12 December 2013

Serious Fraud Office brings first charges under Bribery Act

The Serious Fraud Office (SFO) has charged three British nationals with offences of making and accepting a financial advantage, under the Bribery Act 2010. This is the first time the SFO has brought such actions.

Whilst the charges were brought against individuals, businesses need to beware of breaching parts of the Act which make them potentially liable for bribery offences committed by their 'associated persons'. An associated person is anyone who performs services for or on behalf of the organisation, including employees. It could also include a subsidiary company in the same group, a commercial agent, supplier, contractor or business partner in a joint venture.

The Act therefore makes UK organisations potentially liable for the activities of third parties who breach the Act – even if they are relatively independent and work with the organisation on a single project or transaction, are geographically remote, or operate in a very different business culture. An organisation can be guilty of the offence even if it did not know it was happening.

However, an organisation has a defence if it has 'adequate procedures' in place. These require clear, easy to read, accessible, proportionate, risk-based anti-bribery and corruption procedures designed to stop employees (and agents or others acting on its behalf) from committing bribery.

Official guidance makes clear that the procedures required will depend on factors such as the size, nature and complexity of the business. For example, small companies may be able to 'rely heavily' on regular oral briefings to staff to communicate its procedures on bribery. It also says organisations will not need unnecessary controls on associated persons if their risk assessment shows no risk of bribery by them.

In practice, it is likely the defence will provide substantial comfort to many smaller and medium-sized businesses. However, it is clear that the guidance assumes organisations of all types and sizes will need to have at least carried out a risk assessment, and will have some anti-bribery procedures which they must bring to their employees' attention.

Larger businesses will welcome the British Standards Institution (BSI) specification for an anti-bribery management system, designed to help businesses reduce the risk of prosecutions under the Act.

Recommendations

Businesses should:

  • periodically assess the risk of bribery by the organisation and any associated persons, given their size, nature and complexity of the business/es;
  • establish clear anti-bribery policies and procedures proportionate to the risk;
  • ensure they are communicated to staff, for example, through training and induction;
  • ensure contracts and other arrangements with associated persons impose responsibilities and duties on them designed to protect the business from liability under the Act;
  • ensure these include an obligation to impose similar responsibilities and duties in their own contracts with other businesses down (or up) the supply chain that perform services for you, such as sub-contractors;
  • download the Bribery Act guidance from the Ministry of Justice website.

For more information please contact Lyn Dario at Shulmans on 0113 297 3779 or at ldario@shulmans.co.uk.