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Out-Law News 2 min. read

Almost half" of UK firms do not vet their suppliers' compliance with bribery laws

Almost half of UK firms do not check whether their suppliers comply with UK bribery laws, with the worst offenders amongst mid-market firms, according to new research from professional services firm Ernst and Young.

According to the research, which was compiled from a survey of procurement managers and directors, "mid-market" firms were less likely to have robust processes and systems in place to prevent them from falling foul of bribery laws. The survey defined mid-market firms as those with a turnover of between £5 million and £50m.

Ernst and Young said that 48% of firms overall failed to vet suppliers. Although 60% of mid-market firms had processes in place to assess whether their suppliers' business practices complied with the new rules, 16% of those would "do nothing" if they uncovered non-compliance. Only 40% of larger firms, with a turnover of more than £50, would remove suppliers from their supply chain if they found evidence of non-compliance.

The Bribery Act, which came into force on 1 July 2011, created a new offence of failing to prevent bribery by people working on or on behalf of a business, unless the company can show that it has "adequate procedures" designed to prevent bribery in place. Those companies that do not carry out 'due diligence' to ensure that their suppliers are fully compliant with UK laws can therefore be found guilty of an offence under the Act.

Anti-corruption law expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said that the results of the Ernst and Young survey were "not horrendous" and corresponded with "anecdotal experience". However, he called on businesses to improve their due diligence procedures.

"The E&Y survey [shows that] only 6% would re-tender if they discovered their suppliers were not compliant," he said on his website thebriberyact.com. "Frankly, this statistic begs the question why the businesses who would take no action if they uncover compliance issues bother with due diligence at all."

"Whether businesses take prudent steps to reduce risk or, on the other hand, opt for the risky gamble option is of course a matter of personal choice ... But, if they violate the Bribery Act and a prosecutor argues senior officers are liable for turning a blind eye they will probably find their freedoms curtailed," he said.

John Smart of Ernst and Young said that it was "worrying" to see so many businesses unconcerned by their suppliers' business practices, especially considering the length of time that had elapsed since the Bribery Act took effect.

"Following recent concerns over food contamination, there has been much focus on supply chains and how much companies know about suppliers and agents acting on their behalf," he said.

"Many directors are still unaware that they can be personally accountable for any failings in this area. This means that senior managers and directors risk significant prison terms and large fines for non-compliance in which they are personally involved, even if the breach is caused by the actions of a third-party supplier ... Anyone who thinks that the issue of third-party compliance can simply be glossed over is making a grave mistake," he said.

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