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The Bribery Act: what if adequate procedures fail?

The Bribery Act came into force on 1 July 2011. This article does not explain the new law but instead considers the factors companies should have in mind if they identify that bribery has occurred.

The Act creates two general offences of bribing another person and being bribed, and discrete offences of bribery of a foreign public official and a failure of commercial organisations to prevent bribery by persons associated with them.

This last offence can only be committed by a company, but there is a statutory defence if the company can show it had ‘adequate procedures’ in place to prevent persons associated with it from bribing.

Bribery comes in different forms, including large corrupt payments, lavish hospitality and small unofficial ‘facilitation’ payments to expedite the performance of a routine or necessary action. All are illegal under the new law and, if committed by an agent on behalf of a company, may give rise to criminal liability.

If this happens, what does the company do? Joint guidance issued by the Director of the Serious Fraud Office (SFO) and the Director of Public Prosecutions (DPP) acknowledges that the Act “is not intended to penalise ethically run companies that encounter a risk of bribery” and that “a single instance of bribery does not necessarily mean that a company’s procedures are inadequate.”

A company that has genuinely tried to prevent bribery but failed may avoid prosecution if it can show that the conduct was an isolated incident. However, it is clear that the more prevalent bribery is within the organisation, the greater the risk of prosecution.

So, what does a company do if it identifies bribery within its organisation? Perhaps its best interests may still lie in reporting the matter to the authorities.

Companies should note that if they do not self-report and bribery within their organisation is reported by a third party, this will be viewed as a significant aggravating factor tending in favour of prosecution. Conversely, self-reporting can result in the possible resolution of the matter by civil, as opposed to criminal, proceedings.

The Bribery Act provisions also cannot be considered in isolation. There is a real risk that monies obtained by a company in connection with a corruptly obtained contract would be considered ‘criminal property’ under the Proceeds of Crime Act 2002.

The company would be at risk of committing money laundering offences unless it disclosed that fact to the Serious Organised Crime Agency (SOCA). It is likely the information will be passed to the SFO, giving little choice but to report the underlying conduct to the SFO simultaneously.

Companies clearly need to implement a compliance programme to minimise the risk of bribery being undertaken on their behalf and be better positioned to deal with the fallout if it discovers an instance of bribery.

However, companies cannot make a decision on whether to self-report bribery without regard to the Proceeds of Crime legislation and the possible need to make a disclosure to SOCA.

Any company that decides against a disclosure to SOCA because it wants to keep the bribery under wraps runs the risk of exposing its directors and the company itself to criminal investigations for both bribery and money laundering.

Richard Sallybanks is a partner of BCL Burton Copeland