The Bribery Act 2010 came into force in July 2011. For UK businesses operating in the emerging and frontier markets its effect was seismic. Organisations were suddenly faced with having to comply with some of the toughest anti-corruption rules in the world – many simply stopped doing business in certain countries. Ten years on, how has the Bribery Act fared?
The Bribery Act – Criminal Activities
The Bribery Act 2010 repealed the existing anti-bribery legislation and abolished the common law offence of bribery. It created the following offences:
- Active bribery, which prohibits giving, promising or offering a bribe (section 1).
- Passive bribery, which prohibits requesting, agreeing to receive or accepting a bribe (section 2).
- Bribing a foreign public official (section 6).
- An offence committed by a commercial organisation where a person performing services on the organisation’s behalf pays a bribe to obtain or retain a business advantage for the organisation (section 7). This is commonly known as the offence of failing to prevent bribery.
What is a bribe?
The Bribery Act refers to a “financial or other advantage” so it doesn’t just cover the payment of money. it can include things such as:
- gifts and hospitality.
- employing the relatives of public officials.
- paying for travel expenses and accommodation costs.
- making political of charitable donations.
- engaging the services of a company which a public official has an interest in (e.g. as a shareholder).
The Bribery Act – Section 7
It was section 7 of the Bribery Act that caused businesses (and directors – see below) the most concern. Under section 7 if a person (e.g. a supplier or a subcontractor) associated (e.g. working with) with an organisation bribes another person, intending to obtain or retain business or a business advantage for that organisation then that organisation is guilty of an offence under section 7 unless it can rely on the defence outlined below. So if the subcontractor of a UK business bribed a foreign official, the UK business would, on the face of it, have committed an offence under the Bribery Act for failing to prevent that bribery.
There is a defence to section 7 though: if the UK business can demonstrate that, on the balance of probabilities, it has in place adequate procedures in place designed to prevent bribery then it would not be guilty. Putting in place “adequate procedures” can be complex, costly and time-consuming, depending on the type of work and the jurisdictions in which the UK business is operating in. We will publish a note on “adequate procedures” at a later date.
Bribery Act Penalties
An individual guilty of a section 1, 2 or 6 offence is liable to a maximum 10 year imprisonment or a fine or both. Any other person (such as a company) guilty of an offence under section 1, 2, 6 or 7 is liable to a fine. Organisations can also be barred from participating in tenders for public contracts.
Company directors can also be found individually liable if they consented to or connived in the commission of the offence. “Conniving” in an offence means that the individual knew it may occur but did nothing to prevent the offence from happening – “turning a blind eye” would be connivance.
Bribery Act – the consequences
The combination of a strict approach to corporate liability, a reverse burden corporate defence and a global jurisdictional reach resulted in the offloading onto businesses of a wide-ranging responsibility to police themselves and their supply chains to do their utmost to eradicate the risk of bribery. Compliance departments bulked up and lawyers were kept busy advising on the Act and the procedures and policies that organisations had to put in place. As we allude to in the opening section, some businesses drew a line halfway down Transparency International’s Corruption Perception Index and adopted a policy that they would not do business in jurisdictions below that line. Other countries have adopted similar tough laws to prevent corruption and, although corruption still goes on, it is harder (and more costly) to behave in this way. As to whether the Bribery Act and other modern anti-corruption laws have reduced corrupt behaviour over the last 10 years – that is difficult to say. Some commentators indicate that illicit financial flows are larger now than before.
Litigation under the Bribery Act
Freedom of information requests have revealed that, after ten years, there has been a grand total of 99 convictions under the 2010 Act (www.sfo.gov.uk/foi-request/2020-040-bribery-act-2010/). What is particularly notable is that only two of those convictions have been made against corporates for the failure to prevent bribery offence under section 7 of the 2010 Act.
The majority of the Serious Fraud Office’s (SFO) wins in relation to bribery principally relate to the use of deferred prosecution agreements. Deferred prosecution agreements (DPAs) were introduced in the Crime and Courts Act 2013, which set out a statutory mechanism that allows investigations into fraud, corruption and other crime committed by corporate organisations to be concluded without prosecution. A DPA is made between an organisation and the prosecuting authority and is supervised by a judge.
Some commentators have noted that the use of DPAs has diverted the more substantial and complex section 7 cases away from the courts. This has denied the courts any opportunity to grapple in detail with the issue as to what procedures are considered to be “adequate” for the purposes of establishing the reverse burden defence in section 7.
House of Lords Bribery Act review
The House of Lords select committee’s ten-year review of the 2010 Act is clear in its view that the 2010 Act has been a resounding success (https://publications.parliament.uk/pa/ld201719/ldselect/ldbribact/303/303.pdf). Despite this, the committee did recommend that the meaning of “adequate procedures” for the purposes of establishing the section 7 defence should be further clarified. One possible suggestion was that it should be interpreted to mean “reasonable in all the circumstances”, which echoes section 45.
The committee also requested greater clarity as to where the dividing line should be between what is considered legitimate corporate hospitality and what would be considered as bribery. This was in the context of the fact that government guidance on these topics is perceived to be inadequate, which can contribute to a misinterpretation of these terms (www.gov.uk/government/publications/bribery-act-2010-guidance).
A Challenge for SMEs
Whether or not the government will give greater clarity at some point remains to be seen. But in the meantime, for small businesses the financial burden of having to produce sufficiently adequate compliance procedures, together with the practical burden of implementing and monitoring them is proving to be a real issue.
The committee noted that there was a particular difficulty for those organisations that export goods from the UK to countries where established practices relating to hospitality may be very different to the UK. In these instances, the committee recommended that more should be done by local experts in UK embassies to bridge this gap and reduce the burden on these businesses.
Serious Fraud Office handbook
Some of the issues raised by the House of Lord’s are referenced in the SFO’s operational handbook “Evaluating Compliance Programmes” (the handbook). The handbook is intended for internal use by the SFO and so is not intended to give any guidance to practitioners or businesses. However, it is publicly available and was updated in January 2020 (www.sfo.gov.uk/publications/guidance-policy-and-protocols/sfo-operational-handbook/evaluating-a-compliance-programme/). That update provides details of the SFO’s approach to assessing an organisation’s compliance systems when it is considering whether or not to take action and, if so, what type of measures a business needs to take.
The handbook states that a business’s systems will be examined by reference to three timeframes:
- At the time that the offending incident occurred, although this itself may span a period of time and so cover changes in systems.
- At the time that action is being considered by the SFO.
- At a possible date in the future; for example, in instances where systems may have yet to reach their full potential.
The need for this approach is in itself evidence of the complex and fluid landscape of anti-bribery compliance that businesses need to come to terms with. In producing and maintaining anti-bribery procedures, an organisation has to be aware that whether or not the procedures will be considered to be “adequate” can be assessed against all of those timeframes.
While it seems that the 2010 Act will continue in its current form, nevertheless real issues still exist when it comes to the practical implementation of systems in order to satisfy the adequate procedures defence to section 7.
Risk has to be assessed and procedures and policies have to be drafted, regularly reviewed and disseminated to those affected. Staff have to be trained and effectiveness has to be monitored. All of this must potentially accommodate laws local to a business’s overseas base or customers. It all costs money. How this will play out in practice in a world grappling with the financial impact of COVID-19 remains to be seen.
The near future
With Zoom meetings replacing business lunches and business trips taking a serious dive, there are a number of factors that may provide a natural downward pressure on opportunities for corporate bribery to take place. However, within a globally savaged economy, competition for business opportunities will be fierce and, by its very nature, this competition is the principal driver for almost all bribery that occurs. So it is likely that there will be further prosecutions and DPAs obtained as a result.
A sign of the future may be the impending announcement that the government will go ahead with a £100 million investment into the funding of anti-money laundering systems. Notably, the government proposes to raise this money by way of a levy on financial institutions. In its paper setting out the economic crime plan, the government clearly stated that it believes it to be fair that those institutions whose activities are exposed to risk should pay the government costs that are associated with responding to and mitigating those risks.
If you have any questions on Bribery Act compliance or if you would like us to help you with staff training please get in touch.