Guide to The Bribery Act 2010 by Josiah Hincks

"Don't take bribes: they
blind perfectly good
eyes and pervert the
words of good people"
Exodus 23:8

The Bribery Act 2010

Overview

• Came into effect in July 2011

• Creates criminal offences of offering, promising or giving of a
bribe or requesting / accepting a bribe

• Creates an offence where commercial organisations fa
to prevent a bribe

• Intends to create a culture of doing the right thing

We'll be looking at:

• The Offences

• The Penalties

• Organisational Risks

• Action for organisations

• Case Study - Hospitality

BUT FIRST....

Scenario 1: A company invites a client to their Manchester United
box to watch the game against Liverpool. Company's intention is to
get client to continue using or increase spend with company due to
"good relations".

Scenario 2: A company gives a platinum Manchester United season
ticket to the decision maker of its customer knowing there is a
tender process coming up.

Corporate Hospitality or Bribery?

The Offences
There are four offences:

1. paying bribes

2. receiving bribes

3. the bribery of foreign ofﬁcials

4. the failure of commercial organisations to prevent
bribery.

The Offences
1. Giving Bribes

Case 1 and Case 2 of Section 1 of the Act both deal with
giving bribes and can be summarised as creating

an offence to promise or give a ﬁnancial or other
advantage with the intention of inducing that person to
perform a "relevant function or activity" "improperly" or
to reward that person for doing so.

The Offences

2. Receiving Bribes

Cases 3 to 6 of Section 2 of the Act deal with the
receiving of bribes and create

an offence to receive a ﬁnancial or other advantage
intending that a "relevant function or activity" should be
performed "improperly" as a result.

The Offences

Both the giving and receiving of bribes introduce a
concept of "improper performance"

"Improper performance" will be judged by whether it
breaches the expectation of what a reasonable
person in the UK would expect in relation to the
performance of the type of function or activity
concerned. However, the function or activity need have
no connection to the UK.

The Offences

"Relevant function or activity" includes any function of a
public nature and any activity connected with a
business. The person performing that activity must be
expected to perform it in good faith or impartially
or be in a position of trust.

The Offences

So...

No Giving or Receiving of Bribes intended to alter
the performance of a business activity to a
standard that would be considered improper by a
reasonable person.

The Offences

3. Bribery of foreign public officials

This offence is committed if a person offers or gives a
financial or other advantage to a foreign public official
with the intention of influencing the foreign public official
and obtaining or retaining business, where the foreign
public official was neither permitted nor required by
written law to be so influenced.

The Offences

4. Corporate offence of failing to prevent bribery

The most controversial offence is the new offence which
can be committed only by commercial organisations
(companies and partnerships). It will be committed where:

The Offences

• a person associated with a relevant commercial
organisation (which includes not only employees, but
agents and external third parties) bribes another person
(i.e. commits one of the offences above) intending to
obtain or retain a business advantage; and

• the organisation cannot show that it had adequate
procedures in place to prevent bribes being paid.

The Offences

Under this corporate criminal offence, the company
may be guilty even if no one within the
company knew of the bribery. The company's
defence is limited to showing that it had "adequate
procedures" to prevent bribery. That effectively creates
a burden on corporates to ensure that their anti-
corruption procedures are sufﬁciently robust to stop any
employees, agents or other third parties acting on the
corporates' behalf from committing bribery.

The Penalties
The Act raises the maximum jail term for bribery by an
individual from 7 years to 10 years and/or an unlimited
fine.

A company convicted of failing to prevent bribery could
receive an unlimited fine.

This is in addition to fines from regulatory bodies.

In July 2011, insurance brokerage Willis was fined £6.9
Million for failings in its anti bribery measures by the FSA
despite only finding £140,000 "suspect payments" to third
parties.

The Penalties
The ﬁrst individual prosecution was of Mr Munir Patel an
administrative ofﬁcer at a Magistrates Court who was
offered £20000 but only received £500 to "get rid of a
speeding charge".

He got 6 years.

Aside from the Statutory Penalties, there are obviously some
other risks that could arise from non-compliance, such as:

• Damage to reputation, adverse publicity
• Blacklisting, loss of customers, repudiation of contracts and
revenue loss
• Unanticipated, unbudgeted costs of investigation, corrective
action and legal costs
• Potential impact on loans, covenants and credit lines
• Interruption of service, diversion of management focus, effort
and resources away from core focus
• Fallout from customers, suppliers etc distancing themselves
• Temporary or long term arrest of key employees and/or
directors

Actions for Organisations

Organisations should develop policies to provide practical
guidance for all employees covering:

• Business ethics - to create a culture of doing the right thing
• Conduct and how to deal with conﬂicts of interest
• Gifts and hospitality

Remember: the only defence a corporate has is to ensure it
has adequate procedures in place.

Adequate Procedures

The Ministry of Justice released ofﬁcial guidance (published in
March 2011) about the procedures which commercial
organisations can put in place.

It suggests that procedures put in place should take into
account 6 Principles and also provides some case studies.
The principles are not prescriptive.

"combating bribery is largely about common
sense not burdensome procedures"

Adequate Procedures

Six Principles:

1. Proportionate procedures
2. Top-level commitment
3. Risk Assessment
4. Due Diligence
5. Communication (including Training)
6. Monitoring and Review

Adequate Procedures
1. Proportionate Procedures

An organisation's procedures to prevent bribery are proportionate to the bribery risks it
faces and to the nature, scale and complexity of the organisation's activities. A small
business may still face significant bribery risks.

An initial assessment of risk across the organisation is a necessary first step.

Consider policies which cover:
• The involvement of top-level management
• Public commitment to bribery prevention
• Due diligence of existing "associated persons"
• Hospitality, gifts, promotional expenditure
• Employment terms, remuneration
• Financial and commercial controls eg adequate book keeping, auditing, approval of
expenditure
• Transparency of transactions, record keeping
• Separation of functions and avoidance of conflicts
• Enforcement of breaches
• Whistle blowing by others

Adequate Procedures
2. Top-Level Commitment

The top level management of the organisation, whether the Board, owners, or equivalent)
should be publicly committed to preventing bribery. A culture where bribery is never
acceptable should be communicated.

Each organisation should therefore communicate the organisation's anti bribery stance
and have an appropriate degree of involvement in developing the procedures.

Effective statements are likely to include:
• A commitment to carry on business fairly, honestly and openly
• A commitment to zero tolerance
• The consequences for breaching the policy
• Articulation of the business beneﬁts of rejecting bribery
• Reference to the principle 1 procedures in place
• Identifying key individuals involved in the procedures

Effective leadership in bribery prevention is important, so consider appointment of
Director/individual responsible for bribery compliance

Adequate Procedures
3. Risk Assessment

The commercial organisation must assess the nature and extent of its exposure to the
risks of bribery, periodically in an informed and documented way.

Assessment can be general to the business or specific to different areas of the
business. The risk assessment should be proportionate to the organisations size and
nature and scale of activities.

Characteristics of risk assessment procedures include:
• Top level oversight of the risk assessment (if not done by management)
• Appropriate resourcing to identify risks - small business doesn't need a full time
bribery compliance officer. But still need to identify and prioritise any relevant risks.
• Identification of internal and external sources to enable risks to be assessed
• Accurate, transparent documentation the risk assessment and it's conclusions.

Risks change as businesses change. So a small business looking to enter China, may
need to really consider the bribery risks again more frequently.

Adequate Procedures

Adequate Procedures
3. Risk Assessment

Commonly Encountered Risks can be categorised into ﬁve groups.

Country Risk - where does the organisation operate. Evidenced by perceived higher
levels of corruption, absence of anti bribery legislation, failure of government, media, local
business etc to promote transparent policies.

Sector Risk - higher risk sectors include foreign mining and large scale infrastructure
sectors.

Transactional Risk - certain transactions give rise to higher risks, eg charitable or
political contributions, licences and permits, transactions relating to public procurement.

Business opportunity risk - including tenders, new markets etc. Might arise in high
value projects or where projects are perhaps below market value.

Business partnership risk - eg the use of intermediaries with foreign ofﬁcials; joint
venture partners; agents and suppliers.

Adequate Procedures
4. Due Diligence

Organisations should carry out due diligence proportionate to the risk and can be
internally or externally dealt with.

Due diligence is normally on an associated person.

Should be conducted using a risk based approach. For example, low risk situations may
require little due diligence. Higher risk situations may require more due diligence such
as:

• Conducting direct interrogative enquires
• Carrying out indirect investigations
• General research into the proposed associated person.
• "vetting" of agents, suppliers, sub contractors etc.
• Direct requests on a persons background, expertise, etc, references

Adequate Procedures
5. Communication (and Training)

The policies and procedures in place should be effectively communicated, embedded
and understood throughout the organisation through internal and external
communication, including training. Again, proportionate to the risk.

Enhanced awareness of bribery sanctions and consequences deters bribery. An
organisation should make information available, train it's staff properly and evaluate dn
review the communications constantly.

Internal communications should be from the top down, focusing on the policies and
implications. Communication should also include secure conﬁdential methods of
"whistle blowing".

External communications could be through a public statement or policy.

In higher risk organisations, more vigorous training should perhaps be considered
mandatory whereas in small ﬁrms, more general training might be more appropriate.

Adequate Procedures
6. Monitoring and review

It is important that an organisation monitors and reviews procedures and makes
improvements where necessary.

The bribery risks of an organisation may change over time, as the nature and scale of
its activities change.

The risks also change due to external factors - a change in government policy, or
following an incident of bribery in that sector, or even negative press releases.

Employ systems which deter, detect and investigate bribery, such as internal ﬁnancial
control mechanisms. These can highlight if and where the policies need improving.

Feedback from employees and associated persons is an important source of
information.

Case Study on Hospitality
An organisation maintains a programme of annual events providing entertainment, dining
and attendance at various sporting events, as an expression of appreciation for its
association with its clients, suppliers, agents etc.

The organisation might consider:

• Conducting a bribery risk assessment relating to its dealings with business partners and
in particular the provision of hospitality and promotional expenditure.
• Having in place a public statement committing to anti bribery and a specific statement
committing to transparent, proportionate, reasonable and bona fide hospitality
expenditure.
• Issuing internal guidance on procedures that apply to the provision of hospitality
• Procedures are designed to seek to ensure transparency and conformity with laws
and codes
• Any hospitality should reflect a desire to cement good relations and show
appreciation, or to seek to improve the organisations image, better to present its
products or services, establish cordial relations
• Stating the recipient should not be given the impression that they are under any
obligation to confer a business advantage


• Set criteria when deciding the appropriate levels of hospitality for business
partners, clients, suppliers, agents to ensure the hospitality is appropriate for the
circumstances.
• For expenditure over certain limits (depending on risks), approval by senior
management.
• Record keeping, accounts, invoices etc
• Regular review and monitoring of internal procedures
• Training and communication

How you can help your clients

How you can help your clients
In house, as guardians of finance, or in practice as guardians of the bottom
line, accountants can play a key role in an organisations compliance with the
Act.

You can advise your clients to ensure "adequate procedures" are in place,
following the 6 principles.

But crucially unlike many suppliers, you can help management to identify risk
areas, create procedures and monitor them. In an audit, you can identify for
example payments made to third parties.You can question expenditure that
might be "hidden".

Your ethical responsibilities as a professional may require you to disclose
information to the serious fraud office, but if your client has a commitment to
transparency and adequate procedures, then you can discuss your concerns
with the appropriate person first.

Appoint a board member to Issue a statement Carry out risk
have responsibility for clearly committing to assessment on the
bribery compliance. anti bribery business areas

Which What What Business Business
Countries are Sectors Transactions opportunity risk: partnership, agents,
you in? are you in? and with whom tenders, new markets suppliers, JVs

Identify the level of risk for each area
If all risks are low, Update existing or develop
record ﬁnding and take practical policies and procedures
no further action. to cover bribery issues

Hospitality, Facilitation Internal procedures - senior
Due Diligence,
consider ﬁnancial Payments, look management involvement
vetting
controls, purpose at likely
procedures for
of hospitality, scenarios, local
third parties, eg Communicate and Train employees
senior level sign written laws,
suppliers, on policies. Implement whistle
off reporting
agents, sub blowing policies.
procedures
contractors

Regularly review, obtain feedback, monitor risk, improve
policies and procedures.

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Presenter: Steven Mather LLB
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(C) Josiah Hincks Solicitors Debt Collection
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Guide to The Bribery Act 2010 by Josiah Hincks

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