Distinguishing between genuine hospitality, promotional gifts and what could constitute a bribe, is a grey risk area that South African corporations need to take into account – particularly those associated with British companies.
Dave Loxton, director and Forensics Practice Area Head at Werksmans Attorneys, says that defining this legal distinction presents a challenge across jurisdictions worldwide.
However, he points out that the UK Bribery Act is different to the Foreign Corrupt Practices Act in the US, and the South African legislation, in that it specifically provides for a strict liability offence to cater for corporations that do not have adequate measures in place to mitigate their risks.
Referring to the UK Bribery Act, Loxton cites the example of a company that invites its business partners to a variety of events, such as dinners and sporting occasions, to cement relationships.
In this instance, private bodies and individuals pay their own travel and accommodation costs, but the cost of the travel and accommodation of any foreign public officials attending is met by the host company.
Loxton cautions: "We now enter a very grey area as to whether this is bona fide marketing, or constitutes bribery, which would be an obvious contravention of the UK Bribery Act.
"Werksmans advises corporations associated with British companies to conduct bribery risk assessments relating to their dealings with business partners - and in particular foreign public officials - and specifically investigate the provision of hospitality, entertainment and other promotional expenditure."
Among other safeguards, Loxton advises these companies to publish policy statements committing themselves to "transparent, proportionate, reasonable and bone fide hospitality and promotional expenditure".
They should also issue internal guidelines on procedures that apply to hospitality and/or promotional expenditure - and indicate areas where employees might potentially be in breach of the legislation.
In addition, recipients of hospitality and gifts should not be given the impression that they are under any obligation to confer business advantages, or that their independence will be compromised.
Criteria should also be applied when deciding the appropriate levels of hospitality and the type of hospitality that is appropriate in different sets of circumstances.
Loxton adds that companies should regularly monitor, review and evaluate internal procedures, as well as compliance with them. Appropriate training and supervision should also be provided to employees.
He points out that if South African corporations associated with UK companies do not have adequate measures in place to deal with possible contraventions of the UK Bribery Act, they risk incurring a strict liability offence (where intention is not a requirement).
"The fact that they did not have measures in place would put them fairly and squarely in breach of the Act," he warns.
"In addition to fines, jail sentences can be imposed on those people who are in breach of the Act. The British legislation is more onerous than the US legislation, not only in that it imposes a strict liability, but in that it does not provide for the payment of facilitation payments, which the US legislation permits."
Loxton recommends that, as a general principle, companies faced with contraventions of the Act need to follow due disciplinary processes in dealing with employees, to send a clear message to other employees that such activities will not be tolerated.
Then they need to co-operate with the authorities in full and - if necessary - to agree to criminal prosecution of the employees concerned. This may help mitigate any fines and damages that the company may be in line for.
Go to www.werksmans.com for more information.
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