Why gambling companies must act now on new bribery law

Out-Law Analysis | 28 Jun 2011 | 12:35 pm | 2 min. read

OPINION: When US anti-corruption enforcers get their teeth into an industry the effects are felt around the world, including in the UK. The recent announcement of an investigation into a US gambling company means that firms here need to act.

Gambling operators must pay close attention to new anti-corruption laws that will come into force on 1 July, both because of the action against the Las Vegas Sands Corporation and because gambling is a business that attracts corruption regulators' interest.

The gambling industry is heavily regulated and companies commonly have numerous contacts with government officials and in some cases overseas operations in jurisdictions with poor reputations for corruption.

This makes the industry a prime target for investigation, as the Las Vegas Sands Corporation found out earlier this year. It announced in a stock market filing that it had been asked for documents by stock market regulator the Security and Exchange Commission (SEC) and the US Department of Justice. The request was in relation to the Foreign Corrupt Practices Act and is believed to be in relation to the company's activities in Macau.

Why should gambling companies on the other side of the world care? Because the history of anti-corruption enforcement is filled with investigations which start in the United States and end up washing up on our shores.

US investigations into single companies can often spawn sector-wide investigations into entire industries. That then spreads to the UK.

The US and UK regulators frequently share information and co-cooperate as do other jurisdictions such as other EU countries and Russia. This has happened in the oil and gas, pharmaceuticals and medical devices industries.

The consequences of falling foul of one of these investigations are severe. Fines in the US can run into hundreds of millions of dollars. UK penalties tend to be smaller but UK courts have recently signalled that they intend to take a similar approach to US courts in terms of fines and penalties.

In both the US and the UK individuals involved in bribery are likely to be jailed.

Companies should also consider the effects of an investigation on their business. The costs in terms of time and money of dealing with an investigation can dwarf the cost of penalties. The cost to reputation can be incalculable, and falls in share price are a real danger.

The US Foreign & Corrupt Practices Act (FCPA) has worldwide long-arm jurisdiction. It imposes transparency requirements and, broadly speaking, outlaws the bribery of foreign government officials.

The UK Bribery Act owes plenty of its DNA to the FCPA but goes beyond it, prohibiting commercial bribery as well as government bribery; banning facilitation payments (payments sometimes made to speed up a process) and imposing a new strict liability offence of failing to prevent bribery.

The good news is that there is something companies can do now to protect themselves. The Act has a defence for companies that have put in place Adequate Procedures to prevent bribery.

If businesses have these then broadly speaking they, and the senior officers who run them, will be shielded from successful prosecution in the UK for Bribery Act violations.

The UK Ministry of Justice has issued guidance around what constitutes Adequate Procedures, adopting a principles approach. The application of the principles is fleshed out in the guidance issued at the end of March this year.

A key feature requires that businesses put themselves through a risk assessment, essentially looking at their business to identify where their largest corruption risks may lie so that they can adopt and implement specific policies to address that risk.

Why take the chance when the risk of a successful prosecution for a bribery offence can be reduced to zero by taking some simple steps to prevent bribery?

By Barry Vitou, an anti-corruption specialist at Pinsent Masons, the law firm behind OUT-LAW.COM