The proposed UK Bribery Act has put compliance at the top of the international business agenda, as it threatens severe consequences, both legal and reputational, for businesses and individuals who are found to be in contravention of the Act.
Under the Act, a company can be prosecuted anywhere in the world as long as it has ties to the UK.
According to Alex Maddy, associate director in corporate investigations at global risk advisory firm Control Risks, the Act is more stringent than the current Foreign Corrupt Practices Act, which comes out of the US, as it adds a new corporate offence - failure to prevent bribery.
In effect, this means that the company, its senior executives and employees can all be found liable should there be any form of corruption discovered. It was intended that the Act come into force in April 2011; however pressure from business has delayed it.
Maddy believes that the Act will still be enacted this year, however, and cautions businesses to take adequate measures to ensure that they and their employees do not contravene these new laws.
“A company's only defence will be that they had adequate procedures in place to mitigate against corruption, including risk assessment; top-level commitment; due diligence; policies and procedures; effective implementation and monitoring and review.”
The UK Bribery Act is extra-territorial, and therefore a company can be prosecuted anywhere in the world as long as they have a link to the UK, such as a British bank account or a listing on the LSE.
In addition, employees of any nationality can be charged, Maddy adds.
No differentiation is made between corruption and facilitation payments under the law, which means that companies that have historically made small and not-so-small payments in order to speed up governmental processes, will need to forgo this in future.
“Fines for this type of behaviour have already gone up exponentially. Recently, the US authorities fined Panalpina, a Swiss-based freight-forwarding company, US$80 million for payments made to customs officials to gain special treatment for its customers in, among other countries, Nigeria and Angola.”
Maddy says the trend is certainly moving to greater enforcement and higher fines.
There are about 72 investigations in progress under the Foreign Corrupt Practices Act, and when the UK Bribery Act is promulgated, companies and their employees could be liable under both Acts.
“The new Act could potentially throw up questions around doing business in Africa, as although domestic anti-corruption laws on the continent are mostly good, enforcement is often lacking,” Maddy adds.
“Companies will no longer be able to argue that corruption is a part of cultural norms, as it is a worldwide epidemic.
“Companies that are trying to stall the Act are partly concerned that foreign companies will continue with 'business as usual'; however businesses around the world need to take ownership of the problem and look at what is best practice.”
Maddy says other concerns for business include the cost burden of adherence to the Act, as well as a lack of clarity around what 'adequate procedures' entail.
“Alternative methods to corruption are available, and we believe that in the long-term, business practices will change for the better,” concludes Maddy. - I-Net Bridge