SEE NO EVIL, HEAR NO EVIL - BRIBERY LAW UPDATE (PART 2)

WHAT ISSUES DOES A COMPANY'S ANTI-BRIBERY POLICY NEED TO COVER?

Principle 1 of the Adequate Procedures Guidance states that an organisation may wish to cover within its policies:

• its commitment to bribery prevention
• its general approach to mitigation of bribery risk
• an overview of its strategy to implement its bribery prevention policies.

It is essential that organisations consider putting in place an anti-bribery policy covering these points.

An organisation's policies and procedure should be tailored to the organisation and therefore it is difficult to provide a set standard on what should be covered. A pro-forma policy may not be appropriate for your business.

Accordingly, the Adequate Procedures Guidance provides a non-exhaustive list of the topics an organisation's anti-bribery policy should consider including:

• The involvement of the organisation’s top-level management;
• Risk assessment procedures;
• Due diligence of existing or prospective associated persons;
• The provision of gifts, hospitality and promotional expenditure; charitable and political donations; or demands for facilitation payments;
• Direct and indirect employment, including recruitment, terms and conditions, disciplinary action and remuneration;
• Governance of business relationships with all other associated persons including pre and post contractual agreements;
• Financial and commercial controls such as adequate bookkeeping, auditing and approval of expenditure;
• Transparency of transactions and disclosure of information;
• Decision-making, such as delegation of authority procedures, separation of functions and the avoidance of conflicts of interest;
• Enforcement, detailing discipline processes and sanctions for breaches of the organisation’s anti-bribery rules;
• The reporting of bribery including ‘speak up’ or ‘whistleblowing’ procedures;
• The detail of the process by which the organisation plans to implement its bribery prevention procedures, for example, how its policy will be applied to individual projects and to different parts of the organisation;
• The communication of the organisation’s policies and procedures, and training in their application; and
• The monitoring, review and evaluation of bribery prevention procedures.

HOW SHOULD A COMPANY APPROACH THE TASK OF IMPLEMENTING ITS ANTI-BRIBERY PROGRAMME?

Implementation of a company's anti-bribery programme is a key part of protecting the company from liability under the Bribery Act ("the Act"). The Adequate Procedures Guidance acknowledges that there is no 'one size fits all' approach and accordingly a company's anti-bribery policies and procedures may be proportionate to the size of the company, nature of its business and market sector, and its risk assessment. However, whatever form the policies take, they will require effective implementation if they are to be successful and must not just be kept filed away.

Companies may find it useful to establish a strategy for implementation, including:

• Allocating roles and responsibilities for implementation;
• Drafting procedures for communicating written policies internally to all staff including subsidiaries and externally to agents and other third parties (e.g. through the company's website or face-to-face);
• Commencing clearly communicated and compulsory training courses available on a regular basis for all staff including senior management and possibly contractors or other third parties (and appropriate review, documenting and recording of such training);
• Setting up internal controls to monitor the company's accounts and recordkeeping practices to ensure they are anti-bribery compliant;
• Setting review dates and drawing up targets;
• Monitoring progress and presenting progress reports to senior management;
• Providing accessible channels through which staff can raise concerns and report breaches in confidence and to seek advice on the anti-bribery programme; and
• Making clear the disciplinary procedures and sanctions for breaches (e.g. removing corrupt vendors from the list of approved suppliers).

CREATING AN ANTI-BRIBERY CULTURE

Principle 2 of the Guidance requires the ‘top level management’ of a company to show that they have been active in making sure that staff (including middle management) and the key people the company does business with understand that bribery is never acceptable. The Adequate Procedures Guidance suggests that a formal statement from top level management communicating a commitment to a zero tolerance approach to bribery can be an effective tool. This commitment should include:

• a commitment to carry out business fairly, honestly and openly;
• a commitment to zero tolerance towards bribery;
• the consequences of breaching the policy for employees and managers;
• for other associated persons the consequences of breaching contractual; provisions relating to bribery prevention (this could include a reference to avoiding doing business with others who do not commit to doing business without bribery as a 'best practice' objective);
• articulation of the business benefits of rejecting bribery (reputational, customer and business partner confidence);
• reference to the range of bribery prevention procedures the commercial organisation has or is putting in place, including any protection and procedures for confidential reporting of bribery (whistleblowing);
• key individuals and departments involved in the development and implementation of the organisation’s bribery prevention procedures; and
• reference to the organisation’s involvement in any collective action against bribery in, for example, the same business sector.

The Adequate Procedures Guidance makes clear that top tier management should be involved in:

• Selection and training of senior managers to lead anti-bribery work where appropriate.
• Leadership on key measures such as a code of conduct.
• Endorsement of all bribery prevention related publications.
• Leadership in awareness-raising and encouraging transparent dialogue throughout the organisation so as to seek to ensure effective dissemination of anti-bribery policies and procedures to employees, subsidiaries, and associated persons, etc.
• Engagement with relevant associated persons and external bodies, such as sectoral organisations and the media, to help articulate the organisation’s policies.
• Specific involvement in high profile and critical decision making where appropriate.
• Assurance of risk assessment.
• General oversight of breaches of procedures and the provision of feedback to the board or equivalent, where appropriate, on levels of compliance.

WHAT SHOULD A COMPANY DO IF IT DISCOVERS A POTENTIALLY CORRUPT PAYMENT OR ACTION?

The company should include in its anti-bribery policy the procedure for dealing with incidents of bribery within its organisation including its policy on confidentiality, the documentation of incidents, recourse to external advisors. The procedure should also set out which senior person or team of people in the company is responsible for investigating corrupt actions or alleged bribery and this should be made known within the company.

As discussed above, incidents of bribery should be documented and reported immediately and investigated thoroughly so as to avoid missing the existence of any further corrupt activities. The investigation may be outsourced if appropriate so as to avoid conflicts. Using an outsourced legal team to conduct the investigation has the advantage that the investigation and its conclusion can be subject to legal privilege and therefore withheld from production to third parties or government authorities, if necessary.

Consideration should also be given to appropriate disciplinary action and remedial steps to ensure that incidents of that kind do not occur going forward. The Serious Fraud Office ("SFO") will be especially vigilant if the company has a history of corruption.


HOW SHOULD A COMPANY APPROACH DUE DILIGENCE IN THE CONTEXT OF THE BRIBERY ACT AND WHAT SHOULD THEY DO IF DURING THE PROCESS OF DUE DILIGENCE THEY DISCOVER SOME SUSPECT PAYMENTS WHICH MAY AMOUNT TO BRIBERY?

Principle 4 of the Adequate Procedures Guidance emphasises that due diligence is a firmly established element of good corporate governance and that due diligence related to bribery prevention should form part of the wider due diligence framework.

Organisations should have due diligence policies and procedures in place which cover all parties to business relationships including the supply chain, agents and intermediaries, joint ventures and similar relationships in all markets where an organisation does business.

Organisations should consider making enquiries into the risk of and types of bribery in the relevant countries, into the risks that a particular business opportunity raises and to establish whether relevant individuals or organisations have a reputation for bribery or are being investigated. The extent of any anti-bribery policies in place should also be ascertained and what financial procedures are in place to prevent corrupt payments being concealed. The Adequate Procedures Guidance makes clear the level of due diligence undertaken should be proportionate to the level of risk identified.

When carrying out due diligence, companies should look out for the following issues:

• Inadequate anti-bribery policies and procedures;
• Particularly high levels of corruption in the country or sector with which the business is involved;
• Engagement of third parties to obtain contracts and business;
• Unexplained or disproportionately large payments to third parties or gifts/hospitality to government officials or even their families; and
• News reports of the target company allegedly being involved in bribery or corruption and bad reputation of relevant third parties.

Where significant issues are discovered as part of the due diligence process, a buyer may need to decide whether to back out of the deal or whether to proceed on different terms. If it proceeds, in addition to the usual indemnity and escrow mechanisms it will also need to decide whether (and if so when) disclosure should be made to the relevant authorities.

CONCLUSION

Companies must ‘walk the talk’ and ensure that a compliant top-down corporate anti-bribery policy is in place for a global organisation. Bribery is not something that only happens abroad and it is only a matter of time before we see the first corporate prosecution under the Act. When challenged about Russia’s poor bribery and corruption standing Dmitry Medvedev commented "Let me reveal a secret you perhaps don't know and tell you that it exists even in Britain too."


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.