After receiving widespread criticism for the lack of guidance and compliance clarification, the U.K. Bribery Act of 2010 (Bribery Act) originally scheduled for implementation in April 2011, is now set to take effect July 1, 2011. The act’s jurisdiction extends to commercial organizations incorporated or formed in the U.K. or “which carr[y] on a business or a part of a business in the U.K. irrespective of the place of incorporation or formation.” Determination of such existence will be made by the U.K. courts and will require “a demonstrable business presence.” The official guide states that an organization will not be deemed to be carrying on a business in the U.K. merely by virtue of having its securities listed on the London Stock Exchange or by having a U.K. subsidiary.
Unlike the anti-bribery provisions of the U.S. Foreign Corrupt Practices Act (FCPA), which focus primarily on corruption involving non-U.S. government officials, the Bribery Act widens its scope to prohibit domestic and international bribery across both private and public sectors. And while the FCPA allows exceptions for facilitation payments (generally small payments to lower-level officials for “routine government actions,”) the Bribery Act does not. These payments were illegal under the previous legislation and the common law, but the difference under the Bribery Act is that non-U.K. organizations are broadly subjected to these restrictions for the first time.
The Bribery Act specifically criminalizes the offering, promising or giving a bribe (active bribery) and the requesting, agreeing to receive or accepting a bribe (passive bribery) to obtain or retain business or secure a financial or other advantage. It also contains a provision whereby an organization that fails to prevent bribery by anyone associated with the organization can be charged under the Bribery Act unless it can establish the defense of having implemented preventive “adequate procedures.” The official guide recommends the following six principles as foundation for developing “adequate procedures” to prevent bribery:
- Proportionality – Actions should be proportionate to the risk, nature, size and complexity of the organization.
- Top-level Commitment – Board of directors, owners, officers or equivalent top level- management should establish and promote a culture where bribery is never acceptable and be committed to preventing bribery, both within the organization and with anyone associated with the organization externally.
- Risk Assessment – Various risk exposures, both internal and external, such as country of operation, business sector, types of transaction, new markets, and business partnerships should be evaluated and documented on an ongoing basis.
- Due Diligence – Proportionate, risk-based approach to due diligence procedures assessing existing and proposed relationships should be taken to ensure trustworthy associations and mitigate identified bribery risks.
- Communication – Appropriate channels of communication, awareness and training, both internal and external, on anti-bribery policies and procedures should be implemented and evaluated on a regular basis.
- Monitoring and Review – Anti-bribery policies and procedures should be monitored on an ongoing basis and amended as quickly as possible when activities and risks change.
The penalties for violating the Bribery Act are severe, with individuals facing up to 10 years in prison and organizations facing unlimited fines. Violations also may result in damaging collateral consequences such as director disqualification, ineligibility for public contracts, and asset confiscation.