Gifts and hospitality are an everyday part of corporate life with businesses investing money to build relationships and market their products. Although part of the business culture, such practices can give rise to bribery. The new Bribery Act seeks to clamp down on bribery by introducing tough new anti-corruption laws. With the CPS prosecuting their first case under the Act, individuals and companies alike must be aware of their responsibilities and the risks involved.
Bribery occurs when a person offers, seeks or accepts a payment, gift or favour that influences a business outcome improperly. The Bribery Act makes it an offence to pay or receive a bribe. This covers transactions which take place both in the UK and abroad and in the public and private sectors.
A person would be guilty of an offence if they offer, promise or give an advantage to another person intending them to be rewarded for or induced to perform a function of a public nature; an activity connected with a business; an activity carried out in the course of employment or an activity carried out on behalf of a body of persons.
An offence can also be committed by a company or partnership where a bribe has been paid on their behalf by an employee or agent to gain or retain a business advantage. It is, however, a defence to have adequate procedures in place to prevent bribery. Where a bribery offence has been committed by an organisation with the consent of a senior officer (e.g. director, manager or company secretary) they can also be held liable and proceedings can be taken against them.
The advantage does not have to be financial and the offer can be carried out through a third party. The offence does not have to take place in the UK but the person committing the offence must have a close connection.
Bribes paid by an employee or agent of a subsidiary company will not automatically trigger liability on the part of the parent company even if an indirect benefit is obtained (e.g. payment of a dividend) unless the employee or agent intended to obtain or retain business for any of those companies. However, an indirect benefit from a bribe on the part of a company could give rise to money laundering offences under the Proceeds of Crime Act if they were aware or suspected that the dividend represented the profits obtained from the bribe.
Facilitation payments are small payments demanded by officials to provide a service they are obligated to perform, for example the processing of a visa application. Particularly large or regular payments would make prosecution more likely. However, any person making payments under fear of loss of life, limb or liberty would have the defence of duress available to them.
Charitable donations are permitted but you should ensure that the charity is registered and that monies are being paid to the organisation directly, rather than to an individual. Care should be taken when making a donation if the charity has a connection to a customer or organisation that might influence your company’s business.
All employees should be made aware of the procedure for reporting any breaches of procedures relating to bribery and you should consider whether to include provision in employment policies confirming that any breaches could lead to disciplinary action. Companies could consider providing guidance to their staff on what gifts or hospitality are acceptable, usually by reference to a financial limit.
The appropriate procedures for any particular company will depend more of the level of risk faced by a business of that nature, rather than the size of the company. The six principles of bribery prevention are proportionate procedures, top-level commitment, risk assessment, due diligence, communication, monitoring and review. Together, these principles will assist in establishing an anti-bribery culture. The main requirement of the Bribery Act is for companies to ensure that they have adequate procedures in place to combat bribery and corruption.
Organisations can face unlimited fines and serious reputational damage if found guilty of the bribery offences. Individuals can also be ordered to pay unlimited fines and/or imprisoned for up to ten years.
Munir Patel, an administration clerk at an Essex Magistrates Court is the first person to be convicted under the Act after accepting £500 from a Defendant to ‘fix’ a motoring offence. Mr Patel promised an individual that he could influence the course of criminal proceedings in exchange for the payment. Mr Patel was sentenced to 3 years imprisonment.
The Serious Fraud Office has indicated that it will focus on bribes in excess of £1 million, but this case shows that all bribery will be investigated and will be prosecuted where that is in the public interest.
The more lavish the hospitality the greater the risk it will be viewed as an intended bribe. That said, bribes can also be based on relatively modest expenditure. Generally speaking, hospitality which is reasonable, proportionate and made in good faith will not be penalised. Consideration will be given to what is normal or expected practice in a particular sector or country, but this will not be conclusive. The hospitality needs to have a clear connection with legitimate business activity and transparency is key.
The purpose of the Act is not to outlaw normal and legitimate business practices. Justice Secretary Kenneth Clarke said that companies can “rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix”.
Companies should act quickly in assessing their bribery risks and instigating proportionate procedures.
If you require assistance with any issue arising out of the Bribery Act, please contact Luke Patel on 0113 227 9316 or by email at LPatel@LawBlacks.com