Bribery Act – the calm before the storm

Before the UK Bribery Act 2010 came into force on 1 July last year, many businesses were running scared. With the threat of prosecutions at board level over the corrupt actions of third parties, hired in markets possibly on the other side of the world, a lot of money was spent on compliance.

However, there has been only one prosecution to date: court clerk Munir Patel took money to help people evade prosecution for driving offences. No corporation has yet been called to the dock.

The lack of action should not be interpreted as a lack of a will to prosecute: this may well be the calm before the storm. KPMG Forensic director Charlie Patrick says: “The Serious Fraud Office [SFO] has had a difficult year but the new director, David Green, has said he means business. He comes from a prosecutorial background, and people should take him very seriously.”

Looking for a big scalp

Arnold & Porter partner Kathleen Harris agrees: “I expected it to be two to three years before we saw any significant prosecutions, but the SFO will be looking for a big scalp now to show that it has teeth.”

Patrick points out that the SFO is still dealing with cases under previous legislation, such as civil recovery orders (see box right), but will most likely be poised to deploy the Bribery Act soon. “While this is only my supposition, I think he will chose to focus on a foreign firm with a UK footprint committing a big-ticket crime that [affects] UK plc,” he says. “The last thing he will want to do is prosecute a UK company trying to do the right thing.”

But UK companies should not be complacent merely because the first prosecution may fall on a foreign firm. “Companies should be dusting off their risk assessments and re-assessing them,” says Patrick. “Compliance shouldn’t be seen as a one-off action but a living process. Make sure that there is a proper process of monitoring and review in place.”

The act attempts to level the playing field. It is part of a growing body of universal law in this area, and acting in compliance is an advantage for western businesses

Robert Amsterdam, attorney

Harris believes the act should be seen as a long-term cultural change, like discrimination legislation, and responsible corporates need to take a zero-tolerance approach to the heart of their operation. “The Bribery Act should be a standard feature of risk management and looked at in concordance with every other risk that a business faces,” she says. “Exposure must be reviewed in an active and ongoing way. It’s simply not enough to have done an initial assessment and then think you are covered. There was a great rush to get systems in place by last July, but I’m not sure that all companies have really addressed their risk.”

Risk managers should check their compliance procedures and ensure that they are fit for purpose. “Go through your offices on a risk-by-risk basis,” advises Patrick.

Companies at particular risk include those working in countries with high corruption and expanding rapidly. “Get a handle on any third parties working on your behalf,” warns Patrick. “The burden of compliance for most large businesses has not been too onerous - most have been tethered by similar US legislation since 1977, so big pharma, oil and defence firms were already well prepared.”

He adds: “My concern has been for the smaller-medium sized firms that may not have a head of risk. They have to deal with a barrage of legislation and the Bribery Act may just become something they can’t get around to. But they should take it seriously.”

Smaller companies are not expected to have the same response as a large multinational, but they must take precautions. Harris says:

“They must demonstrate that Bribery Act compliance is part of their business dealings.”

Not just a burden
Avoiding prosecution is an obvious goal, but focusing on the legal burden imposed by the act may have blinded many to the unexpected competitive advantage it is offering them.

Robert Amsterdam, a Canadian attorney who specialises in defending multinational clients in emerging markets, says: “It’s actually a pro-business legislation.”

“The act attempts to level the playing field. It is part of a growing body of universal law in this area, and acting in compliance is an advantage for western businesses. Government policy is behind this: to try to reduce the competitive advantages enjoyed by companies from command economies like China and Russia. The act is a tool to make it easier to operate in markets where we have never had the advantages of local firms. We might not see this for some years, but it is a salutary goal.”

Furthermore, reviewing compliance offers an opportunity to get to grips with the complexities of operations and improve management at all levels and locations. Patrick says: “It can be a very useful tool to really understand how your business works, and what is going on in, say, a sales office in Africa.”

He adds: “If a third party is not complying on bribery issues, what else is it not doing? Maybe there is more than just a problem with corruption.”