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On 30th March, join The Legal Director at the The Trade Finance Show From Informed Funding – The What, Who, Why & When - Finance Conference for Growing Businesses - Glaziers Hall at Bridge. This event will be the biggest UK gathering of trade finance expertise in one place – all to the benefit of companies that want to GROW. Book time with The Legal Director during their 1:1 sessions throughout the afternoon. 

 

It’s all about exports, but are you running a risk of breaking the law?

To see the difficulties that businesses can get into through bribery – or even allegations of bribery – look no further than the reputational damage suffered by FIFA, Rolls-Royce and GlaxoSmithKline in recent times. Not to mention, in the case of Glaxo and Rolls Royce, eye-watering fines.

And it’s not just large multinationals that are being targeted by the authorities. In 2016 AIM-listed construction industry consultants Sweett Group was fined £2.25 million, equivalent to approximately 2.5% of turnover, for an act of bribery in connection with a hotel construction project in Abu Dhabi. Also in 2016, logistics firm Braid Logistics paid a fine of £2.2 million following an SFO investigation into corrupt payments being made by members of its staff in connection with a freight forwarding contract. The fine was equal to the gross profit Braid stood to make on the contract in question.

As the scale of these fines show, the Bribery Act clearly has teeth. What’s more, even if they didn’t know that bribes were being paid or accepted, directors can be personally liable, facing unlimited fines and custodial sentences.

Risks in the supply chain

What makes complying with the Bribery Act particularly challenging is that parts of the legislation have been framed with the intention of not just emulating America’s Foreign Corrupt Practices Act (FCPA), but going beyond it.

Specifically, the Act covers all private sector transactions, irrespective of whether a foreign official is involved or not. 

Which means that the focus isn’t just on whether a company itself pays bribes or not. Corrupt practices carried out by its suppliers and agents also come under the Act—which means that any business with a UK trading presence is now open to a new offence of negligently failing to prevent corruption.

It is here, arguably, that the greatest vulnerability lies. In the real world, few businesses get the opportunity to bribe government officials in order to win multi-million pound contracts.

But many more import goods from contract manufacturers overseas where local officials might have been bribed to ignore health and safety requirements or child labour laws. Equally, bribes paid by overseas agents in order to make sales are also covered by the Act.

If you are doing business overseas, or contemplating moving into new markets, assessing and managing the risk of bribery and corruption has to be part of your action plan.

Prevention is better than defence

So what should a business do? The Bribery Act is very clear that the only defence is to have adequate processes in place. However, having a policy does not automatically mean that it is adequate, and a policy that is not woven into the fabric of the way you do business certainly won’t be. The Braid Logistics fine mentioned above was for failing to prevent bribery – as soon as it found out what had been happening Braid fired the staff members involved and self reported to the SFO. It had policies in place but they were patently inadequate.

If you are contemplating entering new markets, make sure that you undertake a bribery and corruption risk assessment. How does your new target market rank on the Transparency International’s Corruption Perceptions index? Have you done appropriate diligence on the key personnel you will be dealing with, and do they understand your anti-bribery policies? Is compliance with those policies woven into your legal agreements with suppliers, customers, agents and distributors? How will you monitor on-going compliance, and what will you do in the event that bribery allegations emerge?

We can help

The Bribery Act isn’t going away. You can’t assume that you’re too small for the enforcement authorities to be bothered with. And – critically – you can’t assume that compliance with the Bribery Act will somehow just happen, and that everyone in the business shares the same strong moral compass.

Given what is at stake, company directors and senior officers can be forgiven for wanting to make sure that their anti-bribery compliance programme is watertight.

Here at The Legal Director, we specialise in providing clear-cut legal advice in business-friendly language. Providing it affordably, to suit a business’s own needs and workloads.

To find out more, call Ed Simpson on 020 3418 0020 at any time.

 

On 30th March, join The Legal Director at the The Trade Finance Show From Informed Funding – The What, Who, Why & When - Finance Conference for Growing Businesses - Glaziers Hall at Bridge. This event will be the biggest UK gathering of trade finance expertise in one place – all to the benefit of companies that want to GROW. Book time with The Legal Director during their 1:1 sessions throughout the afternoon.