korda fcpa

8/19/2019 Korda Fcpa

http://slidepdf.com/reader/full/korda-fcpa 1/62

ordaMentha

forensic

KordaMentha submission

to

the Senate Economics References

Committee

inquiry

into foreign ri ery

24 August 2 15

Foreign briberySubmission 22



Table

o

contents

ordaMentha

forensic

1.

Introduction ......

......... ..... ....

.......

..

..

..

..

.

..... ..

..... .

....

..

.

..

.

.

........ ......

. 3

1.1 KordaMentha Pty

Ltd

.......

..

.....

...

.

..... ...... .

..

................

......... ........ .

..... .....

.. 3

1.2 Australia s foreign bribery legislation ..... ....

.

...........

.

......

.

.....

..... ..... ..

.

.. 3

2. Legislative change required .....

............ ....

.

............ ....

..................... .... .

....... .

............ ....... 5

2.1 Books and records provision ............

........... .... .......... ...........

........

....... .

................

5

2.2 Offence of failure to prevent bribery ......

....... ........... ..... ........... .

.. . .

.... ......... 6

2.3 Offence of failure to report bribery .

..

....

...

.

...............

.

..............

....... .

.....

...... .. 8

2.4 Facilitation payments ....... .... .......... ..... .

......

.....

..... .

.....

......

.

.

..

.

........ .........

8

2.5 Offence of corporate bribery .

..

..... .

.... .

....

..... ...

......... ......

..... .

...

.

.

.....

....

. 9

2.6 Whistleblowing protection and incentives .....

...... ..

.

..

..... .

.

.....

..

.

.

..........

.

9

2.7 Resolution options ..... .......

....... .

.......

..

..

..

.

..... ...

..

....

....... .

.

......

11

2.8 Enforcement - structure and responsibility ......

.... ..... .... ......

....

.

.

.

.....

..... .....

11

2.9 Conclusion .... ....

..................................

....

..... ..... ....

.

...

..

.

..

...... ........ ......

....

...

. 13

List

o

ppendices

Append ix 1

Appendix 2

Append ix 3

Terms of reference

Comparison of leading legislation against Australian legislation

UK Bribery Act 2010 Guidance

Liability limited by a scheme approved under Professional Standa rds Legislation

2




1

Introduction

1 1 KordaMentha Pty

Ltd

ordaMentha

forensic

1. KordaMentha Pty Ltd (KordaMentha)

is an

advisory and investment firm that provides Forensic,

Restructuring, Turnaround and Real Estate support for companies and their stakeholders.

2. KordaMentha s Forensic practice

is

made up of professionals from diverse backgrounds, including

accounting and finance, law enforcement, regulatory and technology. Many have lived and worked

overseas

in

countries that are regarded as highly corrupt on the Transparency International

Corruption Perceptions Index (CPI) . They have worked

on

projects

in

Australia and overseas

assisting clients to deal with incidents involving fraud and corruption . This includes providing

services

to

the Asian Development Bank to investigate misuse of funds (which may form part of

Australia s contribution) loaned to third world governments for various projects. Based

on

this

experience, we provide real world, insightful advice and guidance

to

clients about implementing

responsible business practices that mitigate against these and many other business risks

in

the

global marketplace.

3

It is based

on

this experience that we make this submission

to

the Senate Economics References

Committee inquiring into the issue of foreign bribery. [Appendix 1 - Senate inquiry terms of

reference]

1.2

Aust

ralia s foreign bribery legislation

4. Australia s forei

gn

bribery legislation has been in need of

an

urgent makeover for some time. Since

1977, the world has had a blueprint to follow

in

terms of anti-corruption legislation

in

the form of the

US Foreign Corrupt Practices Act (FCPA). High levels of coordinated enforcement activity by the

Department of Justice (DOJ) and the Securities Exchange Commission (SEC) have and still set the

standard

in

respect of commitment to and actual enforcement.

hy

a developed nation such as

Australia has not followed suit and modelled its legislation and enforcement regime on the US is

open for debate. Australia s low levels of enforcement and its apparent inability

to

commit to a

coordinated enforcement approach have been openly and firmly criticised by the OECD. This

Senate inquiry

is

a sign that the required level of commitment is materialising and that real efforts

and tangible results will

be

achieved. After all, it

is

the poor and disadvantaged of developing

nations who suffer the most

as

a result of corruption and Australia should play its part

in

striving

to

eradicate it.

5. The real life, day to day experience of corrupt i

on in

business lies with corporations who have been

operating in high risk countries over many years. As such, these corporations and service

providers such as KordaMentha that provide anti-fraud and corruption services, have a great deal

of experience

to

share on the issue before the inquiry.

6. The international business environment

is

ever changing. Therefore

in

our view, the key to

producing relevant and effective legislation to deal with foreign bribery should

be

to adopt the best

elements of the wor

ld

s leading foreign bribery legislation, the FCPA and the relatively new UK

Bribery Act (the leading legislation).

[Refer Appendix 2 - Comparison of leading anti-corruption legislation against Australian legislation]

to the Senate Economics Refe

re

nces Committee inquiry into foreign bribery 24 August 201 5




ordaMentha

forensic

7

Enforcement of criminal legislation

is

not effective unless

it

is

coordinated and proactive

particularly for

an

issue such as foreign bribery. One of the key difficulties of enforcing this area of

criminality

is

the very nature of the offence. It involves corrupt and deceitful intent and conduct and

usually involves concerted effort

on

the part o the bribe payer and receiver

to

conceal the conduct.

As such one dimensional legislation that only deals with the actual bribe paying makes

enforcement difficult. This together with the many challenges associated with conducting cross

jurisdictional investigations further complicates

an

already complex area of criminality and its

enforcement. Therefore a significant global issue such as foreign bribery must

be

tackled through

the use of dedicated resources that are applied solely to the pursuit of devian t corporations and

their employees. The United States DOJ and the SEC are

an

excellent example of such a

dedicated enforcement regime. In the US at any one time there are

in

the vicinity of 100 ongoing

investigations by these agencies and between 2004 and 2014 alone there were been 336

enforcement actions.

http://www.qibsondunn.com /publications/pages/2014-Year-End-FCPA-Update.aspx

to

th

e Senate Econo

mi cs

References

Co

mmittee inquiry into foreign bribery 24 Au gust 201 5

4




~ ®

KordaMentha

fo

re

nsic

2 Legislative change required

8.

Australia's foreign bribery legislation commenced in 1999. Sixteen years on, only two corporate

convictions have been recorded. Being realists, it is very unlikely that the two companies

concerned have been the only companies involved in foreign bribery. Our heavily criticised

enforcement efforts have been piecemeal and distinctly lacking in commitment. Regardless of the

reasons for this, we believe that, to a large extent, this has caused corporate ambivalence about

the issue and produced no incentive for corporations to adhere to the legislation and/or implement

effective compliance programs. Those that have implemented compliance programs generally

appear to be those that have exposure to legislation such as the FCPA or the UK Bribery Act.

9. To enable more effective enforcement of foreign bribery and increase the motivation for companies

to

implement effective compliance programs, some key changes

to

our current legislation are

required.

2 1 ooks and recor

ds

provision

10. From

an

investigative perspective, the standard of proof for the act of bribe paying is often difficult

to achieve. However, funds to pay bribes have to come from somewhere, so following the money

trail is a key investigative activity. Corporations that are providing funding to executives or

executives utilising company monies to pay bribes to foreign officials have to record the transaction

in

its books and records (unless there are off the book bank accounts held for the specific purpose

of paying bribes). Usually, close examination of a company's books and records leads to

anomalies or 'red flags' of bribery such as non-descript categorisation of transactions or a lack of

supporting documentation. It is these anomalies that often lead to identifying bribe payments.

11. Currently, offences

of

false accounting or similar under the various State Crimes Acts or the

Commonwealth Corporations Act 2001 would be the charges most likely to be preferred in the case

of a books and records violation in respect of foreign bribery. The case of David Ellery in the

Securency International and Note Printing Australia scandal is a case

in

point.

12. Whilst the maximum custodial penalties for the State offences mentioned above approximate the

penalty under the foreign bribery legislation of a maximum of 10 years, the penalties for similar

offences under the Corporations Law, e.g. Section 1307 of the Corporations Act 2001, being the

Falsification of books has a penalty of 100 penalty units and/or two years imprisonment as per

Schedule 3 of the Act.

In comparison, the penalty for paying a bribe to a foreign official is 10

years imprisonment or a fine o f up to 10,000 penalty units ( 1.7 million). The penalty for the

falsification of books under the Corporations Act 2001 alone,

in

our view is insufficient.

13. In June 2013, a number of amendments to Canada's Corruption of Foreign Public Officials Act

(CFPOA) came into force. The CFPOA includes offences of bribing foreign officials (Section 3

1

))

and the books and records offence (Section 4 1 )). The books and records provision was added to

the CFPOA in order to address a long-standing criticism that Canada had not fulfilled its obligation

under Article 8 of the OECD Anti-Bribery Convention to prevent businesses from using inaccurate

accounting records to hide bribery. Section 4 (1) which mirrors the requirements of Article

8,

states:

Every person commits an offence who, for the purpose

o

bribing a foreign public official in order to

obtain or retain an advantage in the course

o

business

or

for the purpose o hiding that bribery

a) establishes or maintains accounts which do not appear in any o the books and records that

they are required to keep in accordance with applicable accounting and auditing standards;

Corporations ct 2001 , Section 1307 and Schedule

3.

to the Senate Economics References Committee inquiry into foreign bribery 24 August 2015

5




ordaMentha

forensic

b) makes transactions that are not recorded in those books and records or that are

inadequately identified in them;

c)

records non-existent expenditures

in

those books and records;

d) enters liabilities with incorrect identification of their object in those books and records;

e)

knowingly

uses

false documents; or

f)

intentionally destroys accounting books and records earlier than permitted y law.

14. A large number of settlements relating to enforcement of the FCPA relate to violations o the books

and records provisions and have often led to the discovery o the actual bribes paid.

Recommendation s

i A books and records provision should be incorporated into Australia s foreign bribery

legislation so that Australia s obligations (like those of Canada) under Article 8 of the

OECD Convention are also met. The offence should also provide for sanctions that are

equivalent to the bribe paying offence in order to achieve deterrence and facilitate greater

enforcement success.

2 2 ffence of failure to prevent bribery

15. As mentioned above , our view is that the current enforcement regime has produced little incentive

for Australian companies to proactively implement systems and procedures to prevent bribery.

16. Section 12

o

the Commonwealth Criminal Code deals with Corporate Criminal Liability. Section

12.3 Fault elements other than negligence, states:

1)

lfintention, knowledge or recklessness is a fault element in relation to a physical element

of

an offence, that fault element must be attributed

to

a body corporate that expressly, tacitlyor

impliedly authorised or permitted the commission of the offence.

2)

The means y which such an authorisation or permission may be established include:

a)

proving that the body corporate s board

of

directors intentionally, knowingly

or

recklessly carried out the relevant conduct, or expressly, tacitlyor impliedly authorised

or permitted the commission

of

the offence; or

b)

proving that a high managerial agent

of

the body corporate intentionally, knowingly or

recklessly engaged in the relevant conduct, or expressly, tacitly or impliedly

authorised or permitted the commission

of

the offence; or

c)

proving that a corporate culture existed within the body corporate that directed,

encouraged, tolerated or led to non-compliance with the relevant provision; or

d) proving that the body corporate failed to create and maintain a corporate culture that

required compliance with the relevant provision.

17. Sub-section (3) o Section 12, then states:

3)

Paragraph (2)(b) does not apply if the body corporate proves that it exercised due diligence to

prevent the conduct, or the authorisation or permission.

3

CFPOA,

s

4(1).


6




ordaMentha

fo

rens

ic

18. This section, and in particular paragraphs (b) and (c) of sub-section (2), clearly suggest that the

legislators believe that corporate culture can play a significant role

in

whether business practices

are in compliance with relevant provisions or not. In our view, corporate culture is a key element of

any

compliance program or framework

in an

organisation. Whilst key,

it

is

one element of a

compliance program and the legislation provides little guidance about the other key elements

required for a compliance program to

be

effective .

19. Sub-section (3) of Section 12 gives a broad insight into what might

be

required when it mentions

due diligence

in

respect of preventing conduct, the authorisation or permission, but again this

provides little guidance about what is actually required to achieve compliance .

20. Consideration should be given to adopting the aspects o the UK Bribery Act 2010 legislation that

provide for liability of directors and senior management for failing to diligently execute their roles

and responsibilities.

In

order to facilitate the enforcement of these provisions, consideration should

also

be

given to including the principles relating to the powers and responsibilities over key

persons which has been introduced

in

the UK under the Financial Services (Banking Reform) Act

2013. The relevant legislation provides for enhanced accountability of directors and senior

management through requiring:

• Statements of responsibilities setting out the aspects o the affairs of the company which

the identified director or senior manager will be responsible for managing

in

performing

their function

• Attestations by a named director or senior manager to personally declare a set of facts

relating to the company are true. This will facilitate a proactive risk based approach rather

than a mere perfunctory compliance approach. The practical effect of these attestations is

to fill the potential gap between a company s systems and their personal knowledge of the

adequacy

o

those systems. Therefore, the individual has an obligation imposed

on

them

to

proactively inform themselves. The attestation can then make the director or senior

manager personally liable for subsequent misconduct and can lead

to

fines being imposed

on

the individual and findings the individual is not fit and proper to

be

involved

in

the

management of a company. In other words senior managers are more accountable as by

signing the attestation they are

in

effect putting their professional reputation on the line.

Recommendation s

ii

In order to assist regulatory enforcement of the foreign bribery provisions and create a real

incentive for companies to proactively implement measures to prevent bribery, we

recommend that an offence similar to that o the UK Bribery Acts Failure o a commercial

organisation to prevent bribery with its corresponding defence of adequate procedures

should

be

enacted.

iii. To assist corporate Australia understand what preventing bribery means, we recommend

that similar guidance to that produced by the UK Ministry of Justice pursuant to Section 9

of that Act and the

US

FCPA Resources Guide 2012

4

should be produced for the

Australian context. The UK Guidance, for example , advocates that procedures put

in

place

to prevent bribery should

be

informed by six principles, as follows:

Principle 1 - Proportionate procedures

Principle 2 - Top-level commitment

Principle 3 - Risk assessment

Principle 4 - Due diligence

4

http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171485784


7




Principle

5

Communication (including training)

Principle 6 - Monitoring and review

KorclaMentha

forensic

For your reference, the UK Bribery Act Guidance is attached at Appendix

3.

iv.

Where it

is

found that there

is

a failure to prevent bribery,

in

addition to corporate liability,

directors and senior management should also be held personally liable for failing to

diligently execute their roles and responsibilities. Further, a reverse onus burden of proof

placed

on

directors or senior managers, will create a higher degree of urgency in respect of

compliance.

2 3 Offence of failure to report bribery

21. Where, by whatever means, a company believes

on

reasonable grounds that bribes have been

paid to foreign public officials, it should be compelled by legislation to report the conduct to the

regulator.5 However, to form the belief that the conduct has occurred, the company should conduct

an independent

factual investigation . Once the facts have been established through this

investigation process, then the company should be obliged to report the misconduct.

22. If after confirming by its independent investigation that bribes have been paid and the company

concerned does not report the conduct to the regulator, then the company should

be

held liable for

failing to report bribery.

23. Where an offence of bribe paying is proven as a result of an investigation or resolution with the

regulator, then an independent review o the company s compliance program should be imposed

on

the company by the court or regulator. Any costs associated with the investigation into the bribe

paying and the independent review of the compliance program should be borne by the company

concerned.

Recommendation / s

v.

An offence of failing to report bribery should be introduced to the Australian Criminal Code.

vi.

Where an allegation of foreign bribery

is

proven, the costs associated with any

investigation into that bribe paying and an independent compliance review should

be

borne

by the company against whom the allegations were made.

2 4 Facilitation payments

24.

In

2009, the Organisation for Economic Co-operation and Development (OECD) s Working Group

on

Bribery

in

International Business Transactions Recommendation (the OECD Recommendation

2009) called for a ban on facilitation payments amongst member nations.

6

25. Consequently there has been a move by many countries to prohibit them , including the UK which

provides no defence or exemption under the UK Bribery Act and Canada who has passed

amendments that will eventually lead to the elimination of the exception.

7

Australia has been

considering the vexed issue of facilitation payments since 2011, when the Australian Government

issued a public consultation paper

on

the subject, however, there has been no clear indication

about whether the defence will

be

removed. Hopefully, this inquiry will

be

the impetus for some

clarity

on

the issue.

5

Perhaps the wording

o

Section 9120

o

the Corporations Act could

be

adopted i.e. the need to report within 10 business days of

becoming aware

o

a breach or a likely breach

6

http://www.oecd.org/daf/anti-bribery/antibriberyconvention/ 4417691 O.pdf - The OECD Recommendation 2009 at 4.

7

Canada s Foreign Anti-Bribery Law, page 15 . Michael Osborne, Affleck Greene McMurtry LLP

to

the Senate Economics References Committee inquiry into foreign bribery 24 August 2015 8




KordaMentha

forensic

26. The UK Ministry of Justice believes that

an

exemption for facilitation payments would create

artificial distinctions that are difficult to enforce, undermine corporate anti-bribery procedures ,

confuse anti-bribery communication with employees and other associated persons , perpetuate an

existing culture of bribery and have the potential to be abused.

27. Moreover, while facilitation payments may

be

currently permissible under Australian law, many of

the high risk countries

in

which Australian businesses operate have domestic laws that may treat

facilitation payments as bribes.

28. Many companies are prohibiting facilitation payments despite their domestic legislation providing .a

defence or exemption, largely due

to

the global nature

o

business and the very real possibility

o

being caught under other legislation that does not.

Recommendation/s

vii. We concur with the view held by the UK Ministry of Justice

on

facilitation payments.

Allowing facilitation payments muddies the waters and may lead to a culture of expediency

to

achieve results. For these reasons, we recommend that the facilitation defence be

removed.

viii. If the facilitation payment defence is maintained, we recommend that regulators focus on

proactive scrutiny o these payments to ensure that they comply with the legislation and ·

meet the record keeping requirements .

2 5 Offence of corporate bribery

29. The purpose of implementing foreign bribery legislatfon with other countries is

to

produce a level

playing field , for example, participants

in

the tendering or bidding process for projects. The same

reasoning applies

to

commercial or corporate bribery (not involving government officials).

30

. Major infrastructure, oil and gas and mining projects regardless of whether undertaken

in

Australia

or overseas involve the tendering by contractors for significant tranches of work. Whilst State

legislation could

be

used for many instances of corporate bribery, a Commonwealth corporate

bribery offence with higher penalties than state legislation and jurisdiction for offences occurring

overseas would provide prosecutors with greater flexibility

in

the action that could be taken in

response.

Recommendation/s

ix

We recommend that offences similar to Section 1 - the offering, promising or giving of a

bribe (active bribery) and Section 2 - the requesting, agreeing

to

receive or accepting of a

bribe (passive bribery) contained within the UK Bribery Act should

be

included in the

Australian Criminal Code.

2 6 Whistleblowing protection and incentives

31

. Information about criminal misconduct within corporations received through whistleblowing is one

of the key detection mechanisms. Corporate cultures

o

speaking up about serious misconduct

such as fraud and corruption

is

a primary corporate governance tool and must

be

encouraged by

Boards of Directors and

Senior Management of corporations. The role of the whistleblower

in

the

Securency International and Note Printing Australia scandal and the recent financial advice

scandals within some of the major

ba

.nks illustrate the importance of whistleblowing.

Guidance on the Bribery Act 2010 issued by the Ministry o Justice (March 2011) at 18


9




? ~

KordaM

e

ntha

forens ic

32. The Australian Government should encourage disclosure of serious misconduct such as fraud and

corruption by providing adequate legal protection for whistleblowers who report suspected

misconduct in good faith to management of a company.

33. The Australian whistleblowing regime is fairly comprehensive for the public sector but lacking in the

private sector.

9

The regime could be described as a hotchpotch of State and Commonwealth

legislation which for the purposes of dealing with foreign bribery is not fit for purpose .

34. Australia's whistleblowing regime failed to protect the whistleblowers in the Securency International

and Note Printing Australia cases, Mr Brian Hood and James Shelton, who are former Note

Printing Australia employees. Mr Hood reported his concerns to management about ongoing

corrupt practices

on numerous occasions and as a result was subject to various forms of

harassment , intimidation and eventually forced from his job. This was despite the reported conduct

being in breach of the Corporations Act 2001 under which employees should be protected for

making good faith disclosures about breaches of corporate legislation.

35. In the US at a Federal level, the Sarbanes-Oxley Act protects Whistleblowers, '. ..protects covered

employees who report alleged violations of the federal mail, wire , bank, or securities fraud statutes,

any rule or regulation of the SEC, or any other provision of federal law relating to fraud against

shareholders.'

1

Employees who make reports to their employers of misconduct that

is

covered

under Sarbanes-Oxley are afforded protection under that Act even though it expressly provides for

complaints to be made to the SEC.

36. Given the significant scandals in Australia that have come to light through the integrity and courage

of whistleblowers and their treatment at the hands of their management and the failure of the

regulator to protect them, there is a real need for legislation that will provide protection when

disclosures are made to employers andior the regulator. It is our view that this protection should be

afforded

to

all persons who make good faith disclosures

in

respect of any offence under the

Commonwealth Criminal Code, including foreign bribery.

37.

In

October 2014, the US SEC paid out its biggest reward

to

date

to

a whistleblower, a person,

living abroad, who helped it uncover a particularly hard-to-detect fraud. The payout was US30

million.

38. In the US, depending upon the crime and the agency involved, whistleblowers receive up to 30% of

the money recovered by regulators .

Recommendation s

x We recommend that whistleblower protection should be incorporated into the Australian

Criminal Code,

in

order to provide protection from all forms of intimidation , harassment or

disadvantage as a result of good faith disclosures made to a company's management or a

regulator in respect of any offence under the Commonwealth Criminal Code . .

xi We recommend that the Australian Government should consider establishing a reward

program similar to that in the US that compensates whistleblowers who provide original

and compelling evidence that leads to . he resolution of significant fraud, corruption and

other criminal activity.

9

Whistleblower Protection Laws in G20 Countries - Priorities for Action. Final Report September 2014. Simon Wolfe, Mark Worth ,

Suelette Dreyfus, A J Brown

1

Whistleblowing. An employer's guide to global compliance. DLA Piper.

11

http: www.sm h.com.au/business/comment-and-analysis/corporate-fraud-rewards-for-wh istleblowers-make-sense-20141118-

11 oz5c.html


10




ordaMe

tha

fo

re

nsic

2. 7 Resolution options

39

. To achieve

an

appropriate deterrent effect, as well

as

reduce the amount of costly litigation, an

array of options for the resolution

of

foreign bribery matters should

be

at the disposal

of

regulators

and the courts. The options provided below are used by the US SEC and DOJ and Australia should

consider utilising these options. These options include, but are not limited to:

i

Criminal conviction and sanction

ii

Civil remedies and forfeiture, negotiated settlements together with deferred and non

prosecution agreements, disgorgement of profits etc .

iii. Obligation

to

establish or enhance compliance programs and the imposition of company

monitors and self-reporting regimes

iv. Administrative proceedings

v

Debarment from government contracting.

2

40. The type of resolution afforded to a company should be dependent upon the level of co-operation it

provides to the regulator

in

the investigation of identified wrongdoing. Factors that will determine

the level of co-operation and discounts on fines and settlements should include factors such as but

not limited to:

i

Whether a company has self-reported the bribe paying or compliance with mandatory

reporting obligations (if implemented

in

the future)

ii

. The extent to which the company has investigated the bribe paying and provision of access to

the regulator to investigation findings

iii

. Whether a compliance program was

in

place at the time of the offending or the extent

to

which

improvements

to

the existing compliance program have taken place as a result of the bribe

paying

iv

Full disclosure about the individual or individuals responsible for the bribe paying and the

disciplinary action taken.

Recommendation/s

xii.

In

order to facilitate more timely resolution of foreign bribery matters, w recommend that

the courts and regulators should

be

afforded a wide range of resolution options similar to

those used in the US and some of which are referred to

in

paragraph 39 above.

xiii. We also recommend that resolution options should

be

adopted based on the level of co

operation (discussed above) provided by a company that has identified an incident/s of

bribe paying.

2.8 Enforcement structure nd responsibility

41

. Currently, the Australian Federal Police (AFP) and the Australian Securities and Investment

Commission (ASIC) are tasked with the responsibility of enforcing Australia s foreign bribery

legislation .

2

http://www.gibsondunn.

co

m/publi

ca

tions/paqes/

201

4-Year-End-FCPA-Update.aspx

FCPA Resources Guide 2012


11




~ @

KordaMentha

forensic

42 . From the outside looking in , it appears that largely due to the historical lack

of

focus on enforcing

foreign bribery, these agencies may not be adequately resourced to enforce foreign bribery

legislation. It should reasonably be expected that this situation will be exacerbated if

many ofthe

recommendations to flow from this inquiry are implemented. This and the ongoing external

pressure being applied by organisations such as the OECD should result in an increase in

complaints and investigation activity.

43 Clear strategic direction for the enforcement

of

foreign bribery legislation will be fundamental to the

success of foreign bribery enforcement. If not already established, a working committee consisting

of senior regulators and compliance and risk professionals within the private sector should be

established to set enforcement objectives and activities that involve not only reactive investigation

of bribery incidents, but proactive preventative and detective measures . Proactive measures might

include without notice compliance reviews

of

companies that have global operations . These

reviews would include analysis

of

transactions to identify possible non-compliance and

assessments

of company

compliance programs

13

. This and reactive investigations assistance

could be provided under a public/private partnership arrangement.

. It may be worthwhile to consider whether to include in the proposed Commonwealth bribery

legislation

some

of the legislative provisions in the ASIC Act which assist ASIC in conducting

complex investigations and achieving regulatory outcomes, including:

• Coercive power to require persons to appear for examination on oath and to answer

questions

14

• A provision requiring persons to provide 'all reasonable assistance' in connection with an

investigation

or

potential prosecution. (subject to significant safeguards).

15

These powers

are particularly useful in seeking to obtain witness statements from persons who may not

be willing to volunteer their assistance in relation to the investigation

or

prosecution

of

other persons16

• Facilitative provisions enabling statements made by persons at compulsory examinations

to be admissible in any administrative, civil

or

criminal proceedings (subject to significant

safeguards) 17

• A greater range of remedies for bribery offences in addition to criminal prosecution ,

including enforceable undertakings, administrative, civil and civil penalty actions .

45. Adequate resources , in particular financial and human resources, should be allocated to foreign

bribery enforcement. This may mean bolstering dedicated resources of the current regulators , e.

g

ensuring that appropriately skilled and experienced financial investigators, accountants , lawyers

and technology experts are involved. Ultimately, and depending upon the progress that Australia

makes

in its enforcement efforts, establishment

of

a dedicated anti-corruption

agency may

have to

be considered.

46. Funding for these activities is always problematic given the apparent relentless budgetary cuts to

government agencies, including to ASIC. Serious consideration should be given to establishing a

self-funding regime such as that in place in the US where the penalties imposed and settlements

reached with offending corporations are used to fund the operations of the regulator.

13

Section 28 of the Australian Securities and Investments Commission Act enables ASIC to utilise its coercive powers for the purposes

of ensuring compliance with the Corporations Legislation

14

See section 19(2)(b) of the ASIC Act

15

See sections 19(2)(a) and 49 (3)

of

the ASIC Act

16

Reasons include confidential ity and potenti

al

breach

of

D O Insurance policy conditions regarding admissions

7

See sections 76 to 79 of the ASIC Act


12




Recommendation

s

ordaMentha

forensic

xiv.

In

order to enhance Australia s reputation

in

the global marketplace, w recommend that

adequate resources should

be

allocated by the Australian Government

to

the enforcement

of foreign bribery.

xv

Public private partnerships should

be

considered to assist with foreign bribery

investigations and compliance activities.

xvi. A review of foreign bribery enforcement and its efficacy should be undertaken at some

point

in

the future. The output of this review should also include

an

assessment of whether

a Commonwealth standalone, independent anti-corruption body should be established.

xvii . Any financial resolutions reached with Australian companies as a result of investigations by

the regulators should be allocated

to

those regulators to fund future regulatory operations

and activity. A portion of this funding should also

be

allocated to provide financial rewards

to

whistleblowers who have provided compelling and original evidence that plays a key role

in

resolving foreign bribery incidents (refer recommendation xi.) .

2 9 Conclusion

47. Foreign bribery and corruption have far reaching consequences for a wide range of stakeholders

and this is concisely explained

in

the Foreword

to

the UK Bribery Act Guidance, which states :

Bribery

bl

ights lives. Its immediate victims include firms that lose out unfairly. he wider victims are

government and society undermined

by

a weakened rule of aw and damaged social and

-economic development. t stake is the principle of free and fai

competition which stands

diminished by each bribe offered

or

accepted.

48. Many of us at KordaMentha who have lived and worked

in

developing nations have seen the

devastating effect of foreign bribery and corruption first hand . As such , we appreciate the

opportunity to provide our views about how Australia s forei

gn

bribery legislation and its

enforcement regime might be enhanced .

49. We wish the Senate inquiry committee all the very best

in

its review of foreign bribery and hope

that meaningful change will result.

50 . If we can

be

of further assistance, please do not hesitate to contact Stephen Helberg on

or via email at or David Lehmann on or

via email at

Regards

Stephen Helberg

Partner

24 August 2015

David Lehmann

Director

24 August 2015

to the Senate Economics References Committee inqui ry into foreign br ibery 24 August 201 5

13




pp

endix Terms

o

reference

The terms of reference of the inquiry are to specifically inquire into:

KordaMentha

fo rens ic

a the measures governing the activities of Australian corporations, entities, organisations, individuals,

government and related parties with respect to foreign bribery, with specific reference to the

effectiveness of, and any possible improvements to, Australia s implementation of ts obligations

under:

i. the OECD Convention on Combating Bribery

of

Foreign Public Officials in International Business

Transactions (OECD Convention), and

ii. the United Nations Convention against Corruption (UNCAC); and

b. as part

of,

or

in

addition

to,

paragraph

a)

, the effectiveness

of,

and any possible improvements

to,

existing Commonwealth legislation governing foreign bribery, including:

i. Commonwealth treaties, agreements, jurisdictional reach, and other measures for gathering

information and evidence,

ii. the resourcing, effectiveness and structure of Commonwealth agencies and statutory bodies to

investigate and, where appropriate, prosecute under the legislation, including cooperation

between bodies,

iii. standards of admissible evidence,

iv. the range of penalties available to the courts, including debarment from government contracts

and programs,

v. the statute

of

imitations,

vi. the range of offences, for example:

A. false accounting along the lines of the books and records head in the US Foreign

Corrupt Practices Act,

B. increased focus on the offence

of

failure to create a corporate culture

of

compliance ,

C liability of directors and senior managers who do not implement

a

corporate culture of

compliance, and

D. liability of parent companies for subsidiaries and intermediaries, including join t ventures,

vii. measures to encourage self-reporting, including but not limited to, civil resolutions, settlements,

negotiations, plea bargains, enforceable undertakings and deferred prosecution agreements,

viii. official guidance to corporations and others as to what is

a

culture of compliance

nd a

good

anti-bribery compliance program,

ix. private sector whistleblower protection and other incentives to report foreign bribery,

x.

facilitation payment defence,

xi.

use of suppression orders in prosecutions,

xii. foreign bribery not involving foreign public officials, for example, company to company or

international sporting bodies,

xiii. the economic impact, including compliance and reporting costs, of foreign bribery, and

xiv

any other related matters.

to

the Senate Economics References Committee inquiry into foreign bribery 24 August 2015




KordaMentha

forensic

ppendix Comparison of

leading

legislation

against

ustralian

legislation

Description

Prohibited Conduct

Who is covered?

UK Bribery Act

1. Active bribery - promising or paying financial or

other advantage to another (Section

1)

2. Passive bribery - receivi

ng

or agrees to receive

financial or other advantage (Section

2)

to induce a person to perform improperly a relevant

function or activity

(Applies to both public and private sector)

3. Bribery o foreign public officials (FPO) (Section 6).

Intent to:

i. influence FPO

in

capacity as FPO

ii. Intend to obtain or retain :

a. Business or

b. An advantage in the conduct of business

4. Failure of commercial organisation to prevent

bribery (Section 7)

Defence: Adequate procedures

Bribery (Sections 1, 2 and

6)

Any person (includes body corporate)

Failure of commercial organisation to prevent bribery

(Section 7)

Relevant commercial organisation, being:

UK body corporate carrying

on

business in UK

or elsewhere

Body corporate (incorporated elsewhere) , but

carries on business

in

UK

to

the Senate Economics References Committee inquiry into foreign

br

ibery

FCPA

1.

Bribery of foreign public official

Offering to pay, paying, promis ing to pay, or

authorizing the payment of:

i.

Money, or offer, gift, promise to give, or

authorisation

o

the giving of anything of value.

ii. anything of value to a foreign official

in

order to:

a.

influence any act or decision of the foreign

official in his or her official capacity or

b. to secure any other improper advantage in

order to obtain or r etain business.

((15 U.S.C. §78dd-1(a), §78dd-2(a), §78dd-3(a))

2. Accounting Provisions (aka 'books records

provisions)

iii. make and keep books, records, and accounts

that ,

in

reasonable detail , accurately and fairly

reflect an issuer's transactions and dispositions

of an issuer's assets. (15 U.S.C. §78m b) 2)

(A)

iv. must devise and maintain a system o nternal

accounting controls sufficient to assure

management's control , authority, and

responsibility over the firm's assets. §78m(b)

2) (B).

Bribery:

1. 'issuers' and their officers, directors, employees,

agents , and shareholders ; (15 U.S.C. S78dd-1)

2. 'domestic concerns' and their officers, directors,

employees, agents, and shareholders; and (15

U.S.C. S78dd-2)

3. certain persons and entities , other than issuers and

domestic concerns, acting while in the territory of

the United States. (15 U.S.C. S78dd-3)

Accounting provisions:

Issuers

24 August 2015

Australian Criminal Code

Bribing a foreign public official

1. provides a benefit to another person; or

2.

causes a benefit to

be

provide to another person; or

3. offers to provide, or promises to provide, a benefit to

another person; or

4. causes the offer o f the provision o a benefit, or a

promise of the provision o a benefit, to be made to

another person; and

i. The benefit

is

not legitimately due to the other

person; and

ii. Done with the intention of influencing a foreign

public official (who may be the other person) in

the exercise

o the official's duties as a foreign

public official in order to :

a.

Obtain or retain business; or

b.

Obtain or retain a business advantage that

is not legitimately due to the recipient, or

intended recipient of the business

advantage

(Australian Criminal Code - Section 70.2)

Bribery of foreign public official (Section 70.2)

Any person

(includes body corporate)

15




Description

What conduct is

covered

Jurisdiction

Business promotion

expenditures

Allowable under

local l w

UK Bribery Act

UK Partnership carrying on business in UK or

elsewhere

Partnership (established elsewhere) , but carries on

business in UK

Bribery (Sections 1 2

Focus on improper performance o public function

rather than business nexus.

Bribery o foreign public official (Section 6

Focus is

on

obtaining or r etaining:

business, or

an advantage in the conduct of business.

Individuals who are:

UK nationals, or

ordinarily resident in the UK, and

Organizations that are either:

established in the UK, or

conduct some part o their business

in

the UK

Section 12 4))

No defense, but guidance states such expenditures

are not 'improper' and therefore not a Bribery Act

violation

No violation is permissible under written laws o

foreign country (applies only in case of bribery of

foreign public official; otherwise a factor to be

considered)

Section 6 3))

to the Senate Economics References Committee inquiry into foreign bribery

FCPA

Individuals

Bribery

Payment must be ' .. o secure any other improper

advantage

in

order

to

obtain or retain business .'

• (Business purpose test - broadly interpreted)

Applies to both:

Domestic and

Overseas conduct

Issuers and domestic concerns (as well as officers,

directors, employees, agents or stockholders) may

be prosecuted for using:

US ma\

s

or

Any means of instrumentality of interstate

commerce in furtherance

o

corrupt payments

to a FPO.

Affirmative defense for r easonable and bona fide

expenditure directly related to the business

promotion or contract performance.

Section 78dd-1

c)

2))

• Defence - if payment is lawful under written

laws/regulations of foreign country.

Section 78dd-1 c)

1)

24 August 2015

or

da en

tha

forensic


Bribery (Section 70.2)

1. 'Obtain or retain business; or

2. Obtain or retain a business advantage that is

not legitimately due to the recipient, or

intended recipient, o the business

advantage . .

Conduct constituting the alleged offence occurs

(Section 70 .

5

:

wholly or partly in Australia ; or

wholly or partly

on

board

an

Australian aircraft

or ship; or

Conduct constituting the offence occurs wholly

outside of Australia and:

at time

o

offence, person

is

an Australian

citizen

at time of offence, the person is resident of

Australia; or

at time of offence, the person is a body

corporate incorporated by or under a law of the

Commonwealth or o a State or Territory.

No provisions relating to business promotion

expenditures.

Defence - conduct lawful in foreign public official's

country

Section

70

.

3)

6




Description

Facilitation

payments

Civil criminal

enforcement

Penalties

UK Bribery Act

No facilitating payments exception, although

guidance

is

likely to provide that payments of small

amounts of money are unlikely to be prosecuted

Criminal enforcement only by the UK Serious Fraud

Office (SFO) (Section 10)

Summary conviction:

Imprisonment not exceeding

12

months; or

Fine not exceeding the statutory maximum (£5 ,000)

Indictment:

Individuals

Imprisonment not exceeding 1

O

years and a fine

(amount unlimited);

Entities

Potentially unlimited fines

lo the Senate Economics References Committee inquiry into foreign bribery

FCPA

Exception for,payment to a foreign official to expedite

or secure the performance of a routine (non

discretionary) government action. (Section 78dd-1

(b))

Both civil and criminal proceedings can be brought

by DOJ (Bribery provisions) and SEC (Accounting

provisions)

Bribery (Section 78dd-2 (g))

Individuals

Fine of up to 100,000

Imprisonment of up to five years

Entities

Fine of up to 2 million

Books and records/internal control violations (Section

78ff (a))

Entities

Fine of up to 25 million

Individuals

Fine of up to

5

million

l m p r i s o n m n ~ of

up to 20 years

ollateral consequences

i. Suspension or debarment from contracting

with federal government

ii. Cross-debarment by multilateral development

banks

iii. Suspension or revocation of certain export

privileges

iv.

Appointment of compliance monitor

24

August 2015

orda entha

fo

rensic


Defence - facilitation payments (Section 70.4)

Value of benefit minor

in

nature

Conduct engaged in for the sole or dominant

purpose of expediting or securing the

performance of a routine government action of

a minor nature

As soon as practicable after the conduct

occurred, the person made a record of the

conduct that complies with ss .3.

Australian Federal Police

ASIC (False accounting other provisions)

Individual

Imprisonment for not more than 10 years

Fine not more than 10 ,000 penally units (penally unit =

180. Max - 1.8 million)

Body Corporate

A fine not more than the greatest of :

100,000 penally units ( 18 million)

• f court can determine value

of

benefit ..directly or

indirectly obtained reasonably attributed to the

conduct constituting the offence - 3 limes the value

of that benefit

f court cannot determine the value of the benefit

obtained - 10% of the annual turnover during the

period of 12 months ending at the end of the month

in which the conduct constituting the offence

occurred.

17




ppendix

UK

Bribery

ct

Guidance

to the Senate Economics References Committee inquiry into foreign bribery 24 August 2 15

Kor

daMent

ha

for s ic

8




uidance

abo

ut

procedures which relevant commercial

orga

ni s

t ions c n put

into

pl

ce to

pr

event

pe rso ns associated

with

them from bri b

in

g

section 9

o

the Bribery Act 2010)




The Bribery Act 2010 Guidan e

Foreword

Bribery blights

li

ves. Its

im

mediate victims

include firms

that

lose out unfa irly. The w

id

er

victims

are government

and

society

undermined by a weakened

ru

le of law

and

damaged

social and

economic

developme

nt.

At

stake

s the principle of

free and

fair

competition which sta

nd

s di

minished

by each bribe

offered or

accepted.

Tackling this scourge

is

a priority for anyone

who cares about the future of business, the

developing world or international trade. That

is

why the entry into force of the Bribery

Act on

1

July 2011

is

an

important step

forward for both the UK and UK

plc.

In line

with the

Act

s statutory requirements, Iam

publishing this guidance

to

help organisations

understand the legislation and deal with the

risks

of bribery.

My

aim is

th t it

offers clarity

on

how the

law

will

operate.

Readers of this document

will

be aware

th t

the Act creates offences of offering or

receiving bribes, bribery of foreign public

officials and of

fa

ilure to prevent a bribe

being paid on an organisation s behalf.

These are certainly tough rules.

But

readers

should understand too

th t

they are directed

at maki

ng life

diff icult for the mavericks

responsible for corrupt ion not unduly

burdening the vas t majority of decent,

law-abiding firms .

2

I have listened carefully to business

representatives to ensure the Act is

implemented in a workable way - especially

for small firms

th t

have limited resources .·

And

as I hope this guidance shows,

combating the risks of bribery

is

largely

about common sense, not burdensome

procedures. The core principle it sets out

is

proportionality. It also offers case study

examples

th t

help illuminate the application

of the

Act

.

Rest

assured -

no

one wants to

stop firms getting to know their clients by

taking them

to

events like Wimbledon or

the Grand

Prix

. Separately, we are publishing

non-statutory quick start guidance.

Iencourage small businesses to turn to th is

for a concise introduction to how t hey can

meet the requirements of t

he law

.

Ultimately, the

Bribery Act

matters

for Britain

because our existing legislation

is

out ofdate.

n updating our rules Isay to our international

partners th t the UK wan ts to play a leading




role

in

stamping out corruption and supporting

trade-led international development. But

Iwould argue too

th t

the Act is directly

beneficial for business.That's because

it

creates clarity and a level playing field

helping to align trading nations around decent

standards. lt also establishes a statutory

defence : organisations which have adequate

procedures in place to prevent bribery are

in

a stronger position

if

isolated incidents have

occurred in spite of their efforts.

Some have asked whether business can

afford this legislation - especially at a time of

economic recovery. But the choice is a false

one.We don't have to decide between tackling

corruption and supporting growth. Addressing

bribery

is

good for business because

it

creates

the conditions for free markets to flourish .

Everyone agrees bribery is wrong and t ha t

rules need reform.

In

implement

ing

this Act

we

are striking a blow for the rule of law and

The

r

ibery Act 2010 Guidan

ce

growth of trade. I commend this guidance

to you as a helping hand in doing business

competitively and fairly.

Kenneth larke

Secretary of State for

Ju

stice

March 2011

3




Contents

Introduction

overnment

policy and Sect ion 7

of the

Bribery Act

Section 1 Offences

of

brib ing another person

Sect ion 6 Bribery

of

a foreign official

Section 7 Failu re

of

commercial organisations

to

prevent bribery

The six principles

Appendix

A:

Bribery Act 2010

case

studies

The Bribery Act 2 1 Guidance

6

8

1

5

2

32

5




The Bribery Act 2010 - Guidance

ntroduction

1

2

The Bribery

Act

2010 received Royal 3

Assent on 8 April 2010. Afull copy of

the

Act

and its Explanatory Notes

can

be

accessed at: www .ops

i

gov.

uk

/acts/

acts2010/ukpga_20100023_en_1

The

Act

creales a new offence under

section 7 which

can be

committed

by


1

which fail to 4

prevent persons associated with them

from committing bribery

on

their behalf.

It is

a

full

defence for

an

organisation

to prove th t de spite a particu lar case

of bribery it nevertheless

had

adequate

procedures

in

place to prevent persons

associated with

it

from bribing. Section 9

of the Act requires the Secreta ry of State

to publish guidance about pro cedures

which

commercial orga

ni

sations

can

put

in

place to prevent persons associated with

them from

bribing.This document sets

out that guidance .

The Act

extends to England Wales,

Scotland and Northern Ireland .This

guidance is

for

use in all parts of the

United Kingdom . In accordance with

section 9 3) of the

Act,

the

Sco tt ish

Ministers have been consulted regarding

the content of this guidan ce.The

Northern

Ireland

Assembly ha s also been 5

consulted .

This

guidance explains the policy

behind section 7 and is intended to help

rnmmercial·organisation s of all sizes

and se ctors understand what sorts of

procedures they can put

in place

to prevenl

bribery as mentioned in section

7 1).

The guidance is designed lo

be

of genera l

application and

is

formulated around

six gu

iding principles, each followed

by

commentary and examples.The guidance

is not prescriptive and is not a one

size-fi

ts-all document.The question of

whether

an

organisation had adequate

procedures in place to prevent bribery in

the context of a

pa

rt icular prosecution is

a matter that

can

only

be

resolved by the

courts taking into account the particular

fa cts and ci rcumstances of the case.The

onus will remain on the organ isation,

in

any case where it seeks to

rel

y on the

defence, to

prove

that

it

had adequate

procedures

in

place to prevent bribery.

Ho wever, departures

from

the suggested

procedures contained within the

guidance will not of itself give rise to a

presumption that

an

organisation does

not

ha

ve adequate procedures .

If your organi sation is small or medium

siz

ed the applicati on of t

he prin

ciples

is

likely

to suggest procedures that are

different from those t

ha

t may be right

fo

r

a large multinational org

ani

sation.

The

guidance suggests certain procedures, but

they may

no

t a

ll be

applicable to your

circumstance

s. Sometimes,

you may

have

alternati

ves

in place that are also adequate.

See paragraph 35 below on t he definit ion of the phra

se

' ommercial organis t ion'.

6




6 As the principles make clear commercia l

organisations should adopt a r sk-based

approach to managing bribery

risks

Procedures should

be

proportionate to

the

risks faced

by an

orga

ni

sation . No

policies or procedures are capable of

detecting and preventing all bribery.

A risk-based approach

will

however

serve to focus the effort where it

is

needed and

will have

most impact. A

risk

-based approach recognises that the

bribery threat to organisations varies

across jurisdictions business sectors

business partners and transactions.

7 The language used

in

this guidance

reflects its non-prescriptive nature.

The six principles are intended to

be

of

general application and are therefore

expressed in neutral but affirmative

language.The commentary following

each of the principles is expressed more

broadly.

8 All te rms used in this guidance have

the same meaning as in the

Bribery

Act

2010.Any examples of particular types

of conduct are provided for illustrative

purposes only and do not constitute

exhaustive lists

of

relevant conduct.

The ribery c t 2 1 Gu idance

7




The Bribery

Act

2010 -

Gu

idance

Government po licy and

Section

of the Bribery ct

9 Bribery

undermines democracy and

11

the rule of law and poses very serious

threats to sustained economic progress in

developing and emerging economies and

to the proper operation of free markets

more generally. The

Bribery

Act 2010

is intended to respond to these threats

and to the extremely broad range of

ways th t bribery can

be

committed. It

does this

by

providing robust offences,

enhanced sentencing powers for the

courts (raising the maximum sentence for

bribery committed by

an

individual from

7 to 10 years imprisonment) and wide

jurisdictional powers (see paragraphs 15

and

16 on

page

9).

2

10

The

Act

contains two general offences

covering the offering, promising or

giving of a bribe (active bribery) and

the requesting, agreeing to receive or

accepting

of

a bribe (passive bribery)

at sections 1 and 2 respectively. It also

sets out two further offences which

specifically address commercial bribery.

Section 6 of the Act creates an offence

relating to bribery of a foreign public

official

in

order

to

obtain or retain

business or

an

advantage

in

the conduct

of

business

2

, and section 7 creates a

new

form of corporate liability for failing to

prevent bribery

on

behalf of a commercial

organisation .

More

detail about the

sections 1, 6 and 7 offences is provided

under the separate headings below.

The objective of the

Act

is not to bring

the

full

force of the criminal

law

to bear

upon well

run


that experience

an

isolated incident

of

bribery on their behalf. So

in

order to

achieve

an

appropriate balance, section

7 provides a

full

defence.

This is in

recognition of the fact t hat no bribery

prevention regime will

be

capable of

preventing bribery at

all

times . However,

the defence

is

also included

in

order to

encourage commercial organisations

to put procedures in place to prevent

bribery by persons associated with them.

The

application of bribery prevention

procedures by commercial organisations

is

of significant interest to those

investigating bribery and

is

relevant

if an

organisation wishes to report

an

incident of bribery to the prosecution

authorities -

for

example to the Serious

Fraud

Office

SFO)

which operates

a policy

in

England and Wales and

Northern Ireland of co-operation with

commercial organisations that self-refer

incidents of bribery (see Approach of the

SFO

to dealing with overseas corruption

on the

SFO

website).

The

commercial

organisation s willingness to co-operate

with

an

investigation under the Bribery

Act

and to make a

full

disclosure will also

be

taken into account

in

any decision

as

to whether it is appropriate to commence

criminal proceedings.

2 Conduct amount ing to br

ib

ery of a foreign public official could also be charged u

nd

er section 1 of

the

Act. It

wi

ll be

fo

r

pr

osecutors

to

select t he most appropriat e charge.

8




13

In

order to

be

liable under sect

ion

7 a

commercial organisation must have

failed to prevent conduct

that

would

amount to the commission

of an

offence

under sections 1 or 6, but

it

is

irre levan

t

whether a person has been convicted

of

such

an

offence. Where the prosecution

cannot prove beyond reasonable doubt

that

a sections 1 or 6 offence has been

committed the section 7 offence

will

not

be

triggered.

14

The

section 7 offence is in addition to,

and does not displace, liability which

might arise under sections 1 or 6

of

the

Act

where the commercial organisation

itself commits

an

offence by virtue of the

common law identification princ

ip

le.

3

The Bribery Act 2010 Guidance

urisd

ction

15 Section 12 of the

Act

provides

that

the

courts

will

have jurisdiction over the

sections

1,

2

4

or 6 offences committed

in

the

UK,

but they will also have

jurisdiction over offences committed

outside the UK

where the person

committing them has a close connection

with the

UK by

virtue of being a

British

national or ordinarily resident

in

the

UK

, a

body incorporated

in

the

UK

or a Scottish

partnership.

16

However,

as

regards section

7,

the

requirement of a close connection

with the

UK

does not apply. Section

7(3) makes clear that a commercial

organisation can

be

liable for conduct

amounting

to

a section 1 or 6 offence

on

the part of a person who is neither

a

UK

national or resident in the UK, nor

a body incorporated or formed in the

UK

. In addition, section 12(5) provides

that

it

does not matter whether the

acts or omissions which form part of the

section 7 offence take part in the UKor

elsewhere. So, provided the organisation

is

incorporated or formed

in

the

UK,

or

that

the organisation carries on a

business or part of a business in the

UK

(wherever

in

the world

it

may

be

incorporated or formed) then UK courts

will

have jurisdict

ion

(see more

on

this at

paragraphs 34 to 36) .

3 See section 5 and Schedule 1 to the Interpretat ion Act 1978 which provides that the word person where used in an Act includes bodies

corporate and un

in

corporate. Note also

the

common law identificat ion principle as defined by cases such as Tesco Supermarkets v

Nattrass

[1972]

AC 153

wh

ich provides th at corpora

te

liability arises only where t he offence is committed

by

a natural person who is the

directing mind or wi ll of the organisation.

4 Although th is particular offence is not rele

va

nt fo r the purposes of section Z

9





ection :

f ~ e n c e s

of

bribing another

person

17

18

Section 1 makes

it an

offence for a person

{ P )

to offer, promi

se

or

give

a financial or

other advantage to another person

in

one

of two cases:

• Case applies where P intends the

advantage to bring about the improper

performance

by

another person of

a relevant function or activity or to

reward such improper performance.

• Case 2 applies where P knows or

believes that the acceptance of the

advantage offered, promised or

given

in

itself constitutes the improper

performance of a relevant function or

activity.

Improper performance

is

defined at

sections

3,

4 and 5. n summary, this

means performance which amounts to

a breach

of an

expectation that a person

will

act

in

good faith, impartially, or

in

accordance with a position

of

trust .

The

offence applies to bribery relating to any

function of a public nature, connected

with a busine

ss,

performed

in

the course

of a person s employment or performed

on behalf of a company or another body

of persons.Therefore, bribery in both the

public and

priva te

sectors

is

covered.

19 For the purposes of deciding whether a

function or activity has been performed

improperly the test

of

what is expected

is a test

of

what a reasonable person

in

the

UK

would expect

in

relation to the

performance of that function or activity.

Where the performance

of

the function

or activity

is

not subject to

UK

law (for

10

example,

it

ta

kes

place

in

a country

outside

UK

jurisdiction) then any local

custom or practice must be disregarded

- unless permitted or required

by

the

written

law

applicable to

that

particular

country. Written

law

means any written

constitution, provision made by or under

legislation applicable to the country

concerned or any judicial decision

evidenced

in

published written sources.

2 By

way of illustration, in order to proceed

with a case under section 1 based

on an

allegation

that

hospitality was intended

as

a bribe, the prosecution would need to

show that the hospitality was intended to

induce conduct that amounts

tO

a breach

of an expectation that a person

will

act

in

good faith, impartially, or

in

accordance

with a position oftrust.

This

would be

judged

by

what a reasonable person

in

the

UK

thought.

So, for

example,

an

invitation

to

foreign clients to attend a

Six

Nations match at Twickenham

as

part

of a public relations exercise designed

to cement good relations or enhance

knowledge in

the organisation s

field is

extremely unlikely to engage section

1

as

there is unlikely to be evidence

of an

intention to induce improper

performance of a relevant function.





Section :

Bribery

of

a

foreign public

official

21

Section 6 creates a standalone offence

of bribery of a fore ign public official. The

offence is committed where a person

offers, promises or gives a financial or

other advantage to a foreign public

official with the intention of influencing

the offici

al in

the performance of

his

or

her official functions. The person offering,

promising or giving the advantage must

also intend to obtain or retain business or

an advantage in the conduct of business

by doing so. However, the offence is not

committed where the official

is

permitted

or required by the applicable written

law

to

be

influenced

by

the advantage.

A foreign pub lic officia l includes

officials, whether elected or appointed,

who hold a legislative, administrative or

judicial position of any

kind

of a country

or territory outside the

UK. It

also

includes any person who performs public

functions in any branch of the national,

local or municipal government of such

a country or territory or who exercises

a public function

for

any public agency

or public enterprise of such a country or

territory, such

as

professionals working

for public healt h agencies and officers

exercising public functions in state

owned enterprises. Foreign public officials

can also be an official or agent of a public

international organisation, such as the

UN

or the World

Bank

.

23 Sections 1 and 6 may capture the same

conduct but will do so in different ways.

The

policy t hat founds the offence at

section 6

is

the need to prohibit the

influenci

ng of decision

maki

ng in the

context of publicly funded business

opportunities

by

the inducement of

personal enrichment of foreign public

officials or to others at the official s

request, assent or acquiescence.

Such activity

is

very

likely

to involve

conduct which amounts to improper

performance of a relevant function

or activity to which section 1 applies,

but, unlike section

1,

section 6 does not

require proof of

it or an intention to

induce it. This

is

because the exact nature

of the functions of persons regarded

as

foreign public officials

is

often very

difficult

to

ascertain with any accuracy,

and the securing of evidence will often be

reliant

on

the co-operation of the state

any such officials serve. o require the

prosecution to rely entirely

on

section

1 would amount to a very significant

deficiency

in

the ability of the legislation

to address this particular mischief.That

said,

it is

not the Government s intention

to criminalise behaviour where no such

mischief occurs, but merely to formulate

the offence to take account of the

evidential difficulties referred to above. In

view of its wide scope, and its role

in

the

new form of corporate

liabili

ty at section

7 the Government offers the following

further explanation of issues arising from

the formulation of section 6.

oca

l law

24

For the purposes of sect ion 6 prosecutors

will be required to show not only that

an

advantage was offered, promised

or given to the official or

to

another

person

at

the official s request, assent

or

acquiescence, but

that

the ad vantage was

11




e Bribery Act 2010 Guidance

one that the official was not permitted

or required

to be

influenced

by as

determined

by

the written

law

applicable

to the foreign official.

25 In

seeking tenders for publicly funded

contracts Governments often permit

12

or require those tendering for the

contract to offer,

in

addition to the

principal tender, some

kind

of

additional

investment

in

the local economy

or benefit

to

the local community.

Such

arrangements could

in

certain

circumstances amount to a financial

or other advantage to a public official

or

to

another person at the official s

request, assent or acquiesc.ence. Where,

however,

re

levant written

la

w permits

or requires the official to be influenced

by

such arrangements they

will fall

outside the scope of the offence.

So,

for

example, where local planning

law

permits community investment

or requires a foreign public official to

minimise the cost

of

public procurement

administration through cost sharing with

contractors, a prospective contractor s

offer of free training

is

very unlikely

to engage section 6.

n

circumstances

where the additional investment would

amount to

an

advantage to a foreign

public official and the local

law

is silent

as

to whether the official is permitted

or

required to

be

influenced by

it,

prosecutors

will

consider the public

interest in prosecuting. This

will

provide

an

appropriate backstop in circumstances

w

he re

the evidence suggests

that

the

offer of additional investment

is

a

legitimate part of a tender exerci

se.

Hospitality promotional and other

business expenditure

6

Bona

fide hospitality and promotional, or

other business expenditure which seeks

to improve the image

of

a commercial

organisation, better to present products

and services, or establish cordial

relations,

is

recognised

as an

established

and important part of doing business

and it

is not the intention of the Act

to criminalise such behaviour.

The

Government does not intend

for

the

Act

to prohibit reasonable and proportionate

hospitality and promotional or other

simi

lar business expenditure intended

for these purposes.

It is,

however, clear

that hospitality and promotion

al or

·

other similar business expenditure can

be

employed as bribes.

27

n

order to amount to a bribe under

section 6 there must

be an

intention

for

a

financial or other advantage

to

influence

the official in his or her official role and

thereby secure business or a

bu si

ness

advantage .

In

this regard,

it

may

be in

some circumstances that hospitality

or

promotional expenditure

in

the form

of travel and accommodation costs

does not even amount to

a

financial or

other advantage

to

the relevant official

because

it is

a cost

that

would otherwise

be

borne by the relevant foreign

Government rather than the official

him

or herself.




28

Where the prosecution

is

able to

establish a financial or other advantage

has been offered promised or given

it

must then show that there is a sufficient

connection between the advantage and

the intention to influence and secure

business or a business advantage . Where

the prosecution cannot prove this to

the requisite standard then no offence

under section 6

will be

committed .

There may be direct evidence to support

the existence of this connection and

such evidence may indeed relate to

relatively modest expenditure. In

many cases however the question

as

to whether such a connection can be

established

will

depend on the totality

of the evidence which takes into account

all of the surrounding circumstances.

It

would include matters such

as

the

type and level

of

advantage offered

the manner and form in which the

advantage is provided and the level of

influence the particular foreign public

official has over awardi

ng

the business.

In this circumstantial context the more

lavish the hospitality or the higher

the expenditure in relation to travel

accommodat

ion

or other similar business

expendit

ure

provided to a foreign public

official then generally the greater the

inference that it

is

intended to influence

the official to grant business or a business

advantage in return .

The Bribery Act 2 1

Guidance

29

The

standards or norms applying in a

particular sector may also be relevant

here. However simply providing

hospitality or promotional or other

similar business expenditure which

is

commensurate with such norms

is

not

of itself evidence that no bribe was paid

if

there

is

other evidence

to

the contrary;

particularly

if

the norms in question are

extravagant.

3 Levels

of expenditure will not therefore

be the only consideration in determining

whether a section 6 offence has been

committed.

But

in the absence of any

further evidence demonstrating the

required connection

it

is unlikely for

example that incidental provision of a

routine business courtesy will raise the

inference

that it

was intended to have

a direct impact on decision making

particularly where such hospitality

is

commensurate with the reasonable and

proportionate norms for the particular

industry;

e g

. the provision of airport to

hotel transfer services to facilitate an

on-site visit or dining and tickets to an

event.

13





31 Some further examples might be helpful.

14

The

provision by a

U

mining company

of

reasonable travel and accommodation

to allow foreign public officials to visit

their distant mining operations so that

those officials may be satisfied of the high

standard and safety of the company s

installations

and

operating systems

are circumstances that fall outside the

intended scope of the offence.

Flights

and

accommodation to allow foreign public

officials

to

meet with senior executi

ves

of a

U

commercial organisation in New

York

as a matter

of

genuine mutual

convenience, and some reasonable

hospitality

for

the individual and

his

or her

partner, such as fine dining and attendance

at a baseball match are facts that are ,

in

themselves,

unlikely

to

raise

the necessary

inferences. However if the choice of New

York as the most convenient venue was in

doubt because the organisation s senior

executives could easily have seen the

official with

all

the relevant documentation

when th·

ey had

visited the relevant country

the previous week then the necessary

inference might be

raised. Similarly

s u p p l m ~ n t i n g

information provided to

a foreign public official on a commercial

organisation s background, track record

and expertise in providing private health

care with an offer of ordinary travel and

lodgings to enable a visit to a hospital run

by the commercial organisation

is

unlikely

to engage section 6.

On

the other hand,

the

provision

by that same commercial

organisation of a five-star holiday

for

the

foreign public off icial which is unrelated

to a demonstration of the organisation s

services is

all

things being equal, far more

likely to

raise

the necessary inference.

32

It may be that, as a result of the

introduction of the section 7 offence,

commercial organisations will review

their policies on hospitality and

promotional or other similar business

expenditure as part of the selection and

implementation of bribery prevention

procedures, so as to ensure th t they

are seen to be acting both competitively

and fairly.

It

is however, for individual

organisations, or business representative

bodies, to establish and disseminate

appropriate standards for hospitality and

promotional or other similar expenditure.




The Bribery Act 2 1 Guidance

Section : ailure of commercial organisations to

prevent bribery

A commercial organisation

will be

liable

to prosecution if a person associated

with it bribes another person intending

to obtain or retain business or

an

advantage

in

the conduct of business

for that organisation. As set out above,

the commercial organisation will have a

full defence

if

it can show

that

despite a

particular case of bribery

it

nevertheless

had adequate procedures

in

place to

prevent persons associated with it from

bribing. In accordance with established

case

law,

the standard of proof which the

commercial organisation would need to

discharge in order to prove the defence,

in

the event it

was

prosecuted, is the

balance of probabilities.

ommercial organisation

4 Only a relevant commercial organisation

can commit

an

offence under section 7 of

the Bribery

Act

. A relevant commercial

organisation

is

defined at section

7(5)

as

a body or partnership incorporated or

formed in the U irrespective

of

where it

carries on a business, or an incorporated

body or partnership which carries on a

business or part of a business

in

the

U

irrespective of the place of incorporation

or formation. The key concept here is

that

of an organisation which carries on

a business .The courts wi

ll

be the final

arbiter as to whether

an

organisation

carries on

a business

in

the

U

taking

in

to account the particular facts

in

individual cases. However, the following

paragraphs set out t

he

Government s

intention as regards the application of the

phrase.

5 As regards bodies incorporated,

or

partnerships formed,

in

the UK, despite

the fact

that

there are many ways

in

which a body corporate or a partnership

can pursue business objectives, the

Government expects that whether

such a body or partnership can

be

said

.to be carrying on a business will be

answered by applying a common sense

approach. So long as the organisation in

question is incorporated (by whatever

means), or

is

a partnership,

it

does not

matter

if it

pursues primarily charitable

or educational aims or purely public

functions. It will

be

caught if it engages in

commercial activities, irrespective of the

·purpose for which profits are made.

6 As regards bodies incorporated, or

partnerships formed, outside the

United Kingdom, whether such bodies

can properly

be

regarded as carrying

on

a business or part of a business

in any part of the United Kingdom

will again

be

answered by applying a

common sense approach . Where there

is

a particular dispute as

to

whether a

business presence

in

the United Kingdom

satisfies the

test

in

the Act, the final

arbiter,

in

any particular case, will

be

the

courts as set out above. However, the

Government anticipates

that

applying

a common sense approach would mean

that organisations t ha t do not have a

demonstrable business presence

in

the

United Kingdom would not

be

caught.

The

Government would not expect, for

example, the mere fact that a company s

securities have been admitted to the

UK Listing Authority s Official List and

therefore admitted to trading

on

the

15




The Bribery Act 2010 idance

London Stock Exchange,

in

itself, to

qualify that company as carrying on a

business or part of a business in the

UK

and therefore falling within the definition

of a relevant commercial organisation

for the purposes of section

7

Likewise,

having a

UK

subsidiary

will

not, in itself,

mean

that

a parent company

is

carrying

on a business in the UK, since a subsidiary

may act independently of its parent or

other group companies .

ssociated

person

37

A commercial organisation is liable under

section 7

if

a person associated with

16

it

bribes another person intending to

obtain

or

retain business or a business

advantage for the organisation . A

person associated with a commercial

organ

is

ation

is

defined at section 8

as

a

person who performs services for or on

behalf of the organisation.

This

person

can

be an

individual or

an

incorporated

or unincorporated body. Section 8

provides that the capacity in which a

person performs services for or on behalf

of the organisation does not matter, so

employees (who are presumed to

be

performing services

for

their employer),

agents and subsidiaries are included .

Section 8(

4),

however, makes

it

clear that

the question

as

to whether a person is

performing services for

an

organisation

is

to be de termined by reference to all the

relevant circumstances and not merely by

reference to the nature of t

he

relationship

between that person

and

the organisation.

The

concept of a person who performs

services

for

or

on

behalf of the organisation

is intended to

give

section 7 broad scope so

as

to embrace the whole range of persons

connected to

an

organisation who might

be capable of committing bribery on the

organisation s behalf.

8

This

broad scope means

that

contractors

could be associated persons to the

extent that they are performing services

for or on behalf of a commercial

organisation.

Also,

where a supplier can

properly

be

said to

be

performing services

for a commercial organisation rather than

simply acting as the seller

of

goods,

it

may also

be an

associated person.

9

Where a

supply chain involves

several

entities or a project

is

to

be

performed

by

a prime contractor with a series

of

sub

contractors,

an

organisation

is

likely

only

to

exercise control over its relationship with

its contractual counterparty. Indeed, the

organisation may only

know

the identity

of its

contractual counterparty.

It is

likely

that pe rsons who contract

with

that

counterparty will

be

performing

services for

the counterparty and not for other persons

in

the contractual chain .

The

principal way

in

which


may

decide to approach

bribery

risks

which arise

as a result ofa supply chain

is

by employing

the types of anti-bribery procedures

referred to elsewhere in this guidance

(e.g. risk-based

due

diligence and

the

use

of anti-bribery terms and conditions) in

the relationship with their contractual

counterparty,

and

by requesting t hat

counterparty to adopt a similar approach

wi

th the next party

in

the chain .




4 As

for joint ventures, these come in many

different forms, sometimes operating

through a separate legal entity, but

at other times through contractual

arrangements . In the case of a joint

venture operating t hrough a separate

legal entity, a bribe paid by the joint

venture entity may lead to liability for a

member of the joint venture if the joint

venture is performing services for the

member and the bribe

is paid

with the

intention of benefiting

that

member.

However, the existence of a joint venture

entity

will

not of itself mean that it is

associated with any of

it

s members. A

bribe paid

on

behalf of the joint venture

entity

by

one of its employees or agents

will

therefore not trigger liability for

members of the joint venture simply by

virtue of them benefiting

ind ir

ectly from

the bribe through their investment in or

ownership of the joint venture.

41

The situation will be different where

the joint venture is conducted through

a contractual arrangement.

The

degree

of control

that

a participant has over

that arrangement

is

ke ly to be one

of the relevant circumstances

that

would be taken into account in deciding

whether a person who paid a bribe in the

conduct of the joint venture business

was performing services for or

on

behalf

of a participant in that arrangement.

It

may

be

for example,

that an

employee

of such a participant who

has paid

a bribe

in order to benefit

his

employer is not

to be regarded as a person associated

with all the other participants in the

joint ventu re. Ordinarily, the employee

T

he Br

ibe

ry Act 2 1 uidance

of a participant

will

be presumed to be

a person performing services for and

on

behalf of

his

employer. Likewise

an

agent

engaged by a participant in a contractual

joint venture is

likely

to be regarded as a

person associated with that participant in

t he absence of evidence

that

the agent

is

acting on behalf of the contractual joint

venture as a whole.

42 Even

if it

can properly be said that

an

agent, a subsidiary, or another

person acting for a member of a joint

venture, was performing services for

the organisation,

an

offence

will

be

committed only

if

that agent, subsidiary

or person intended to obtain or retain

business or an advantage in the conduct

of business for the organisation.

The

fact

that an organisation benefits indirectly

from a bribe is very unlikely in itself, to

amount

to

proof of the specific intention

required by the offence. Without proof

of the required intention , liability will

not accrue through simple corporate

ownership or investment, or through

the payment of dividends or provision of

loans by a subsidiary to its parent. So for

example, a bribe on behalf of a subsidia

ry

by one of

its

employees or agents

will

not automatically involve liability

on

the

part of its parent company, or any other

subsidiaries of the parent company, if

it

cannot be shown the employee or agent

intended to obtain or retain business

or a business advantage for the parent

company or other subsidiaries.

This is

so even though the parent company or

subsidiaries may benefit indirectly from

the bribe.

By

the same

Loken liab

ty

17




The Bribery Act 2010 Gu idance

for

a parent company could arise where

a subsidiary

is

the person which pays a

bribe which

it

intends will result in the

parent company obtaining or retaining

business or

vice

versa.

43

The

question of adequacy of bribery

prevention procedures

will

depend in

the final analysis

on

the facts of each

case, including matters such

as

the

level of

control over the activities

of

the

associated person and the degree

of

risk

that requires mitigation .

The

scope

of

the definition at section 8 needs to

be

appreciated within this context. This point

is

developed in more detail under the

six

principles set out

on

pages

20

to 31.

F

i

tation payments

Small bribes paid to facilitate routine

Government action - otherwise called

facilitation payments - could trigger

either the section 6 offence

or,

where

there

i s an

intention to induce improper

conduct, including where the acceptance

of

such payments

is

itself improper, the

section 1 offence and therefore potential

liability under section

7.

45

As

was the case under the old law,

the Bribery Act does not unlike

US

foreign bribery

law)

provide any

exemption for such payments.

The

2009

Recommendation

of

the Organisation

for Economic Co-operation and

Development

5

recognises the corrosive

effect

of

facilitation payments and

asks adhering countries to discourage

companies from making such payments.

Exemptions in this context create

artificial distinctions that are difficult

to enforce, undermine corporate anti

bribery procedures, confuse anti-bribery

communication with employees and

other associated persons, perpetuate

an

existing culture

of

bribery and have the

potential to be abused .

6

The

Government does, however,

recognise the problems that commercial

organisations face

in

some parts

of

the world and in certain sectors.

The

eradication of facilitation payments

is

recognised at the national and

international level

as

a

long

term

objective that

will

require economic

and social progress and sustained

commitment to the rule

of law

in those

parts of the world where the problem

is

most prevalent.

It

will also require

collaboration between international

bodies, governments, the anti-bribery

lobby,

business representative bodies

and sectoral organisations. Businesses

themselves also have a role to play and

the guidance below offers an indication

of how the problem may

be

addressed

through the selection

of

bribery

prevention procedures by commercial

organisations .

7

Issues relating to the prosecution

of

facilitation payments

in England

and

Wales are referred t in

the guidance of

the Director of the Serious

Fraud

Office

and the Director of

Public

Prosecutions.

6

5 Recommendation of

th

e Counc il for Fu rther Combat ing Bribery o Fore ign

Pu

blic Officials in Int ernational us iness

Tran

sactions.

6 Bribery Act 2010: oint Prosecut ion

Gu id

ance of t he Director

o

the Serious Fraud Office and the Director of Public Prosecutions.

18




uress

8

It is recognised that there are

circumstances

in

which individuals are

left with

no

alternative but to make

payments

in

order to protect against

loss of

life

limb or liberty.

The

common

law

defence of duress

is

very

likely

to

be

available

in

such circumstances.

rosecutorial discretion

9

Whether to prosecute

an

offence under

the

Act

is a matter for the prosecuting

authorities. In deciding whether to

proceed prosecutors must first decide

if

there

is

a sufficiency of evidence and

if so whether a prosecution is

in

the

public interest.

If

the evidential test has

been met prosecutors

will

consider the

general public interest

in

ensuring

that

bribery

is

effectively dealt with .

The

more

serious the offence the more

likely it is

that a prosecution will

be

required

in

the

public interest.

50 In cases where hospitality promotional

expenditure

or facilitation payments do

on their face trigger the provisions of

the

Act

prosecutors will consider very

carefully what

is

in

the public interest

before deciding whether

to

prosecute.

The operation of prosecutoria l discretion

provides a degree of flexibility which

is

helpful to ensure the just and fair

operation of the

Act.

The

Bribery

Act 2 1 Guidance

51

Factors

that

weigh for and against t

he

public interest

in

prosecuting

in

England

and Wales are referred to

in

the joint

guidance of the Director of the Serious

Fraud

Office and the Director of Public

Prosecutions referred to at paragraph 47.

19





rinciple

Proportionate procedures

A commercial organisat ion s procedures

to prevent bribery by persons associated

with it are proportion te to the bribery

risks it faces and to the nature, scale

and complexity of the commercial

organisation s activit ies. They are also

clear, practical, access ible, effectively

implemented and enforced .

Commentary

1.1 The term procedures is used in this

guidance to embrace both bribe

ry

prevention policies an d the pro cedures

which implement them. Policies

articulate a commercial orga

ni

sat ion

s

an ti-b

r

bery stance, show how it will

be

maintained and help to c

re

ate an

anti-bribery culture.They are the refore

a nece

ss ary

meas

ur

e

in

the prevention

of

bribery, but they

wi

ll not ach ieve

that objective unless they are properly

implemented. Further guidance

on

implementation is provided through

pr inciples 2 to 6.

1.2 Adequate bribery prevention procedures

ought to

be

pro portionate to the br bery

risks th t the organisat ion faces .

An

initial

assessment of

risk

across t

he

organisat

ion

is the refore a necessary first step.

o

a

certain extent the leve l of

risk wi

ll be

linked to t he size of the organisation an d

t he nature and complexity of its bu sine s

s,

but size

wi

ll not

be

the on ly determining

factor. Some small organisations can

face quite significant risks, and will

need more extensive procedures than

their

co un

terparts fac

in

g limited

risks

.

However, small organisations are

unli

ke ly

to need procedur

es

that a

re

as exlens iv

as th

os

e of a large multi-nat ional

organisation. For example, a very sma ll

business

ma

y

be

able to rely heavily on

periodic oral briefings

to

communicate

its policies while a large one

ma

y need to

rely

on

exten

si

ve written communication.

1.3

Th e leve l of

risk

t ha t organisations face

wi ll

al

so

vary with t

he

type and nature

of the persons associated with

it.

For

example, a commercial organi sation

that pro perly assesses th t there is no

risk

of

bribery on th e part of one of its

associated persons will accordingly

require nothing in the way of proced

ure

s

to prevent br bery in the context of that

relationship.

By

the same token the

bribery risks as so ciated with rel

ian

ce

on

a third party agent representing a

commercial organisation in negotiations

with foreign public officials may

be

assessed as significant and accordingly

require mu ch more in the way of

procedures to mitigate those risks.

Organisations are

likel

y to need to select

pro cedur

es

to cover a broad range of

risks

but any consideration by a court

in an individ

ual

case of the adequacy of

procedures is

likel

y necessarily to focus

on those pro cedures de signed to prevent

bribery

on

the part of t

he

associated

person committing t he offence in question.

1.4 Bribery prevention procedur

es

may

be

stand alo ne or form part of wider

guidance, for example on recruitment or

on managing a tender process in public

procurement Whatever t he ch osen

model, the procedures sho uld seek to

ensure there is a practical a

nd

rea listic

means of ac

hievin

g t he organisation s

stated an t i-bribery

po

l

icy

objectives

acro

ss all

of the organisation s functions.

21





1.5 The Gove rnment recognises that applying

these procedures retrospectively to

existing associated persons is more

difficult, but this should be done over

time, adopting a risk-based approach

and with due allowance for what is

practicable and t

he

level

of

cont

rol

over

existing arrangements.

roc

dures

1.6

Commercial organisations bribery

prevention policies are

likely

to

in

cl

ud

e

certain common elements.

As

an indicative

and not exhausti

ve

list, an organisation

may wish to cover

in

its policies:

• its commitment to bribery prevention

(see Principle

2)

• its general approach to mitigation

of specific bribery risks , such as

those arising from the

co ndu

ct of

intermediaries and agents, or thos e

associated with hospitality and

promotional expenditure, facilitation

payments or political and ch aritable

donation s or contributions; (see

Principle 3 on

risk

assessment)

•

an

overview

of

its st rategy to

implement its bribery prevent ion

policies.

1.7

The

procedures put in

pla

ce to implement

an organisation s bribe ry prevention

policies should be designed to mftigate

identified risks as well as to prevent

deliberate unethical conduct on

the part

of associated persons. The following

22

is an indicative and not ex hau stive

lis

t

of the topics that bribery

preve

ntion

procedures might embrace depend i

ng on

the particular risks face d:

• The involvement of the organisation s top

level

management

(see Principle

2) .

• Risk assessment procedures

(see Principle 3) .

• Due diligence of existing or prospective

associated persons

(see

Principle 4) .

• The provision of gifts, hospita lity and

promotional expenditure; charitable

and political donations; or demands

for


• Direct

and

indirect employment,

including

recruitment, terms

and

conditions,

di

sciplinary action and remuneration .

• Governa nce of bu s nes s relationships with

all

other associated persons including

pre

and

post contractual agreements.

• Fina nci

al

and commercial controls such

as

adequate bookkeeping, auditing

and

approval of

expenditure.

• Transparency

of

transactions

and

disclosure of information.

• Decision making , such as delegation

of

authority procedures, separation of

functions

and

the avoidance

of

conflicts

of

interest.

• Enforcement, detailing discipline processes

and sanctions

for

breaches of the

organ isation s anti-bribery

rules

.

• The reporting of bribery includin g speak

up or whistle blow

ing

procedures.

•

The

detail of the pro cess by

which

t

he

organisation plan s to imp lemen t its bribery

prevention procedures, for example, how

its

policy

will

be applied to individual projects

and to different parts of the organisation.

•

The

communication of the organisation s

po cies

and

procedures,

and

training in

the ir application (see Principle 5) .

•

The

mo

t

orin

g,

review and

evaluation

of br

ibery

preventi

on pr

o

ce

du res (see

Princip

le 6) .




rin iple

Top-level commitment

The

top

-level management of a

commercial organis

t

ion be it a b

oa

rd

of directors, the owners or any other

equivalent body or person are committed

t o prevent ing bribery by persons

assoc iated wi

th

it. They foster a culture

within

th

e organisation in which bribery is

never

acce

pt

able.

Commentary

2.1 Those at the top

of

an organisation are

in the best position to fo ster a cu lture of

integrity where bribe ry is unacceptable.

The purpose of this principle is to

encourage the involvement of top-

le

vel

management in the determination

of

bribery prevention pro cedure s. It is also

to encourage top-level invo lvement

in

any

key

deci

si

on

making relating to

bribery

risk

where that is appropriate

for

the organisation s management structure.

Procedures

2.2 Whatever the

size,

structure or market

of a commercial organisation, top-

level

management commitment

to bribery

pre

vention is

likely

to

include (1) communication of the

o

rg

anisation s anti-bribery stance, and

(2)

an appropriate degree of involvement

in developing br bery prevention

procedures.

Interna l and ext ernal

communicat io n of t he commitm nt

to zero

tol

rance to bribery

2.3 This could take a va riety of forms.

A formal statement appropriately

commu nicated can be

ve

ry effective in

estab sh ing an an

ti

-bribery cu lture w

ith

in

an

organisation. Communication might

The Br i

ber

y Act 2010 - Gu idance

be tailored to different audiences.

The

statement would probably need to be

dra

wn to people s attention on a periodic

basis and co

uld be

gene rally available,

for

examp le on

an

organisa tion s intranet

and/or internet site. Effective formal

statements t hat demonstrate top level

commitment are

likely

to include:

• a commitment to carry out business

fairly

, honest ly and openly

• a commitment to zero tolerance

towards bribery

• the consequences of breaching the

policy for employees and managers

•

for ot

her associated pe rsons

the consequences

of

breaching

contractual pro visions relating to

bribery prevention (this could include

a refe

re

nce to avoiding doing business

with others who do not commit to

doi ng bu siness without bribery as a

best practice objective)

• articulation of the business benefits

of

reje

cting bribery (reputational,

custome r and busine ss partner

confidence)

• reference to the ra nge of bribery

prevention procedures the commercial

organisation has or is putting in

pla ce, including any protection and

procedures for confidential reporting

of bribery (whistle-blowing)

• key individuals and departments

involved

in

the deve lop ment and

implementation of the organisation s

bribery prevention procedures

• refe

re nce

to the organisation s

invo lvement in any co ective action

against bribery

in,

for example, t he

same business sector.

23




The Bribery Act 2010 Guidan e

Top level involvement n bribery

prevention

2.4 Effective leadership

in

bribery

preventi

on will

take a

va

rie ty

of

forms

appropriate

for

and proportionate to

24

· the organisation s size, management

structure and ci rc

um

stan ces.

In

smaller

organisations a proportionate response

may require top -level manage rs to

be

personally involved

in

init

ia

ting,

developing and implementing bribery

prevention procedures and bribery

criti c

al

deci

s

ion

making.

In

a large multi

national organisation the board sho uld

be

responsible for setting bribe ry prevention

policies, tasking management to design,

operate and monitor bribe ry preve ntion

procedures, and keeping these po

licie

s

and procedures under regular

re

v

iew

.

But

whatever the appropriate model, top

level engagement is likely to

re

flect the

following elements:

• Selection and t raining

of

senior

managers to lead ant i-bribe ry work

where appropriate.

• Leadership

on

key measu

re

s such as a

code of conduct.

• Endorsement of all bribery prevention

related publications.

• Leadershi p in awareness raising and

encour

ag

ing t ranspare nt dia logue

throughout t he organisation so as to

seek to ensure effec

ti

ve dissemination

of anti-bribery policies and procedures

to employees, subs idia

es

, and

associated persons, etc.

• Engagement with releva nt associated

persons and exte rnal bodies, s

uch as

sectoral organisations and the media,

to help articulate the organ isation s

poli

cies .

• Specific involvement in

high

profile

and critical decision making where

appropriate.

• Assurance of risk assessment.

• Ge neral oversight

of

breaches

of

procedures and the provision of

feedback t the board or equiva lent,

whe

re

ap propriate,

on

levels of

compliance.




rincip

le

Risk

ssessment

The

commerc

ial o rgan isation assesses

t he nature and extent of its exposure to

potential externa l and internal risks of

bribery on its behalf by pe rsons associat ed

with it . The assessment is periodi

c,

informed and documented .

Commentary

3 1 Fo

r many commercial organisations this

principle will manifest itself as part of

a more general risk assessment carried

out

in

relation to business objective

s.

For

others,

it

s application may produce

a more specific stand alone bribery

r sk a

ss

e

ss

ment. The purpose of this

prin c

iple

is to promote the ad option

of

risk

assessment pro cedures that are

proportionate to the organ

isa

t ion s

size

and structure and to the nature,

scale and location of its activit

ie

s. But

whateve r ap proa ch is ad opted t he full er

the understanding of the bribery risks an

organisation

fa

ces the more effective its

efforts to prevent bribery are

likel

y

to be

.

3.2 Some aspects of risk asse ss ment

in

volve

procedures t hat

fa

ll within t he gener

all

y

accepted meaning of t

he

te

rm

due

diligence .

Th

e role of due d

gence as a

risk mi t igation tool is separately dealt

with under

Principl

e 4.

The Bribery

Ac

t 2010 - Gu idance

rocedures

3.3 Ri

sk

assessment procedures that enable

the commercial organisation accurately

to identify and prioritise t

he

r s

ks

it

faces

will,

whatever its

si

ze, activities,

customers or markets, usually reflect a

few

ba

sic characteristics.The se are :

• Oversight of the

risk

assessment by

top level management.

• Approp riate resourcing- this should

reflect the scale of the organisation s

bu s

in

ess and the need to identify and

prioriti se all relevant

risks

.

• Identification of the internal and

external informat ion sources that

w

ill

enable r sk to

be

assessed and

reviewed.

• D

ue

diligence enquiries

(see

Prin

ciple

4)

.

• Accurate and appropriate

documentation of the r

is

k assessment

and it

s conclusions .

3 4

As a commercial organisation s business

e

vol

v

es, so

will the

bribe

ry risks

it fa

ces

and

hen

ce

so

should

its r

sk assessmen

t.

For

example, t he r skassessment that applies

to a

co

mme

rci

al

organisation s domestic

operations

migh

t not apply when it enters a

new

mark

et in a part of the world

in which

it

has not done busine

ss

before

(see Principle 6 for more on t

his)

.

25




The

Bri

be

ry

Act 2010 - Guidan e

ommonly encountered r sks

3.5 Commonly encountered external risks

can

be

categorised into five broad groups

- country, sectora l transaction, business

opportunity and business partnership:

6

• Country risk t his is evidenced by

perceived high levels

of

co

rruption,

an

absence of effectively implemented

anti-bribery legislation and a failure of

the foreign government, media, local

business community

and civil

society

effectively to promote transparent

procurement and investment poli cies.

• Sectoral risk so me sectors are higher

risk

than other

s.

Higher risksectors

include the extractive industries and the

large

scale infrastructu

re

sector.

•

Transaction

risk certain types of

transaction give

rise

to higher risks

for example, charitable or political

contributions, licences and permit

s

and

transactions relating to public

procurement.

•

Business

opportunity

risk

such risks

might

arise

in

high value projects

or with projects involving many

contractors

or

intermediaries;

or

with

projects which are not apparently

undertaken at market prices or which

do

not have a clear legitimate object ive .

• Businesspartnershiprisk certain

relationships may

involve hi

gher risk

for

example, the use of intermediaries in

transactions with foreign public officials;

consortia or joint venture partners; and

relationships with politi

ca lly

exposed

persons where the proposed business

relationship

invol

ve

s

or

is

l

inked

to, a

prominent public official.

3.6

An

assessment of external bribery risk s

is intended to help decide

how

those

ri

s

ks

can

be

mitigated by procedures

governing the relevant operations or

business relationships; but a bribery risk

assessment should also examine the

extent to

which

internal structures or

procedures may themselves add to the

level of

risk

. Commonly encountered

internal factors may

includ

e:

• deficiencies

in

employee training, skills

and knowledge

• bonu s cul ture that r ~ w r excessive

risk taking

• lac kof clarity

in

the orga nisation s

policies on and procedures for,

hospitality and promot ional

expenditure, and politic

al

or charitable

co

ntributions

•

lack

of clear financial controls

• lack of a clear anti-bribery message

from

the top-level management .




rinciple

ue

diligence

The commercial organisation applies due

diligence procedures taking a proport iona

t

and risk ba

sed

ap proach in respect of

pe rsons who

pe

rform or will pe

rf

orm

services for or on behalf of th organisation

in order t o m it igate ident ified bribe

ry

risks.

Commentary

4.1 Due

dilige

nce is i rmly established as an

e

le

men t of co rporate go od governance

and it is envisag ed that due diligence

re

lated to b

ri

bery p

re

v

en

ti on

wi

ll often

fo

rm part of a wi der du e di lige nce

frame

wo

rk . Due diligen ce procedures are

both a form of b

rib

ery ri sk assessment

(see

Prin

ciple

3)

and a means of

mitigating a risk. By way of i

llu

strat

io

n,

a commerc

ial

o

rg

anisation may identify

r

isk

s that as a gener

al

proposit i

on

attach

to do i

ng

bu

si

ne ss

in

reliance upon

local third party intermediaries. Du e

diligence of speci i c prospective third

party intermedia

ri es

could sign ifica nt ly

mitigate t hese risks.The

si

gnificance of

the ro

le

of due diligen ce

in

br ibery ri sk

mit igation justifies its i

nclu

sion here as a

Principle in its own right.

4.2

The

purpose of t

hi

s

Pr

in

cip

le is to

en co

ur

age co mme rci

al

organisat ions t

pu t

in

place

du

e di l

igen

ce proced ures

that ad equately info rm t he applicati

on

of pro portionate measure s desi gned to

prevent persons associated wit h t hem

from brib ing on t heir behalf.

rocedures

4.3 As this gu idan ce emphas ises throug

ho

ut,

due d

il

igence procedures should be

proportionate to the identifi

ed

risk .

Th ey

can also be undertaken interna lly

The Bribe ry Act 201 0 - Gu idance

or by external co nsultants . Apers

on

associated with a co mme rci

al

organi sati on as set out at section 8 of

t he Bribery Act includes any pe rson

perfo rm ing services for a co mmercial

organ isation.

As ex

plained at paragraphs

37 to 43 in the section Government

P

ol

icy and section

7

, t

he

s

co

pe of th

is

definition is broad and ca n embrace a

w

id

e ran ge of bu

si

ne ss re lationships. But

the appropr

ia

te

level

of du e diligence

to prevent bribery wi ll vary enormously

depending on the risks ari s

ing

from the

particula r relat ionsh

ip

. So , fo r example,

the appropriate lev

el

of

du

e dil igence

required by a co mmercial organisation

wh

en

contracting

for

the performanc e of

information technology services may be

low,

to reflect

low risks

of bribe

ry

on

its

beha

lf

. In contrast,

an

organisation that

is selec ting an intermediary to assist in

establishi ng a

bu

si ne

ss

in fo reign markets

will typica lly req uire a mu ch higher l

eve

l

of

du

e diligence to mitigate the ri

sks

of

br

ibery

on its behalf.

4.4 Organisa tions will need to take

co ns

id

erab

le

care in enteri

ng

into

ce

rt

ain

busin

es

s r

el

ations

hip

s,

due

to t he particular c

ir

cumstances in

which t he

re

lat ionships

co

me into

ex isten ce.

An

ex ample is whe re loc

al

la

w or co

nve

nt ion dictate s the use of

loca l age

nts in

cir

c

um

stanc

es wh

ere

it may be difficult

fo

r a comme

rci

al

orga nisation to ex

tri

cate itself from a

business relationshi p once es tablished.

Th e importance of t horough due

dilige

nce

and r

isk

mitigati

on pri

or to

any commitment are paramount in such

circ umsta nces. Anot her rela

ti

onship

27




Th e

Br

i

be

ry Act 2010 - Guidance

th t

carries particularly

import nt

due diligence implications

is

a merger

of


or an

acquisition

of

one by another.

4 5 Due diligence for the purposes

of

Principle 4 shou ld be conducted us

in

g

28

a risk-based approach as referred

to

on page 27) . For example, in lower risk

s

itu t

ions, commercia l organisations

may decide

th t th

ere is no need

to

conduct much in the way

of

due

diligence.

In

higher risk situations,

due diligence

m y

include conduc

ting

direct interrogative enquirie

s,

indirect

investigations,

or

general research on

propos

ed as

sociated persons. Appr

ai

sal

and continued

monitor

ing

of

recruit

ed

or

engaged associated persons may also

be

required, proportionate to the identified

risks. Generally, more

inform tion

is

likely to be

re

quir

ed

from prospective

and existing associated pe rson s

th t

are incorporated

e

.g. compan ies) than

from individuals. This

is

because on a

basic level more individuals

are

likely

to

be invo lved in the performance

of

services by a company and the exact

nature of the roles of such individua ls

or other connected bodies may not

be

immediately obvious.

Ac

co rdingly, due

diligence may involve direct request s

for details on t he background, expertise

an

d business experienc

e,

of relev

nt

individuals.This in

form t

ion c

an

then

be verified through research and the

following up of reference

s,

et

c.

4 6 A commercial organisation s employees

a

re

presumed

to

be

persons associated

with

the organisation for the purposes

of

the Bribery Act .The organ isation

may wish, therefore,

to

incorporate in

its recru i

tment

and hum

an

resources

procedures

an

appropriate

le

vel

of

due

diligence

to

mitigate t he risks

of

bribery

being undert aken by employees which

is

proportionate

to

the risk associated

with

the post in question.

Du

e dil igence is

unlikely

to

be needed

in

relation

to

lower

risk posts .




Th

Briber

y Act

2 1

-

Gu

i

dance

rinciple

Communication including training)

The commercial o

rg

anisation seeks

t o ensu re that its bribery prevention

pol i

ci

es and procedur

es

are embedded

and understood t hrougho

ut

the

organisation through internal and external

communicat ion, including training, th t is

proportionate to the risks it faces.

ommentary

5.1

Communication and training deters

bribery by associated persons by

enhancing awareness and understanding

of a commercial organisation s

procedures and to the organ isation s

commitment to their proper application .

Making information available assists

in

more effective monitoring, evaluation

and review of bribery

pr-evention

procedures .Training provides the

knowledge and ski lls needed to emp loy

the organisation

s

procedures and deal

with any bribery

re

lated problems or

issues that may arise.

Procedures

Communication

5.2

Th

e content, language and tone

of communicat ion s for internal

consumption

ma

y vary from that for

external use

in

response to the different

relationship the audience has with the

commercial organ isation .The nature of

co mm unication will vary enormously

be tween commercial organisations in

accordance with the different bribery

risks

faced , the size of the organisation

and the scale and nature

of

its activities.

5.3 Internal communicatio ns should convey

the tone from the top but are also likely

to focus on the implementation of t he

organisation s policies and pro ce dures

and the implications for employees.

Such

commun ication includes policies

on particular areas such as de

cis ion

making, financial control, hospitality and

pro motional expend iture, facilitation

payments, training, charitable and

political donations and penalties for

breach of rules and the articu lation of

management roles at different levels.

Another important aspect of interna l

communications is the establishment

of a secure, confidential and accessible

means

for internal

or

external part ies

to raise concerns about bribery

on

the

part of associated persons, to provide

suggestions for improvement of bribery

prevention procedures and controls and

for requesting advice.These so called

speak up procedures can amount

to a very helpful management tool

for commercial organisations with

diverse operations that may be

in

many

countries. If these procedures are to

be effective there mu st be adequate

pro

tection for t hose reporti

ng

concerns.

5.4 External communication of bribery

prevention policies through a statement

or codes of conduct, for examp le ,

can reassure existing and prospective

associated perso

ns

and can act as a

deterrent to those intending to bribe on

a co mmercial organisatio

n s

behalf

Such

comm uni cations can include

in

for mation

on bri be ry prevention proced

ur

es and

contro

ls

,

sa

n

cLions,

results of internal

29




The Bribery Act 2010 Gui

nce

survey

s,

rules governing recruitment,

procurement and tendering. A

commercial organ isation may consider

it proport ionate a

nd

appropriate to

communicate its anti-bribery policies

and commitment to them to a wid er

audience, such

as

other organisations

in

its sector and to sectoral organ isations

that wo

uld fa ll

outside the scope of t

he

range of its associated persons, or to the

general publi c.

raining

5.5

Like all procedures training shou ld be

proportionate to ri sk but some training is

likely

to

be

effective

in fi rm ly

establishing

an

anti-bribery culture whatever the level

of

risk

.

Training

may take the form

of

education and awareness raising about

the threats posed by bri bery

in

general

and

in

the sector or areas

in

which the

organisation operates in particular, and

the various ways it is being addressed .

5.6 General training could be mandatory

3

for new employe

es

or

for

agents on

a weighted risk basis) as part of

an

indu

ction process, but

it

should also

be

tailored to the specific risks associated

with specific posts. Consideration should

also be given to tailoring training to the

special needs

of

those

invo

lved

in

any

speak

up

p

roc

edures, and higher

risk

functions such

as

purchas

ing

, contracting,

distri bu tion and marketing, an d work

in

g

in high

ri

sk co

unt ri

es.

Effective training

is

continuous, a

nd

regularly monitored an d

evaluated .

5 7

It may

be

appropriate to require

associated persons to undergo training.

This will

be

particularly relevant for

high

ris k associated perso

ns

.

n an

y event,

organ isat io

ns

may wish to encourage

associated persons to adopt bribery

prevention train ing .

5 8 N

owa

days there are many different

training formats availab le in addition

to the traditional classroom or seminar

formats,

su ch

as e-learning and other

we

b-

ba

se d tools. But whatever the

fo rmat, the training ought to achieve

its objective of ensuring that tho

se

participating

in

it develop a firm

understanding of what the re levan t

poli

cies and

pro ce

dures mean

in

pra

c

ti ce

for them.




rinciple

onitoring

and review

The commercia l organisat ion mo

ni t

ors and

r

ev

iews procedures de signed

to

prevent

bribery by persons associat

ed

wi

t h it and

mak

es

improvements w

he

re necessary.

Commentary

6.1 The bribery risks that a commercial

organisation faces m

ay

change over

time, as may the nature and scale of

its

activities, so the proced ures required

to mitigate those s

ks

are also likely

to change . Commercial o

rgani

sa t ions

will therefore wis h to consider how to

monitor and evaluate the effectiveness of

their bribery preven

ti

on pro cedures and

adapt them where necessa

ry

.

In

addition

to regular monitoring, an organisation

might want to review its

pro

cesses in

response to other stimuli , for example

governmental changes in countries

in

which they operate, an

incid

ent of b

ribe

ry

or negative press reports.

rocedures

6.2

There is a wide range of

in

ternal and

external revi

ew

mechanisms which

commercial organisat ion s cou ld

co

nsider

usi ng . Systems set up to deter, detect

and investigate bribe

ry,

and monitor the

ethical quality of transact

ion s,

such as

internal financial control mechanisms,

will help provide insight into t he

effectiveness

of

procedures designed

to prevent bribery. Staff surveys,

questionnaires and feedba

ck

from

training

can

also

pro

v

ide

an

imp

ortant

so urce of information on effectiveness

and a means by which employees and

other associated persons can inform

co

ntinu ing improvement of anti -bribery

policies.

Th

e

Bribe

ry Act 2 10 Gu idance

6.3 Organisations

co

uld also co n

si

der

forma l

peri

odic reviews and reports for

top-

level management. Organisations

co uld also draw on information on other

organisat ions

pra

ct ices,

for

example

relevant trade bodies or regulators

might highlight examples of good or bad

practice

in

their publications.

6 4 In addition , organisations might wish

to consider seeki ng so

me

form

of

external verification or assurance of the

effectiveness of anti -bribery procedure s.

Some organisations may

be

able to apply

for cert

ified

compliance with one of

the independently-verified anti-bribery

standards maintained

by indu

st rial sector

associations or multilateral bodies .

However, such certification may not

ne

cessar

ily

mean that a co mmercial

organi sa tion

s

bribery prevention

procedures are adequate

for

all purposes

where an offence under section 7

of

the

Bribery Act cou

ld

be charged .

31




The Bribery Act 2010 p pendix A:

Case

Studies

ppendix

Bribery Act 2010

case

studies

In t

rod

uct

io

n

These case studies which do not form part

of the guidance issued under section 9 of

the

Act) look

at how the application of

the six principles might rela te to a number

of hypothetical scenarios commercial

organisations may encounter.

The

Government believes th t this illustrative

context can assist commercial organisations in

deciding what procedures to prevent persons ·

associated with them from bribing

on

their

behalf might be most suitable to their needs.

These case studies are illustrative.They

are intended to complement the guidance.

They do not replace or supersede any of the

principles.

The

considerations set out below

merely show

in

some circumstances how

the principles can

be

applied and should

not be seen as standard setting establishing

any presumption reflecting a minimum

baseline of action or being appropriate for all

organisations whatever their

size.

Accordingly

the considerations set out below are not:

• comprehensive of

all

considerations in all

circumstances

• conclusive of adequate procedures

• conclusive of inadequate procedures if not

all of the considerations are considered

and/or applied.

32

All but one of these case studies focus on

bribery risks associated with foreign markets.

This is because bribery

risks

associated with

foreign markets are generally higher than

those associated with domestic markets .

Accordingly case studies focussing on foreign

markets are better suited

as

vehicles for the

illustration ofbribery prevention procedures.




ase study 1 Principle 1

Facilitation payments

A medium siz

ed

company

( A )

ha s acquired

a new customer in a foreign country

( B )

where it operates through its agent company

( C ). Its

bribery

risk

assessment has identified

facilitation payments as a significant problem

in securing reliable importation into B and

transport

to

its new customer s manufacturing

lo

cations. The se sometimes take the

fo

rm of

inspection fees required before Bs import

inspectors wi ll issue a certificate of inspection

a

nd

thereby facili tate the clearance of goods.

A could consider any or a combination

of

the •

following:

• Communication of

its

policy of non-

payment of facilitation paymenfs to C

and its staff. •

• Seeking advice on the law of Brelating

to certi

fi

cates of inspection and fees for

these to differentiate between properly

payable fee s and disguised requests for

facilitation payment

s.

• Building realist ic timesca

le

s into the

planning of th e

proj

ect so th t shipping,

importation a

nd

delivery schedules allow

where feasible

for

resisting and tes ti

ng

demands for fa cilitat

ion

payments.

• Request

in

g that Ct rain its staff about

resisting demands for facilitation

payments and the rel

ev

ant local

law

and

provisions of t

he Bribery Act 2010.

• Proposing or including as part of any

contractual arrangement certain

procedures

fo

r Ca

nd

its sta

ff,

which may

include one or more of t

he

followin

g, if

approp r

ia

te:

• questioning of

le

giti macy of demands

• requesting receipts and identification

details of t he o

ffic

ial mak

ing

the

dema

nd

The

Bribery Act 20

1

App

endi

xA: Case Sudies

• requests to consult with superior

officials

• trying to avoid paying inspect

ion

fees

(if

not properly due) in cash and

directly

to

an official

• informing those demanding payments

t hat compliance with the demand

may mean that A (and possibly C

will

commit

an

offence under

UK law

• informi

ng

those demanding payments

th t

it

will be necessary for C to inform

the

U

embassy of the demand .

Maintaining close liaison with C so as to

keep abreast of any local developments

th t

may provide solutions and

encouraging C to develop its own

strategies based

on

local knowledge.

Use of

any

U

diplomatic channels

or participation in locally active non-

governmental organisations, so as

to

apply pressure on the authorities of

B o take action to stop demands for


33




The Bribery Act 2010 Append ix A: se Studies

ase

study 2

Principle

1

Proportionate Procedures

A sma ll to medium sized installation company

is operating entirely within the United

Kingdom

domestic market. It relies to varying •

degrees on independent consultants to

facilitate business opportunities and to assist

in the preparation of both pre-qualification

submissions and formal tenders in seeking

new business. Such consultants work on an

arms-length-fee-plus-expenses basis. They are

engaged by sales staff and selected because of •

their extensive network of business contacts

and the specialist information they have •

The reason for engaging them is to enhance

the company s prospects of being included

in tender and pre-qualification lists and of

being selected as main or sub-contractors. •

The reliance on consultants and, in particular,

difficulties

in

monitoring expenditure which

sometimes involves cash transactions has

been identified by the company as a source •

of medium to high

risk

of bribery being

undertaken

on

the company s behalf.

In

seeking to mitigate these risks the company

could consider any or a combination of the

following:

• Commun ication of a policy statement

committing

it

to transparency and zero

tolerance of bribery in pursuit of its

business objectives.

The

statement could

be communicated to the company s

employees, known consultants and

external contacts, such as sectoral bodies

and local chambers of commerce.

• Firming up its due diligence before

engaging consultants. This could include

making enquiries through business

contacts, local chambers of commerce,

business associations, or internet

4

searches and following up any business

references and financial statements.

Considering firming up the terms of

the consultants contracts

so

that they

reflect a commitment to zero tolerance

of bribery, set clear criteria for provision

of bona

fide

hospitality

on

the company s

behalf and define in detail the basis of

remuneration, including expenses.

Consider making consu ltants contracts

subject to periodic review and renewal.

Drawing up key points guidance

on

preventing bribery for its sales staff and

all other staff involved in bidding for

business and when engaging consultants

Periodically emphasising these po l

icies

and procedures at meetings - for

example, this might form a standing item

on

meeting agendas every few months.

Providing a confidential means for staff

and externa l business contacts to air any

suspicions of the use of bribery on the

company s beha lf.




The

Bribery

Act 2010 Appendix A: Case Studies

ase study

3

Principles

1

and

6

joint venture

A medium sized company ( D )

is

interested •

in

significant foreign mineral deposits. D

proposes to enter into a joint venture with a

local mining company

( E ) .

It

is

proposed th t

D and E would have

an

equal holding

in

the

joint venture company

( DE )

. D identifies the

necessary interaction between E and local

public officials as a source of significant risks

of bribery.

D could consider negotiating

for

the inclusion

of any or a combination of the following

bribery prevention procedures into the

agreement setting

up

DE:

• Parity of representation on the board of

DE.

• That E put

in

place measures designed

to ensure compliance with all applicable

bribery and corruption

laws.

These

measures might cover such issues as :

• gifts and hospitality

• agreed decision making rules

• procurement

• engagement

of

third parties including

due diligence requirements

• conduct of rela t ions with public

officials

• training for staff

in

high

risk

positions

• record keeping and accounting.

• The establishment of

an

audit committee

with at least one representative of each

of D and E

h t

has the power to view

accounts and certain expenditure and

prepare regular reports.

Binding commitments by Dand E

o

comply with all applicable bribery

laws

in

relation

to

the operation of DE, with

a breach by either Dor E being a breach

of the agreement between them. Where

such a breach is a material breach this

could lead to termination or other

similarly significant consequences.

35




Case

study 5 Principle 3

ssessing

risks

A small specialist manufacturer is seeking to

expand its business in one of several emerging

markets

all of

which offer comparable

opportunities. t has no specialist risk

assessment expertise and

is

unsure how to

go

about assessing the

risks

of entering a new

market .

The small manufacturer could consider any or

a combination of the following:

• Incorporating

an

assessment

of

bribery

risk into research to identify the optimum

market for expansion.

• Seeking advice from U diplomatic

services and government organisations

such as U Trade and Investment.

• Consulting general country assessments

undertaken

by

local chambers of

commerce relevant non-governmental

organisations and sectoral organisations.

• Seeking advice from industry

representatives.

• Following up any general or specialist

advice with further independent research.

The Brib

ery

Act

2 1

A

ppend

ix A:

Ca

se

Stu

dies

37




Th

e

Bri

bery c t 2010

p

pendix A: Case S dies

ase

study

6

Principle

4

Due diligence of agents

A medium to large sized manufacturer

of

•

specialist equipment ( G ) has an opportunity

to

enter an emerging market in a foreign

country ( H ) by way of a government contract

to supply equipment

to

the state.

Local

•

convention requires any foreign commercial

organisations to operate through a local

agent . G is concerned to appoint a reputable

agent and ensure

that

the

risk

of bribery being

used to develop its business in the market

is

minimised.

G could consider any or a combination

of

the

following: •

• Compiling a suitable questionnaire for

potential agents requiring for example,

details of ownership

if

not an individual;

CVs and references for those involved

in performing the proposed service;

details

of

any directorships held, existing

partnerships and third party relationships

and any relevant judicial or regulatory

findings .

• Having a clear statement of the precise

nature of the services offered, costs,

commissions, fees and the preferred

means of remuneration .

• Undertaking research, including internet

searches, of the prospective agents and,

if a corporate body of every person

identified as having a degree of control

over its affairs.

•

Making

enquiries with the relevant

authorities in H to verify the information

received in response to the questionnaire.

• Following up references and clarifying

any matters arising from the

questionnaire or any other information

rec

ei

ved with t he agents, arranging face

to face meet

ings

where appropriate.

8

Requesting sight or evidence

of

any

potential agent s

own anti-bribery

policies and, where a corporate body

reporting procedures and records.

Being

alert to

key

commercial questions

such

as :

• s the agent really required?

• Does the agent have the required

expertise?

• Are they interacting with or closely

connected to public officials?

• s what you are proposing to pay

reasonable and commercial?

Renewing due diligence enquiries

on

a

periodic basis if an agent

is

appointed .




asestudy 7

Principle

5

ommunicating

and

training

A sma.

l UK

manufacturer

of

specialist

equipment ( J ) has engaged

an

individual as

a local agent and adviser ( K )

to

assist with

winning a contract and developing its business

in a foreign country where the risk of bribery is

assesse

d as high.

J could consider any or a combination

of

the

following:

• Making employees

of

J engaged in

bidding

for

business fully aware

of

J s

anti-bribery statement, code of conduct

and, where appropriate, th t details

of

its anti-bribery policies

are

included

in

its

tender.

• Including suitable contractual terms

0n bribery prevention measures in the

agreement between J and K, for example:

requiring K not to offer or pay bribes;

giving J the ability

to

audit

K s

activities

and expenditure; requiring K

to

report

any requests for bribes by officials to

J and, in the event

of

suspicion arising

as

to

K s activities, giving J the right

to

terminate the arrangement.

• Making employees

of

Jfully aware

of policies

and

procedures applying

to

relevant

issue

s such

as

hospitality

and facilitation payments, including

a

ll

financia l control mechanisms,

sanctions for any breaches

of

t he rules

and i

ns

t ructions on how

to

report any

suspicious conduct.

. • Supplementing the information, where

appropriate,

with

specially prepared

t raining

to J s

staff involved

with

the

foreign country.

The Bribery Act 2010 - Append ix A: Case Studies

9




The Bribery Act 2010 Appendix

A Case

Stud ies

ase

study 8

~ r i n c p e

1 4 and 6

Community

benefits

and

charitable donations

A company

( L )

exports a range of seed

productsto growers

ar.ound the globe. Its

representative travels to a foreign country

( M ) to discuss with a local farming co

operative the possible supply of a new

strain

of wheat that

is

resistant to a disease

which recently swept the region . In the

meeting, the head of the co-operative tells

L s

representative about the problems which

the relative unavailability of antiretroviral

drugs cause locally in the face of a

high HIV

infection rate .

In a subsequent meeting with

an

official of M

to discuss the approval of L s new wheat strain

for import, the official suggests

that

L could

pay for the necessary antiretroviral drugs and

that this

will be

a very positive factor

in

the

•

Government s consideration of the licence •

to import the new seed strain. In a further

meeting, the same official states

that

Lshould

donate money

to

a certain charity suggested

by the official which, the official assures, will

then take the necessary steps to purchase and •

distribute the drugs. L dentifies this

as

raising

potential bribery

risks

.

L could consider any or a combination of the

following: •

• Making reasonable efforts to conduct

4

due diligence, including consultation with

staff members and any business partners

it

has in country M in order to satisfy

itself that the suggested arrangement is

legitimate and in conformity with any

relevant

laws

and codes applying to the

foreign public official responsible for

approving the product.

It

could do this

by

•

obtaining information on :

• M s local law on community benefits

as

part of Government procurement

and,

if no

particular local law, the

official status and legitimacy of the

suggested arrangement

• the particular charity in question

including its legal status, its reputation

in M, and whether

it

has conducted

similar projects, and

• any connections the charity might

have with the foreign official in

question,

if

possible.

Adopting an internal communication plan

designed to ensure that any relationships

with charitable organisations are

conducted in a transparent and open

manner and do not raise any expectation

of the award of a contract or licence.

Adopting company-wide policies

and procedures about the selection

of

charitable projects

or

initiatives

which are informed by appropriate risk

assessments .

Training and support for staff in

implementing the relevant policies

and procedures

of

communication

which allow issues to be reported and

compliance to be monitored.

If charitable donations made in country

Mare routinely channelled through

government officials or to others at the

official s request, a red flag should be

raised and L may seek to monitor t

he

way

its contributions are ultimately applied,

or investigate alternative methods of

donation such as official off-set or

community gain arrangements with the

government of M.

Evaluation of its policies

re

lating to

charitable donations as part of its

next periodic review of its anti-bribery

procedures .




asestudy 9 Principle 4

Due diligence

of

agents

A small

U

company ( N ) relies

on

agents

in country ( P ) from which

it

imports local

high quality perishable produce and to which

it exports finished goods. The bribery

risks

it

faces arise entirely

as

a result of its reliance

on agents and their relationship with local

businessmen and officials. N is offered a new

business opportunity

in

Pthrough a new

agent ( Q ) .

An

agreement with Q needs to be

concluded quickly.

N could consider any or a combination of the

following:

• Conducting due diligence and background

checks

on

Q th t are proportionate to

the risk before engaging Q; which could

include:

• making enquiries through N s business

contacts, local chambers of commerce

or business associations, or internet

searches

• seeking business references and a

financial statement from Q and

reviewing Q s CV to ensure Q has

suitable experience.

• Considering how

bes

t to structure

the relationship with Q, including

how Q should

be

remunerated for its

services and how to seek to ensure Q s

compliance with relevant laws and codes

applying to foreign public officials.

• Making the contract with Q renewable

annually or periodically.

• Travelling to P periodically to review t

he

agency situa ti

on

.

The Bribery Act 2010 Appendix A: ase Studies

41




The Bribery Act 2010 Appendix A Case Studies

Case

study

1

Principle

2

Top level commitment

A small to medium sized component

manufacturer

is

seeking contracts in markets

abroad where there

is

a

risk

of bribery.

As

part of its preparation a senior manager has

devoted some time to participation

in the

development of a sector wide anti-bribery

initiative.

The top level management of the

manufacturer could consider any or a

combination of the following:

• The making of a clear statement

disseminated to its staff and

key

business

partners of its commitment to carry

out business

fairly

honestly and openly

referencing its key bribery prevention ·

procedures and its Involvement

in

the

sectoral initiative.

• Establishing a code of conduct th t

includes suitable anti-bribery provisions

and making

it

accessible to staff and third

parties

on

its website.

• Considering an internal launch of

a code of conduct with a message

of commitment to it from senior

management.

• Senior management emphasising among

the workforce and other associated

persons the importance of understanding

and applying the code of conduct and the

consequences of breaching the policy or

contractual provisions relating to bribery

prevention for employees and managers

and external associated persons.

• Identifying someone of a suitable level of

seniority to

be

a point-person for queries

and issues relating to bribery risks

.

42


korda fcpa

Documents