressure to consolidate and strengthen anti-bribery and corruption law for some time, it hardly came as a surprise when the Bribery Act was officially announced in 2009. After some delays it came into effect just 18 months ago and yet the dust has settled surprisingly quickly on what was then deemed one of the most far-reaching pieces of anti-corruption legislation in the world. In its research released at the very close of 2012, Ernst & Young revealed that more than half of UK enterprises were entirely unaware that the act existed, meaning that those firms are potentially exposed to legal reprisal if someone in their organisation breaks the regulations.
One of the most surprising elements of the research was the fact that the lowest awareness of the act and adoption of the measures required wasn’t among large corporations – stereotypically viewed as being the industries most exposed to bribery risks. While awareness rates among the UK’s larger companies was as high as 76%, only a meagre 36% of small and medium-sized enterprises (SMEs) said they were familiar with it. Nearly four in every five businesses in the north of England are unaware of the legislation, with the south not faring much better. So how is it that such a far-reaching piece of legislation is passing companies by?
John Smart, partner and head of fraud investigation and dispute services at Ernst & Young, explains this trend: “I suspect it’s one of those things that is on the list of potential risks to the business but is not high up; they’re more concerned about cashflow, profitability and opening new markets.” Other regulations such as health and safety and employee legislation may seem more immediately pressing for SMEs and this means protecting themselves against the risk of bribery and corruption can get pushed onto the back-burner.
Additionally, many smaller companies may feel that bribery is a distant concern, unlikely to happen in the areas they operate in. “They might think they don’t operate in an environment that might be high risk like Africa, Asia or eastern Europe, and therefore that they’re not exposed to those risks,” says Smart. But the risk of corruption isn’t limited just to developing economies; transactions taking place solely within the UK are still susceptible to bribery and require just as careful monitoring. “Two cases that have been prosecuted so far under the Bribery Act have been in the UK.”
There’s also an impression that some enterprises may simply feel that the laws don’t apply to the sorts of industries they are working in. “People assume bribery is associated with industries like defence, construction or extractive industries such as oil or gas mining and therefore if you’re in a different sector, you might think you’re not exposed,” Smart says. And while the recent prosecutions for breaches of the Bribery Act do feature some companies operating in these sectors, that in no way gives the full picture. “There are some in publishing, there’s some in gambling, there’s some in food retailing, banking, engineering, insurance – it covers a broad range of industries,” he continues. “I suspect they haven’t been publicised very heavily so I think people are not thinking about the risks they face in those sectors.
And non-compliance has had some very serious repercussions for those who have been caught out. “There have been two cases where people have been locked up, mainly in relation to receiving bribes but it’s equally relevant to those who are paying bribes,” Smart explains. “Businesses might be sleepwalking into a potential exposure to both criminal and civil penalties.” Obviously the ramifications of not having the right measures in place can also extend far past the legal measures; the associated damage to reputation means that it’s incredibly important to ensure you’re seen to be complying with the full letter of the law.
Fortunately, getting up to speed on the act is quite simple. “It’s reasonably straightforward because actually it condenses what already existed under various acts in the past,” comments Smart. “What it basically says is you can’t pay money or something of value to influence somebody to give you business and vice-versa.” However, it’s still not worth underestimating the bill’s reach; it isn’t limited simply to cash transactions and covers any gifts or treatment intended to influence another party’s objectivity. “The challenge is in the detail of what you need to do to make sure that you’re compliant with the act.”
A place to start is with the advice provided by the Ministry of Justice and the Serious Fraud Office (SFO) themselves. “It sets out six principles that you need to adopt as a company, ranging from making sure you’ve done a risk assessment through to training and communication,” Smart explains.
“One of the protections that the SFO suggests is that you’re seen to take potential risks seriously and document them in some way,” Smart says. “They will see that effectively there’s a bad apple in the organisation who has ignored the processes you’ve set up.” Whether dealing with minor transactions or tenders, or moving huge orders across international borders, assessing its own level of risk and documenting how it’s dealing with that will go a long way toward mitigating an enterprise’s culpability in the eyes of the law,” explains Smart.
“It’s about showing you’ve done the thinking and documented it – and, if you’ve found somebody who is a high risk, proving that you’ve mitigated it in some way.”