In the first of a two-part article we look at the main practical considerations for organisations in assessing the risk of bribery, facilitation payments and ensuring the that gifts, hospitality and expenses do not contravene the Act. The article is written from the company’s viewpoint, particularly those companies doing business or thinking about doing business internationally with companies from higher risk countries.
ASSESSING THE RISK OF BRIBERY
The Government's guidance as to what constitutes "adequate procedures" ("Adequate Procedures Guidance") provides (at principle 3) that companies must consider the bribery risk they face.
An organisation's risk assessment must be overseen by top level management and be appropriately resourced. Risk assessments should be carried out periodically and must also be repeated when the organisation's risk levels change, for example when an organisation enters a new market.
Organisations should document the risk assessments they undertake and any conclusions drawn as a result of the assessment. Organisations must consider within their risk assessments both internal and external risks. The Adequate Procedures Guidance suggests the following internal and external risks should be considered.
INTERNAL RISKS
- deficiencies in employee training, skills and knowledge
- bonus culture that rewards excessive risk taking
- lack of clarity in the organisation’s policies on, and procedures for, hospitality and promotional expenditure, and political or charitable contributions
- lack of clear financial controls
- lack of a clear anti-bribery message from the top-level management.
EXTERNAL RISKS
- Country risk: this is evidenced by perceived high levels of corruption, an absence of effectively implemented anti-bribery legislation and a failure of the foreign government, media, local business.
- Community and civil society effectively to promote transparent procurement and investment policies.
- Sectoral risk: some sectors are higher risk than others. Higher risk sectors include the extractive industries and the large scale infrastructure sector.
- Transaction risk: certain types of transaction give rise to higher risks, for example, charitable or political contributions, licences and permits, and transactions relating to public procurement.
- Business opportunity risk: such risks might arise in high value projects or with projects involving many contractors or intermediaries; or with projects which are not apparently undertaken at market prices, or which do not have a clear legitimate objective.
- Business partnership risk: certain relationships may involve higher risk, for example, the use of intermediaries in transactions with foreign public officials; consortia or joint venture partners; and relationships with politically exposed persons where the proposed business relationship involves, or is linked to, a prominent public official.
FACILITATION PAYMENTS
The Adequate Procedures Guidance confirms that facilitation payments are bribes and there is no exemption for such payments under the Act. The company must ensure that its anti-bribery policy prohibits all facilitation payments and includes a definition of facilitation payments. Its policy must be explained to agents and other third parties. Training and guidance must also be in place for all employees, especially those who are most likely to face situations involving facilitation payments. Any such payments that are made in contravention of the policy must be documented and dealt with by senior management.
ENSURING THAT GIFTS, HOSPITALITY AND EXPENSES DO NOT CONTRAVENE THE ACT
The company must ensure that its anti-bribery policy contains clear and definitive guidance on what are reasonable and proportionate bona fide expenditures and prohibits the offer or receipt of gifts, hospitality and expenses where this could affect or be perceived to affect business transactions. The policy should also ensure that local laws in foreign countries are adhered to and appropriate legal advice should be taken as appropriate. The policies must be implemented and there should be reporting procedures ensuring the policies are adhered to. As with facilitation payments, training must be given on handling the giving or receiving of gifts or hospitality and all gifts, hospitality and expenses must be thoroughly recorded and monitored.
The question as to whether a particular item of expenditure constitutes a bribe will depend on all the surrounding circumstances. The Adequate Procedures Guidance states that the authorities will look at factors such as the level of hospitality offered, the manner in which it was provided and the level of influence the individual receiving it had on the business decision in question.
Generally, the higher the expenditure and the more lavish the hospitality or expenditure provided to a public official the greater the likely inference that it is intended to influence the official to grant business or a business advantage in return.
It is for individual businesses, or business representative bodies to fulfil any expectations as regards the establishment and dissemination of any appropriate standards for hospitality and promotional expenditure.
CHECKLIST
Do gifts and hospitality comply with a company’s anti-bribery programme?
- Modest and in line with the good business practice set out in the company’s anti-bribery policy;
- Fully documented and transparent;
- Reported to management;
- Appropriate to the business relationship with the recipient;
- Compliant with local laws and customs (the custom must have been recognised by the written local law or a published judicial decision);
- Do not place the recipient under any obligation or create expectations;
- Given to show genuine appreciation;
- Would be seen favourably by the shareholders;
- Do not breach the rules or codes of the recipient organisation;
- Not a regular occurrence.
EXAMPLES:
- Arranging an all-expenses paid two-day conference to promote the company's new product and booking attendees into a 5 star hotel could constitute a bribe under section 1 of the Act as well as likely to be an offence under section 7 for failing to prevent bribery by offering excessive expenses and hospitality. Is it reasonable and proportionate?
- Arranging a presentation for foreign public officials visiting the UK (who are paying their own expenses) and providing light refreshments such as coffee and pastries is unlikely to be an offence under section 6 as they are modest, reasonable and bona fide expenses.
CONCLUSION
So what about an expensive lunch at The Savoy, London as the guest of a company that may in the near future be tendering for a contract with your company? Using the checklist, the first question would whether the lunch breaches the rules or codes of the recipient company and its anti-bribery policy, particularly if a contract was shortly to be put out to tender? If the answer to this question is no, could the lunch be justified as no specific details of the contract or tender were discussed? Was the lunch appropriate to the business relationship and was it fully documented and reported? If the answers to these questions are yes, and it was a single lunch, then it should be fine. Lunch between the same individuals every week at The Savoy may be an entirely different proposition as well as setting tongues wagging.
In part 2 of this article we will consider the essential ingredients of a company’s anti-bribery policy, what a company should do if it discovers a potentially corrupt payment and how a company should approach due diligence in the context of the Act.
Slides from a presentation and overview of the Act can be found here on the firm’s blog »
This article contains general advice and comments only and therefore specific legal advice should be taken before reliance is placed upon it in any particular circumstances.
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