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D I S P U T E S & I N V E S T I G A T I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O R Y • M A N A G E M E N T C O N S U L T I N G
The UK Bribery Act
Raising the Bar Above the
Foreign Corrupt Practices Act
22nd Annual CFE Fraud Conference
San Diego, California
June 12-17, 2011 Ken Yormark, CFE, CPA, CFF Navigant Consulting
The UK Bribery Act
Received Royal Ascent on April 8, 2010
Goes into effect on July 1, 2011
Page 2
On March 30, 2011 – Guidance on
how the Act should be interpreted
was issued
The UK Bribery Act
“Bribery blights lives. Its immediate victims include firms that
lose out unfairly. The wider victims are government and
society, undermined by a weakened rule of law and damaged
social and economic development. At stake is the principle of
free and fair competition, which stands diminished by each
bribe offered or accepted. “
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Kenneth Clarke Secretary of State for Justice March 2011
Commentary
Rules are directed at making life difficult for the mavericks responsible for corruption, not unduly burdening the vast majority of decent, law-abiding firms.
Combating the risks of bribery is largely about common sense, not burdensome procedures.
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Some have asked whether business can afford this legislation
– especially at a time of economic recovery.
Addressing bribery is good for business because it creates the
conditions for free markets to flourish.
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Commentary
UK Bribery Act
Establishes a statutory defense:
Organizations which have adequate procedures in place to
prevent bribery are in a stronger position if isolated incidents
have occurred in spite of their efforts.
Page 6
UK Bribery Act
Establishes a statutory defense:
Organizations which have ADEQUATE PROCEDURES in
place to prevent bribery are in a stronger position if isolated
incidents have occurred in spite of their efforts.
Page 7
What is covered by the Act?
Bribery - Giving someone a financial or other advantage to
encourage that person to perform their functions or activities
improperly or to reward that person for having already done so.
Seeking to influence a decision-maker by giving them some
kind of extra benefit.
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What is covered by the Act? (con‟t)
Expressly prohibits the requesting, agreeing to receive, or accepting of a financial or other type of advantage.
Requires that the bribe be paid to obtain or retain business, or an advantage in the conduct of business.
FCPA is only related to foreign officials. UKBA is much broader.
UKBA specifies that accepting a bribe is prohibited. FCPA does not address this issue.
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When could my organization be liable?
An “associated” person (an employee or agent) that performs
services for it pays a bribe to:
• Get business
• Keep business
• Gain a business advantage for your organization
A very senior person in the organization commits a bribery
offense.
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What do I need to do to rely on the defense?
Show that your organization had „adequate procedures‟ in
place to prevent bribery.
• Adequate depends on-the bribery risks you face and
• The nature, size and complexity of your business.
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Six Principles
» Proportionality
» Top Level Commitment
» Risk Assessment
» Due Diligence
» Communication
» Monitoring and Review
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Principle 1
Proportionate Procedures
Procedures should be clear, practical, accessible, effectively
implemented and enforced.
An organization‟s procedures should be proportionate, its risks
should include certain common elements.
• a clear commitment
• a strategy
Page 13
Proportionate Procedures (continued)
» Policies designed to mitigate identified risks as well as prevent
deliberate unethical conduct.
» Topics might include:
• Gift policy
• Hospitality and promotional expenses
• Charitable and political contributions
• Facilitation payments
• Transparency of transactions
Page 14
Principle 2
Top-level commitment
» Top-level management fosters a culture within the organization
in which bribery is never acceptable.
» Company should deliver statements reflecting:
• A commitment to carry out business fairly, honestly
and openly
• A commitment to zero tolerance towards bribery
• The consequences of breaching the policy for
employees and managers
Page 15
Top-level commitment (con‟t)
» In a large multi-national organization the board should be
responsible for:
• Setting bribery prevention policies
• Tasking management to design, operate and monitor bribery
prevention procedures
• Keeping these policies and procedures under regular review
Page 16
Principal 3
Risk Assessment
» The organization assesses the nature and extent of its
exposure to potential external and internal risks of bribery.
» The assessment is periodic, informed and documented.
• Oversight by top level management
• Document the assessment and its conclusions
Page 17
Risk Assessment (con‟t)
» Commonly encountered risks
‒ External risks
• Geography/Country
• Business Sector
• Transaction risk
• Business opportunity risk
• Business partnership risk
Page 18
Risk Assessment (con‟t)
» Commonly encountered risks
―Internal factors
• deficiencies in employee training, skills and knowledge
• bonus culture that rewards excessive risk taking
• lack of clarity in the organization‟s policies on, and
procedures for, hospitality and promotional
expenditure, and political or charitable contributions
• lack of clear financial controls
• lack of a clear anti-bribery message from the top-level
management.
Page 19
How do I assess risk?
» Other risk factors:
• The value and duration of your project
• The kind of business you want to do
• The people you engage to do your business
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Principle 4
Due Diligence
» The organization should apply procedures using a
proportionate and risk based approach.
Page 21
Principle 5
Communication
» Communication will vary enormously between organizations in
accordance with the different bribery risks faced, size of the
organization and the scale and nature of its activities.
» Training should be proportionate to the risk faced and tailored
to responsibilities.
Page 22
Principle 6
Monitoring and review
» The organization should regularly analyze procedures to check
effectiveness and make necessary improvements.
Page 23
Do I need complex procedures in place even if
there is no risk?
No. If there is very little risk of bribery being committed.
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Mr. Clarke stated “combating bribery is largely about common
sense, not burdensome procedures.” “Procedure should be
proportionate to the risks faced by an organization.”
Do I need to do due diligence on all my suppliers?
How much due diligence you need to do will depend on your
risk assessment.
Think about doing due diligence on persons who will actually
perform services for you, on your behalf.
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Controversial Areas:
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Hospitality, promotional or other business expenditures
Likely to be acceptable if as under the FCPA:
• It is reasonable and bona fide
• It is transparent
• It is proportionate; and
• The organization has adequate procedures and policies
in place to monitor and regulate the expenses
Controversial Areas (con‟t)
Facilitation Payments
• Payments to induce officials to perform routine functions they
are otherwise obligated to perform, are considered bribes.
• The Act does not permit an exception
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Comparing and Contrasting the FCPA and the U.K. Bribery Act
FCPA U.K. Bribery Act
The FCPA applies only to bribery of foreign officials. The Act covers both commercial bribery and bribery
of foreign political officials.
The FCPA does not apply to the receipt of a bribe. The provisions of the Act relating to bribery of foreign
political officials apply only to the offer, promise or
payment of a bribe.
However, the commercial bribery provisions of the
Act apply to both the offer and acceptance of a bribe.
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Comparing and Contrasting the FCPA and the U.K. Bribery Act
FCPA U.K. Bribery Act
The bribery provisions of the FCPA apply to: (i) SEC
issuers (U.S. and foreign companies; (ii) “domestic
concerns”; (iii) U.S. persons acting outside U.S. in
furtherance of a prohibited payment ; (iv) foreign
nationals and entities that commit an act in the U.S. in
furtherance of a prohibited payment; (v) U.S. or
foreign agents of any of the foregoing.
The “failure to prevent bribery” provision applies to:
(i) U.K. entities that conduct business in the U.K. or
elsewhere; and (ii) any corporation, wherever formed,
which carries on business or part of a business in the
U.K.
For other offenses, the act must either be committed
in the U.K. or the person committing the act must
have a close connection to the U.K.
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Comparing and Contrasting the FCPA and the U.K. Bribery Act
FCPA U.K. Bribery Act
The FCPA permits facilitation payments for low-level payments for certain routine government actions.
The Act does not permit an exception for facilitation payments.
The FCPA contains accounting provisions. UK Bribery Act does not.
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Company isn‟t responsible for third party
behavior (agents, subsidiaries).
Third Parties are considered “associated”
persons.
If it‟s an acceptable cultural practice in the
company it‟s not a bribe
Only defense is if the inducement is bribery
specifically permitted under local law.
We are FCPA compliant Bribery Act covers private and public bribery.
We are SOX compliant Materiality does not apply.
We are an FSA regulated entity and our money
laundering procedures make us compliant. Need to consider what the funds used for.
Common misconceptions
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