It has been reported that the Serious Fraud Office is investigating Canadian aircraft manufacturer Bombardier Inc. over suspected bribery and corruption in relation to contracts and orders from Garuda Indonesia, Indonesia’s national airline. Why does this affect UK financial services businesses? In the run-up to the introduction of the Bribery Act 2010, then Secretary of State for Justice, Kenneth Clarke said:
“Bribery blights lives. Its immediate victims include firms that lose out unfairly. The wider victims are government and society, undermined by a weakened rule of law and damaged social and economic development. At stake is the principle of free and fair competition, which stands diminished by each bribe offered or accepted.”
Every business needs to consider how their firm may be impacted by bribery, it could be by a supplier, or by a customer or even by a member of staff.
In financial services, monitoring the systems and controls for the prevention of bribery and corruption usually sits with the Money Laundering Reporting Officer whose brief now includes all forms of financial crime prevention. But all businesses need to be aware of the potential for bribery and corruption impacting their operations. As ever, the FCA will expect Senior Management to take the lead and set a culture that tells staff at all levels of the organisation that any form of bribery is unacceptable.
As ever, the FCA will expect Senior Management to take the lead and set a culture that tells staff at all levels of the organisation that any form of bribery is unacceptable
Time, then, for a quick refresher on the Bribery Act 2010. The act came into force on 1st July 2011 to repeal and consolidate all previous legislation, some of which was out-dated and no longer fit for purpose. The aims of the Act were to modernise and simplify the existing legislation to enable a more straightforward prosecution process and to encourage organisations to be proactive in implementing anti-bribery processes and procedures. It has an international reach, bribing someone in another jurisdiction can lead to a prosecution in the UK.
The Act defined the bribery offences in the UK and the penalties committing those offences.
The Bribery Act created the following offences:
- Active bribery: promising or giving a financial or other advantage.
- Passive bribery: agreeing to receive or accepting a financial or other advantage.
- Bribery of foreign public officials is a standalone offence
- The failure of commercial organisations to prevent bribery by an associated person (also known as the corporate offence).
These offences may be committed by gaining “a financial or other advantage” in the words of the Act. Which gives a wide scope and deliberately goes beyond the exchange of the proverbial brown envelope.
And the penalties?
The penalties under the Act are severe – there is a maximum penalty of 10 years’ imprisonment and/or an unlimited fine for individuals.
Corporates face an unlimited fine (including in respect of the corporate offence).
A firm can mitigate the Corporate Offence by demonstrating that regular training regarding how bribery can impact the firm has been given to all staff.
There are other possible serious financial, as well as reputational, consequences of being found guilty of an offence under the Act, including confiscation under proceeds of crime legislation, the requirement to appoint an external monitor to review and ensure compliance with internal policies and controls and/or to pay substantial costs associated with the prosecution.
For a person to commit the active bribery offence, there must be intention in addition to the giving of the bribe, in other words, it must be a deliberate act. Both the active and passive offences incorporate the notion of improper performance, in other words not meeting expectations by not acting in good faith.
The key to whether an offence has been committed is the connection between the bribe and any wrongfulness element; without the connection, no offence is committed. Improper performance is assessed by reference to whether a reasonable person would consider the recipient of the bribe to have breached an expectation of good faith, impartiality, or trust.
These general offences apply to activities of a private or public nature and apply equally to individuals and corporate entities.
Being mindful of these six principles will help your business reduce the possibility of or even prevent bribery. Application of these six principles within your firm will be proportionate to the size and complexity of your business and the markets in which your firm operates.
- Have clear and practical procedures that are proportionate to your business. Make sure they are tailored to your firm and take into account your suppliers as well as your staff and customers.
- Commitment from the Board and Senior Management. The culture of your firm and the examples set by the Board and Senior Management are key, and now in sharp focus with the introduction of the additional accountability that the introduction of SM&CR has brought. A member of the Senior Management team (not the compliance officer) could take the role of anti-bribery champion to communicate with staff and report regularly to the Board.
- Assess the potential exposure to bribery with regular risk assessments. It is essential your firm periodically carries out an assessment of the bribery risks that it may face and document these in order to manage or mitigate the risk.
- Proportionate due diligence on individuals and firms which perform services for your firm or who supply services to your firm. How do you satisfy yourself that firms you purchase goods and services from have anti-bribery procedures that meet the standards you set for your firm. Equally, how do you assess the businesses that carry our work on your behalf.
- Regular communication with staff, including training and refresher training. The first element is having clear and accessible procedures backed up by proportionate systems and controls. The other element is providing regular training to ensure your staff are up to date with current risks and best practice to minimise your firm breaching any of the offences defined in the Act. Highlight the red flags you have identified and particular to your business.
- Regular monitoring and review of the effectiveness of procedures. Monitoring and review is the key to identifying the effectiveness of your procedures, processes, systems and controls. What lessons have been learnt and what improvements can you make.
Policies and Procedures
Your anti-bribery policy may be a stand-alone document but it may also cross-refer to other policies and procedures that you have, for example:
- Gifts and hospitality
- Marketing and promotions
- Personal Account Dealing
- Dealing with agents, appointed representatives and other intermediaries
Ensuring that staff are fully aware of your policies and how they interconnect be central to your firm minimising the risk of it falling victim to bribery
You may think that working in regulated financial services you are at a low risk of bribery but that does not mean you should be complacent. Consider your firm’s activities and how your suppliers work with you. Keeping in mind the six principles will help you minimise the risk of the reputational damage of being associated with another firm or individual being found guilty of bribery.