Andrea Bonime-Blanc, an expert in world-wide anti-corruption compliance, considers how large businesses should tackle compliance with the most far-reaching new laws on bribery and corruption since 1977
Business action on corruption has come a long way since the adoption of the United States Foreign Corrupt Practices Act of 1977 (FCPA) and the enactment of the Organization of Economic Cooperation and Development’s Convention on Combating Bribery in 1997 (OECD Convention).
Since its adoption thirteen years ago, the OECD Convention has almost 40 signatories including countries outside of the original OECD – such as Brazil, Argentina, Israel and New Zealand. The OECD recently published the results of a study on enforcement activities within the OECD countries.
The report showed slow but steady movement toward more proactive government enforcement of anti-corruption laws over the first decade of the OECD Convention. In the past couple of years, the Bush and now Obama Administrations have substantially ratcheted up the US Government’s pursuit of all manner of cases in the anti-corruption space.
This has increasingly empowering both the Department of Justice, which has oversight over federal criminal corruption prosecutions, and more recently, the Securities and Exchange Commission, with oversight over publicly traded companies.
And now another major chapter in the fight against corruption seems to be imminent: starting in early 2011 with the expected enforcement of the UK Anti-Bribery Act, the latest and greatest in this type of law, passed by Parliament in April 2010.
If this law is actively enforced by the UK authorities, and all indications are that it will be, the new UK legal regime is bound to throw a whole new spin and twist into the global anti-corruption debate over the next few years.
Let us turn now to a quick snapshot of the UK Anti-Bribery Act so that we can turn to the real purpose of this article: to understand what the average global company should do in anticipation of this important change that will affect not just UK companies doing business elsewhere, but non-UK headquartered companies that have a connection -- office, personnel, property, facilities -- to the UK
Snapshot: Key provisions in the UK Anti-Bribery Act
The major changes the UK Anti-Bribery Act will bring to the standard FCPA-type laws most of the 38 countries with such laws have had in place include the following:
The new UK law does not only apply to the bribing of foreign government and quasi-government officials, but also applies to commercial bribery between two completely private entities or individuals.
This broadly expands the reach of its extra-territorial law to cover all manner of bribery and corruption.
The sanctions for bribery will apply, in the case of commercial bribery, both to the giving and the receipt of the bribe. This will not be the case for the official government bribery part of the law which remains focused strictly on the giving of the bribe, as is the case with other national FCPA-like laws.
The typical anti-corruption law requirement of “mens rea” – i.e., that the entity/person providing the bribe knew it was a bribe – will no longer be required, thus bringing about the dawn of strict liability regarding bribery.
Most FCPA-like laws allow for reasonable business expenses associated with showing off the business – plants, equipment, products, services, etc. The UK law does not have an exception for such business related demonstrations, thus putting quite a pall on what many international companies have been able to do under the other FCPA-like laws in place.
The UK law forbids facilitation payments meaning that monies paid to facilitate the expediting of non-critical, non-discretionary governmental actions will not be allowed.
The US FCPA allows for this exception to the overall prohibition on bribery although other countries have also forbidden this practice (see earlier column on this topic:FCPA enforcement in 2010 and beyond)
Given the changes that are anticipated from the UK Anti-Bribery law, companies with operations or a presence in the UK should consider the following important steps as they prepare their operations and their people for the upcoming changes:
Compliance personnel
The compliance and legal department of the company must be thoroughly familiar with the upcoming changes and ensure that all personnel within these departments worldwide understand the implications of the new law to their company’s operations.
Code of conduct and anti-corruption policy
Review and update global anti-corruption policy to include specific references to the UK Anti-Bribery law, specifically considering the following:
Revise the company code of conduct for both company personnel and for third parties needs to include the above-referenced nuances of the new UK anti-corruption.
Review procurement and supply chain policies to incorporate references to the UK Anti-Bribery law to inform employees that the UK law now covers private forms of bribery and the other important changes mentioned above.
Review facilitation payments policy to ensure that the U.K, prohibition is incorporated. Consider adopting an across the board prohibition of facilitation payments as it is becoming increasingly difficult to maintain a patchwork of inconsistent policies; i.e., if you are a US-based company, you may be able to allow facilitation payments but if you are a US company with a presence in the UK and your UK entity is doing business elsewhere, that UK part of the business will not be able to allow facilitation payments (see article on facilitation payments from March 2010).
Such a patchwork of policies will not only be difficult to coordinate from an internal controls standpoint, it will open the company up to greater risk of non-compliance.
Accounting/Finance/Procurement
Finance, accounting and procurement personnel should be targeted for an educational update as well as a review of current procedures and practices. This is to ensure that internal controls are in place to detect not only official government bribes, but any kind of fraud and corruption in expense reporting, etc.
Supply Chain Management
Supply chain management of third party vendors and suppliers should be reviewed to ensure that all operation and personnel emanating from a company’s UK operations and offices are also targeted and informed of the changes. Specifically, all supply chain activity managed from or through UK entities or offices should become thoroughly familiar with these changes.
Senior Management Education
Compliance personnel should ensure that both senior executive management at the headquarters, regional and UK country levels are thoroughly briefed and informed on the relevant changes.
Board Information
Senior management and compliance personnel should include a substantive presentation on the implications of the UK Anti-Bribery law to the company’s operations. This should explain both the implications of the new law for the company’s international operations and personnel. It should also detail the steps the company is taking to address and resolve any issues that may come up internally.
Employee and Consultant Education and Communication
Critically, compliance personnel should target all employees and third party contractors and consultants at the front lines of international business for specific education on the implications of the UK Anti-Bribery laws to them.
This can involve adding a training module to live or online education or sending a specific communications via email or posting information and tools on the company’s ethics and compliance webpage or intranet announcing the new law and its implications.
This would also include ensuring that any reporting tools, whistleblower hotlines or advice lines include a tab or category that reflects the new nuances of this law.
Review and Revision of Risk Management
Companies need to incorporate the nuances of this new law into their compliance and ethics risk assessment and monitoring systems. Firms should also co-ordinate these changes with their enterprise risk management program.
Monitoring & Auditing
About a year after the foregoing revisions and improvements are made, the company’s auditing and compliance teams should collaborate on a review and analysis of how well the company has implemented these changes.
It is definitely too early to understand what the exact implications of this new law will be. The UK authorities themselves are working on providing more guidance to the public on the nuances of the law as it will be enforced starting next year. But it is not too early for global companies doing business in the UK to begin to prepare for this new law.
It is clear from both the passage of the law and the proactive stance the UK Government seems to be taking on anti-corruption issues generally.
Global companies doing business in or through the UK would be wise to review where they are today on their anti-corruption policy and protocols.
Smart companies will begin to weave the relevant changes and awareness into their operations and personnel by year-end.
Andrea Bonime-Blanc is Director of Ethics & Compliance and Associate General Counsel at Navigant Consulting, Inc. She is the chairwoman of the board of directors of the Ethics a& Compliance Officer Association and the Vice Chair of the Conference Board’s Global Council on Business Conduct. andrea.bonime-blanc@navigantconsulting.com
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This recent research report on ethics training best practice may also be of interest