MT Expert - Legal: Bribery doesn't pay

SMEs will soon be liable for any corrupt business practices by anyone working on their behalf...

Last Updated: 31 Aug 2010

In November 2009, the Bribery Bill was announced as a key piece of legislation in the Queen’s Speech, writes Eversheds' Neill Blundell. It sets out to completely overhaul current criminal laws in dealing with bribery and corruption, and introduces a tough new regime for business in the UK.  It is currently progressing through the House of Commons; the information we have suggests that the committee stage will take place on the 25th March, and - since there is cross party support - it will achieve Royal Assent on the 'wash up' (the last chance for acts to be passed prior to the election).

However, we have conducted some research which shows that businesses – SMEs included - are startlingly unaware of what the new legislation will mean. Of those we asked, one in four SMEs has no policy in place to address corrupt practices, and only one in ten SMEs is aware that they could face a 10 year prison sentence if found liable. There is also a general lack of awareness of what constitutes bribery.

Tellingly, nearly half (48%) of SMEs also believed that the legislation places an unnecessary burden on businesses in the current economic climate. However, with it almost certain to become law, businesses have to act now to prepare.

The legislation comprises the following elements - a general offence of offering or receiving bribes; a specific offence of bribing a foreign public official and a corporate offence of failing to prevent bribery.

The introduction of a new corporate offence - failure to prevent bribery by individuals acting on behalf of an organisation - clearly places responsibility on businesses to ensure that their employees, agents and intermediaries are acting within the law. It is this area that presents the biggest challenges for business, and the research shows that 65% of SMEs are unaware of this area of the legislation.

Although this is a strict liability offence, organisations will have a defence if they can show that they have ‘adequate procedures’ in place to prevent corrupt business practices.

The legislation does not provide a definition of what these ‘adequate procedures’ should be, but businesses should consider the following:

• Reviewing existing policies and ensuring there is an integrated anti-corruption policy in place which is visible and properly communicated throughout the organisation – from board level down;
• Delivering a suitable training programme on bribery and corruption across the organisation;
• Conducting adequate and detailed due diligence when establishing new relationships with intermediaries and agents;
• Conducting a risk-based ‘corruption audit’ of the organisation’s global activities;
• Applying clear accountability for anti-bribery and corruption policy and processes at senior management level;
• Monitoring the activity of agents and intermediaries acting on behalf of the organisation;
• Importantly – ensuring enough time and resource is dedicated to understanding the actions required by the business to comply.

Neill Blundell is Head of Fraud at Eversheds LLP. Eversheds LLP and its world wide offices have over 4,500 people providing services to the private and public sector business and finance community. LLP

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