July 2011 saw the greatly anticipated UK Bribery Act come into effect, with the aim of replacing the ineffective anti-corporate corruption regime that preceded it, a regime criticised for favouring settlement over prosecution in incidences of corporate bribery.
The act initially looked set to deliver on its promises by giving UK courts the power to enforce up to 10 year jail sentences and unlimited fines.
It struck fear into the hearts of many previously complacent directors and CEOs by holding them directly responsible for any suspicious spending, not only by employees, but by any, loosely defined, “associates”.
This fear, however, seems to have been unfounded; we are now 18 months down the line and yet to see any high-profile corporate prosecutions.
Lack of faith
The recent Ernst & Young Global Fraud Survey highlighted a significant lack of faith in Serious Fraud Office’s (SFO’s) ability to enforce the Bribery Act: only 26% of executives thought that UK enforcers were willing to prosecute in cases of bribery and corruption.
It is important to remember that bribery and fraud investigations can take years to come to a fruition
In another blow to the SFO’s integrity, the Ernst & Young survey also discovered that only 56% of UK companies even knew that the Bribery Act existed. One would have thought that more prosecutions would have arisen from this ignorance, but the figures speak for themselves.
All of that said, it is important to remember that bribery and fraud investigations can take years to come to a fruition.
Evidence of this can be seen when you consider that during 2012, several UK organisations faced bribery-related prosecutions under separate or previous laws. It will not be long before the Bribery Act begins to show its teeth.
Furthermore, the purpose of the act is not to lock-up as many bribery perpetrators as can be found, but to educate and manufacture a change in attitude. The SFO has laid out five key corporate hospitality criteria that must be satisfied in order to mitigate against bribery prosecutions:
- The company has a clear issued policy regarding gifts and hospitality
- The amount of employee expenditure is within policy limits and any claims that exceed the limit are referred to a high level within the organisation
- Expenditure is “proportionate”
- The company has evidence that all employee expenditure was recorded, and the recipient was entitled to receive the hospitality under the relevant legal jurisdiction
Increasing director and CEO liability should be more than sufficient in placing these criteria at the top of companies’ agendas. Businesses will need to consider the methods used to capture, check and record employee expenditure, in order to generate an up-to-date paper trail in case of an investigation by the SFO.
The lack of prosecutions could hinder the success of these criteria in changing business practices because there are no case studies for what the SFO views as ‘poor practice’.
However, once the remaining cases under the old legislation have been dealt with and the SFO starts securing prosecutions with the new Act, a uniform policy trend will begin to appear.