"Monday's announcement of the delay of the implementation of the Bribery Act does not mean it will not happen," warns Alan Donaldson, partner with accountants Scott-Moncrieff.

"I strongly recommend that Chamber members - and other businesses - use the extra time to prepare by absorbing the information already issued in the shape of the draft guidelines, which are set out below."

The Bribery Act 2010 was passed in the final days of the last Government and was due to come into force in April 2011.

However on 31 January 2011, the Ministry of Justice confirmed that implementation was being delayed until it has finalised and issued its guidance for business. Once the guidance has been issued, businesses will have 3 months to put procedures in place before the act comes into force. So we now need to watch out for the guidance being finalised…

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The delay will only be temporary and effectively gives businesses more time to prepare.  Whilst it will be appropriate to finalise detailed procedures once the guidance has been issued, the draft guidance gives a clear indication of the areas that business will need to address.

Background

Bribery has, of course, been illegal in the UK for a long time - going back to the Sale of Offices Act 1551, the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption Acts of 1906 and 1916.

However the UK has faced criticism internationally for appearing to have weak enforcement against bribery (e.g. over allegations relating to BAE Systems sales to Saudi Arabia) the new law was introduced to clarify and extend the prevention of bribery and corruption by:

• Replacing and updating the earlier legislation
• Creating general offences of offering, promising or giving of an advantage, and requesting, agreeing to receive or accepting of an advantage
• Creating an offence of bribery of a foreign public official
• Creating a new offence of "corporate bribery"
• Creating a new offence of failure by a commercial organisation to prevent a bribe being paid for or on its behalf (the only defence being if the organisation has adequate procedures in place to prevent bribery).
• Requirement to prevent bribery by anyone acting on your behalf

Being honest and fair in your own dealings will no longer be enough…you will now need to assess and monitor your organisation and also agents and others outside it who work on your behalf.

The most significant impact of the new Act is the requirement to have "adequate procedures in place to prevent bribery".  The consequence being that if someone acting on behalf of the organisation (including an agent in a far flung part of the world) is found to have either bribed someone else or has been bribed, then the organisation is automatically guilty of failing to prevent the bribery unless it can demonstrate that it has adequate procedures to prevent bribery.

The penalty for failing to prevent bribery can be an unlimited fine on the organisation or on individual senior managers.

The penalties for bribing or being bribed can be an unlimited fine or up to 10 years in jail.

Gifts and Hospitality

The scope of the new law and guidance includes gifts and hospitality.  The guidance states that "reasonable hospitality or promotional expenditure which seeks to improve the image of a commercial organisation, better to present its products and services or establish cordial relations is recognised as an established and important part of doing business".

In order to amount to a bribe, "hospitality or promotional expenditure must be intended to induce a person to perform a function improperly".

In order for businesses to avoid challenge, key questions to ask when giving or receiving gifts or hospitality are:

• Does the event involve providing information about the product or service (better if it does)
• Who benefits? - the inclusion of other family members will require greater justification
• Is the level of expenditure appropriate? (lavish expenditure will be harder to justify)

The implications of the new act are that businesses will need systems and records to demonstrate that such gifts and hospitality are appropriate and proportionate.

Facilitation Payments

The OECD defines "facilitation payments" as "a payment to a government employee to speed up an administrative process where the outcome is already pre-determined".  (I.e. the payment has not changed the outcome).  Anti-bribery legislation in some countries permits facilitation payments (e.g. the Foreign Corrupt Practices Act in the US and similar legislation in Canada, Australia, New Zealand and South Korea).

However the new UK legislation criminalises the act of "influencing the performance of a foreign public official's function, which includes any omission to exercise those functions", so "facilitation payments" are illegal under the new Act.

UK businesses will therefore need to have systems to prevent such payments, and to identify and address any such payments that do occur.

Guidance on policy and procedures

Whilst the Act was due to come in to force in April 2011, on 31 January 2011 the Ministry of Justice confirmed that implementation was being delayed until it has finalised and issued its guidance for business.  The draft version of the guidance describes what adequate procedures might look like.

The draft guidance is at www.justice.gov.uk/consultations/docs/bribery-act-guidance-consultation1.pdf

The draft guidance sets out six key principles that it is expected that organisations will consider in preparing their policies and procedures:

1. Risk Assessment

Knowing about and keeping up-to-date with the bribery risks in your sector and market.

2. Top level commitment

Establishing a culture across the organisation in which bribery is unacceptable.

3. Due diligence

Knowing who you do business with; why, when and to whom you release funds, and seeking reciprocal anti-bribery agreements and being in a position to feel confident that business relationships are transparent and ethical.

4. Clear, Practical and Accessible Policies and Procedures

Applying to everyone, covering risks such as political and charitable contributions, gifts and hospitality, promotional expenses and responding to demands for facilitation payments or allegations of bribery.

5. Effective implementation

Going beyond paper compliance to embed "anti-bribery" in your organisation's internal controls, recruitment, remuneration, operations, communications and training.

6. Monitoring and Review

Financial controls and monitoring that are sensitive to bribery and transparent

Every commercial organisation needs to prepare and be ready to put in place an appropriate anti-bribery policy and procedures within 3 months of the issue of final guidance by the Ministry of Justice.

Contact:

Alan Donaldson, Partner, Audit & Assurance