UK: UK Bribery Act - Know What’s Ahead

With the advent of the new UK Bribery Act and continued regulatory developments, anti-bribery and corruption compliance should now be a high priority for financial institutions.

The new Act significantly strengthens the UK law in this area and the Financial Services Authority's Business Plan clearly sets out anti-corruption as a key financial crime priority for 2010 and beyond.

The UK Bribery Act 2010

The new UK Bribery Act is expected to come into force in a matter of months. The Act has a broad scope and contains two general offences of (i) offering, promising or giving a bribe and (ii) requesting, agreeing to receive or accepting a bribe and a specific offence of bribery of a foreign government official.

What is the new corporate offence?

In addition, and perhaps most importantly for financial institutions, the Act creates a new strict liability corporate offence for institutions for the failure to prevent bribes being paid directly or indirectly on their behalf by an entity or persons 'associated' with them.

The only defence available will be for the institution to demonstrate that it had 'adequate procedures' in place that were designed to prevent bribes being paid. As such, if wrongdoing is identified, an institution will be liable to prosecution unless it can demonstrate it had adequate procedures.

Currently, no formal guidance has been issued to define what 'adequate procedures' are. Whilst the Government has undertaken to do this prior to the Act coming into force, the guidance is not expected to be very prescriptive.

What if we didn't pay the bribe?

Financial institutions should note that under the corporate offence provision in the Act they can be found guilty not only for the failure to prevent a bribe being paid directly but also a bribe paid indirectly by an entity or person performing services on its behalf (an 'associated person').

This is clearly a key area of risk as many financial institutions use third parties such as sales introducers to obtain business. The 'associated' entity or person need have no link whatsoever with the UK for an offence to be committed.

Although the definition of 'associated' is quite vague, the effect is clear; institutions need to ensure that, when engaging third parties to perform some kind of service or entering into business with partners, they have appropriate procedures in place to ensure that the third party's compliance with UK law is similarly rigorous and that the compliance of the third party is monitored on an ongoing basis.

What is the extra-territorial effect of the new Act?

It should also be noted that the Act has far reaching implications for financial institutions that have operations beyond the UK. The corporate offence applies to any corporate or partnership, wherever registered or incorporated, so long as it conducts part of its business (no matter how small) in the UK.

The offence itself can take place outside or inside the UK. This means a financial institution must ensure that not only its UK operations, but its entire global operations, are operating to the standard required by UK law. There is no scope for any aspect of the anti-corruption programme to get lost in translation between the UK and an overseas operation. If adequate procedures are not fully implemented across global operations, the financial institution may be exposing itself to significant risk.

The Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act

The US Foreign Corrupt Practices Act (FCPA) led many institutions to implement anti-bribery frameworks but they should be aware that the new UK legislation goes further than the FCPA in several areas. Some of these key areas are outlined in Figure 1 below. As a result of these differences, even institutions with experience of ensuring FCPA compliance should revisit their anti-corruption frameworks to ensure compliance with UK law.

Increased regulatory focus on, and appetite for, anti-corruption

The FSA's Business Plan published in March this year, clearly sets out anti-corruption as a key financial crime priority for 2010 and beyond. In 2010 the FSA are planning a themed corruption review on investment banking that will likely incorporate private equity activity and are also planning to continue their themed work from 2009 on insurance brokers.

The FSA imposed its largest ever fine of £5.25million (the first relating to corruption) in January 2009 against an insurance broker for breach of Principle 3 for 'failing to take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems'.

No bribery was proven; the broker simply failed to implement and maintain effective systems and controls for countering the risks of bribery and corruption in its business, in particular around making payments to overseas third parties who assisted it to win business. A primary driver of this fine was to provide a credible deterrent and encourage other firms across the financial services sector to raise standards of conduct in this area. We expect further FSA enforcement actions to follow in this area in the future.

What should financial institutions be doing?

Faced with these regulatory and legislative priorities, institutions should be taking action now to understand the corruption risks faced and consider appropriate risk management strategies, policies and procedures to mitigate the risks of bribes being paid, directly or indirectly. We have experience in assisting financial institutions in the UK with corruption matters, including when under enforcement, and have outlined below (see Figure 2) some key areas for consideration:

Figure 2.

Anti-Bribery and Corruption Risk Assessment Factors to be considered would include:

  • In what jurisdictions are you doing business and with whom?
  • Where are you using third parties to obtain business?
  • Where is entertainment and other hospitality activity significant in the sales process?
  • Have you performed a corruption risk analysis on your operations in order to identify potential high risk areas and ensure the continued effectiveness of the company's anti-corruption procedures?

Culture, tone and ownership

  • Is your culture one of zero tolerance and is that tone driven from the top?
  • Does responsibility for anti-corruption procedures sit with a designated member of senior management with appropriate access to the board?

Embedded controls

  • Do you conduct sufficient, effective due diligence when entering into relationships with third parties and monitor those relationships?
  • Do you have appropriate review and authorisation controls over the nature and purpose of payments and do you understand the commercial rationale for payments that you make?
  • Do you have a rigorously enforced gifts and entertainment policy?

Training and awareness

  • Do you have an anti-bribery and corruption policy that has been communicated and is demonstrably enforced?
  • Do your staff receive regular, appropriate and specific anti-corruption training?
  • Do you have a mechanism in place to provide guidance to employees, representatives and business partners on complying with anti-corruption procedures when dealing with potentially problematic situations?

Demonstrating an effective anti-bribery and corruption programme

Based on our experience, we have developed an Anti-Bribery and Corruption Controls Framework (see Figure 3 below) which can be tailored to individual organisations and their specific anti-bribery and corruption risks. Our framework is based on the COSO controls framework and is designed to facilitate the reinforcement of existing, or development of, anti-bribery and corruption controls. The framework is supported by a benchmark set of detailed controls which form the basis of our approach to assessment.

Our framework illustrates that an effective anti-bribery and corruption programme must combine an effective culture with functioning process controls.

It will not be sufficient to rely on an established code of conduct or company values because an organisation will remain vulnerable to rogue employees.

However, process controls won't prevent collusion and cannot cater for every eventuality so it's important that the company culture is right.

How Deloitte can help

The anti-corruption specialists at Deloitte have helped some of the world's leading institutions and companies navigate the risks arising from anti-corruption legislation. Our clients seek our assistance on a broad range of corruption-related matters including:

Adequate Procedures and Anti-Bribery and Corruption Compliance Programmes

We can assist with the development, implementation and review of anti-bribery and corruption compliance programmes. This can involve supporting organisations in: " Understanding and prioritising the risks they face.

  • Establishing the control objectives and key controls necessary to enable them to determine if the risks are controlled.
  • Assessing the effectiveness of the controls in place.
  • Developing enhancement plans to improve controls.
  • Training and awareness.

Forensic Data Analytics

Our Forensic Data Analytics team has a number of relevant tools and techniques which are used to assist clients in their anti-corruption efforts. These include:

  • Data mining and interrogation capabilities that can highlight potentially problematic transactions quickly and efficiently.
  • Online survey tools that can quickly gauge the state of awareness of staff with a company's anticorruption policy and related procedures and controls as well as highlight potential corruption risk areas.

Business Intelligence Services

Our Business Intelligence team are able to obtain information relating to the background and reputation of potential joint venture partners, sales agents or other business partners who may fall into the definition of 'associates'.

Transactional Due Diligence

Our corruption specialists have worked with both buyers and sellers to identify corruption risks as part of the due diligence process. The results of such work can influence deal price and also allow acquirers to mitigate identified corruption risks both pre and post acquisition.

Forensic Investigations

Our corruption and forensic accounting specialists have deep experience of conducting investigations and producing reports that are responsive to the needs and expectations of regulators and enforcement authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions