Risk

When corporate hospitality could equate to bribery

The UK Bribery Act became law in April 2010 and will come into force later this year, creating a host of fresh risks to business and commercial organisations, and presenting a complex ethical conundrum.

And yet, our survey suggests senior management frequently turn a blind eye to business conducted abroad at local or ground level in order to grease the wheels of industry.

So, exactly what are the risks – and more importantly how can you mitigate them?

While few could argue with the sentiment of the new law, it is stirring up a hornet’s nest of how to compete with less scrupulous companies, how to achieve compliance in less scrupulous countries, a zero tolerance of facilitation payments and lack of guidance on, for example, how lavish corporate hospitality can be before it is deemed to be a bribe.

Grant Thornton surveyed more than 160 UK businesses on their awareness and understanding of corruption risk and current issues, as well as trends in legislation and policy and strategy. The results appear in our Anti-corruption Survey 2010 [ 806 kb ], which you can download for free.

The new Bribery Act offences include: 

  1. Offering, promising or the giving of a bribe.
  2. Requesting, agreeing to receive, or accepting a bribe, either in the UK or abroad, in both the public and private sectors.
  3. Bribery of a foreign public official in order to obtain or retain business.
  4. Corporate liability in relation to ‘commercial organisations’ which fail to prevent a bribe being paid by those who perform services for or on behalf of the organisation. (thus capturing agents and other third party intermediaries).

All seemingly positive steps. But, they raise a number of new compliance and competitive edge issues for UK companies.

For example, companies will now face a new corporate offence of failing to prevent bribery. There will be potential criminal liability where bribes are paid by overseas agents and subsidiaries – even if the relevant conduct has no connection with the UK and might be part of business as usual in that country.

Hospitality/gifts to foreign public officials, and facilitation payments are prohibited, but with nearly a quarter of survey respondents considering payment of a bribe in order to do business unavoidable, it leaves them at risk of investigation at best, or facing a withdrawal from operations and investment in the country concerned at worst.

The legislation goes far beyond its US counterpart – the Foreign Corrupt Practices Act 1977 (FCPA). The UK Bribery Act’s extended reach is due to the inclusion of commercial bribery, and not simply bribery of foreign public officials.

M&A activity also carries the risk of ‘successor liability’. Companies may face taking on responsibility for any corrupt activity which may have previously occurred in the acquired entity – extended due diligence is therefore critical.

It seems clear that boardrooms up and down the UK have some difficult decisions to take in the face of the new Bribery Act. To reduce their exposure, they need to review their position and assess their risks on anti-corruption, their strategy and their actions as they pursue a return to growth post-recession.

For advice on how we can help your business answer these questions and mitigate corruption risks, please contact us at askoncorruption@gtuk.com.

 

Image: © Don Hankins