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Guide to The Bribery Act 2010 by Josiah Hincks
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Guide to The Bribery Act 2010 by Josiah Hincks

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The Bribery Act 2010 came in to force in the UK in July 2011. ...

The Bribery Act 2010 came in to force in the UK in July 2011.

It creates criminal offences for individuals who give or receive bribes.

It also creates an offence for Companies and Partnerships who fail to prevent bribery occuring. The fines are unlimited.

This slide show from Josiah Hincks Solicitors in Leicester presents everything you need to know about Bribery, The Bribery Act, and how to ensure your business is compliant.

Visit http://www.josiahhincks.co.uk for more information about our firm of solicitors in Leicester.

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Guide to The Bribery Act 2010 by Josiah Hincks Guide to The Bribery Act 2010 by Josiah Hincks Presentation Transcript

  • "Dont take bribes: they blind perfectly good eyes and pervert the words of good people" Exodus 23:8 The Bribery Act 2010
  • The Bribery Act 2010Overview • 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
  • The Bribery Act 2010Well be looking at: • The Offences • The Penalties • Organisational Risks • Action for organisations • Case Study - Hospitality
  • The Bribery Act 2010 BUT FIRST.... Scenario 1: A company invites a client to their Manchester Unitedbox to watch the game against Liverpool. Companys intention is toget 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 Bribery Act 2010The 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 Bribery Act 2010The 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 Bribery Act 2010The 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 Bribery Act 2010The 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 Bribery Act 2010The 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 Bribery Act 2010The 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 Bribery Act 2010The 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 Bribery Act 2010The 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 Bribery Act 2010The 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 Bribery Act 2010The Offences Under this corporate criminal offence, the company may be guilty even if no one within the company knew of the bribery. The companys 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 Bribery Act 2010The 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 Bribery Act 2010The PenaltiesThe first individual prosecution was of Mr Munir Patel anadministrative officer at a Magistrates Court who wasoffered £20000 but only received £500 to "get rid of aspeeding charge".He got 6 years.
  • The Bribery Act 2010 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
  • The Bribery Act 2010Actions 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.
  • The Bribery Act 2010Adequate ProceduresThe Ministry of Justice released official guidance (published inMarch 2011) about the procedures which commercialorganisations can put in place.It suggests that procedures put in place should take intoaccount 6 Principles and also provides some case studies.The principles are not prescriptive."combating bribery is largely about commonsense not burdensome procedures"
  • The Bribery Act 2010Adequate ProceduresSix Principles:1. Proportionate procedures2. Top-level commitment3. Risk Assessment4. Due Diligence5. Communication (including Training)6. Monitoring and Review
  • The Bribery Act 2010Adequate Procedures1. Proportionate ProceduresAn organisations procedures to prevent bribery are proportionate to the bribery risks itfaces and to the nature, scale and complexity of the organisations activities. A smallbusiness 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
  • The Bribery Act 2010Adequate Procedures2. Top-Level CommitmentThe top level management of the organisation, whether the Board, owners, or equivalent)should be publicly committed to preventing bribery. A culture where bribery is neveracceptable should be communicated.Each organisation should therefore communicate the organisations anti bribery stanceand 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 proceduresEffective leadership in bribery prevention is important, so consider appointment ofDirector/individual responsible for bribery compliance
  • The Bribery Act 2010Adequate Procedures3. Risk AssessmentThe commercial organisation must assess the nature and extent of its exposure to therisks of bribery, periodically in an informed and documented way.Assessment can be general to the business or specific to different areas of thebusiness. The risk assessment should be proportionate to the organisations size andnature 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 doesnt 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 its conclusions.Risks change as businesses change. So a small business looking to enter China, mayneed to really consider the bribery risks again more frequently.
  • The Bribery Act 2010Adequate Procedures
  • The Bribery Act 2010Adequate Procedures
  • The Bribery Act 2010Adequate Procedures3. Risk AssessmentCommonly Encountered Risks can be categorised into five groups.Country Risk - where does the organisation operate. Evidenced by perceived higherlevels of corruption, absence of anti bribery legislation, failure of government, media, localbusiness etc to promote transparent policies.Sector Risk - higher risk sectors include foreign mining and large scale infrastructuresectors.Transactional Risk - certain transactions give rise to higher risks, eg charitable orpolitical contributions, licences and permits, transactions relating to public procurement.Business opportunity risk - including tenders, new markets etc. Might arise in highvalue projects or where projects are perhaps below market value.Business partnership risk - eg the use of intermediaries with foreign officials; jointventure partners; agents and suppliers.
  • The Bribery Act 2010 Adequate Procedures4. Due DiligenceOrganisations should carry out due diligence proportionate to the risk and can beinternally 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 mayrequire little due diligence. Higher risk situations may require more due diligence suchas:• 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
  • The Bribery Act 2010Adequate Procedures5. Communication (and Training)The policies and procedures in place should be effectively communicated, embeddedand understood throughout the organisation through internal and externalcommunication, including training. Again, proportionate to the risk.Enhanced awareness of bribery sanctions and consequences deters bribery. Anorganisation should make information available, train its staff properly and evaluate dnreview the communications constantly.Internal communications should be from the top down, focusing on the policies andimplications. 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 consideredmandatory whereas in small firms, more general training might be more appropriate.
  • The Bribery Act 2010Adequate Procedures6. Monitoring and reviewIt is important that an organisation monitors and reviews procedures and makesimprovements where necessary.The bribery risks of an organisation may change over time, as the nature and scale ofits activities change.The risks also change due to external factors - a change in government policy, orfollowing an incident of bribery in that sector, or even negative press releases.Employ systems which deter, detect and investigate bribery, such as internal financialcontrol mechanisms. These can highlight if and where the policies need improving.Feedback from employees and associated persons is an important source ofinformation.
  • The Bribery Act 2010Case 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
  • The Bribery Act 2010Case Study on Hospitality
  • The Bribery Act 2010Case Study on Hospitality
  • The Bribery Act 2010Case Study on Hospitality • 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
  • The Bribery Act 2010How you can help your clients
  • The Bribery Act 2010How you can help your clientsIn house, as guardians of finance, or in practice as guardians of the bottomline, accountants can play a key role in an organisations compliance with theAct.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 riskareas, create procedures and monitor them. In an audit, you can identify forexample payments made to third parties.You can question expenditure thatmight be "hidden".Your ethical responsibilities as a professional may require you to discloseinformation to the serious fraud office, but if your client has a commitment totransparency and adequate procedures, then you can discuss your concernswith the appropriate person first.
  • The Bribery Act 2010 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 BusinessCountries 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 developrecord finding and take practical policies and procedures no further action. to cover bribery issues Hospitality, Facilitation Internal procedures - seniorDue Diligence, consider financial Payments, look management involvement vetting controls, purpose at likely procedures for of hospitality, scenarios, localthird 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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