Out-Law / Your Daily Need-To-Know

Lack of major prosecution under Bribery Act does not mean the new laws are not being enforced, expert warns

Out-Law News | 30 Apr 2012 | 4:02 pm | 3 min. read

Organisations that believe anti-corruption laws introduced in the UK last year are not being enforced are too blasé and risk falling foul of the rules, an expert has said. Meanwhile, managers have claimed that the laws put UK firms at a disadvantage.

Specialist in fraud and bribery laws Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said companies should be aware that regulators are stepping up their enforcement of the Bribery Act.

"Was the Bribery Act really a case of much ado about nothing?  Those who think so risk an unpleasant early morning wake up call," he said. "Anti-corruption enforcement trends continue to rise."

"The new Director of the Serious Fraud Office (SFO), David Green, has only been in office a week and has issued a series of uncompromising messages. At the same time the UK’s financial regulator, the FSA, has issued a blizzard of guidance about required anti-bribery/crime systems and controls coupled with damning reviews of present industry practice and large fines. For those watching carefully enforcement activity has started. For those hanging on for a big SFO investigation – don’t wait too long before doing something – it could be into you," Vitou said.

A new survey of middle managers has revealed that nearly a quarter believe the Bribery Act places UK firms at a competitive disadvantage.

Accountancy firm Ernst & Young said that 24% of the 1000 middle managers they surveyed believe the Act is damaging UK plc's competitiveness. More than three quarters (78%) of the managers that believe the Act is damaging said UK businesses would lose out to rivals that pay bribes, whilst 22% of those managers attributed the cost of complying with the Act as a reason affecting UK competitiveness.

"Only 30% of those with awareness of the new laws were convinced they would not ultimately damage British competitiveness," the accountancy firm said in a statement detailing the results of its survey.

John Smart of Ernst & Young said that the Bribery Act does not place UK companies at a disadvantage.

"Businesses may feel that they have been placed at a competitive disadvantage due to the Bribery Act," Smart said. "In the short term it may seem to hand opportunities to less scrupulous competitors, particularly in sectors or countries where the risks of bribes or facilitation payments are more common. However with increasing enforcement and a global drive to reduce corruption, in the long run there will be a level playing field among different countries."

“Although the requirements set out by the Bribery Act clearly need to be taken very seriously, it is wrong to assume that the Act will hurt British competitiveness on the global stage. With the right policies, procedures and systems in place, British companies have nothing to fear, and neither do their customers.”

"Nearly one year on we are finding that companies operating in countries where corruption is endemic still need a better understanding of the risks. It is necessary to have policies and procedures in place to protect themselves not just from temptation to pay bribes, but also from receiving unlawful payments. Building in checks and awareness is also vital to counter the risk of potential fraud from within an organisation," Smart said.

The Bribery Act came into force last July and states that foreign companies which operate in the UK can face prosecution for bribery regardless of where the alleged activity has taken place, unless the suspect activities are permitted locally. The Act also creates the offence of bribing a foreign public official, even if that person has demanded a bribe.

A company can also be responsible for bribery carried out by its employees without its knowledge or consent under the Bribery Act. The Act creates a new offence of failure to prevent bribery by people working for or on behalf of a business, but companies can escape liability if they show that they have 'adequate procedures' designed to prevent bribery in place.

Under the Act, the maximum penalty for individuals found guilty of bribery will rise from seven to 10 years' imprisonment and an unlimited fine.

Although the SFO is the lead prosecutor of offences under the Bribery Act, it was the Crown Prosecution Service which successfully prosecuted in the one conviction obtained for an offence under the Act since the laws came into force.

Munir Patel, a former magistrates' court administrative officer, was sentenced to a three year prison term for bribery offences and a concurrent six year prison term for misconduct in public office. Patel admitted accepting a £500 bribe to "get rid of a speeding charge" and pleaded guilty to an offence under section two of the Bribery Act last month.

Under section two of the Act it is an offence if a person requests, agrees to receive, or accepts an advantage, financial or otherwise, with the intention that they or someone else perform a "relevant function or activity" improperly.

The SFO has insisted that it is working towards bringing court action for offences under the Act but that it is not interested in bringing cases where the subject is considered "low hanging fruit".

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