Globalisation has created enormous opportunities for businesses and people to trade in goods and services on a scale previously unknown in human history. The development and growth of transport, logistics and payment systems enable firms to reach customers anywhere in the world and receive payment securely and easily. Technology enables organisations to reach markets without having to have a physical footprint in them.
British firms have driven the growth of globalisation since the invention of the steam engine. And today, UK commercial organisations compete successfully in many global industries, including banking and finance, insurance, manufacturing, mining, aerospace and defence, shipping and logistics. British companies and citizens can be found in every country. And they are not just engaging in commercial activities. The UK plays a major role in providing humanitarian aid particularly in Africa either alone or in conjunction with other international bodies for example, the United Nations and European Union.
And if the citizens of the UK are not working for home grown firms and organisations, they will be employed by foreign entities in a variety of roles. In Singapore, UK citizens can be found working in all sectors of the economy. While the British empire no longer exists, British influence around the globe is perhaps stronger than it has ever been.
The environment in which British firms and UK citizens operate is very competitive. And unfortunately, it is not a level playing field. When competitors cannot compete equally on quality and price, some of them resort to bribery and corruption to win contracts. Denying profits and growth opportunities to UK firms that comply with the law and do not resort to criminal acts to succeed.
The actions of foreign firms who engage in bribery to secure a commercial advantage, places pressure on UK firms to follow suit. And unfortunately, several British firms have been caught committing bribery to win contracts.
Many unscrupulous companies know that most developing countries and authoritarian regimes have weak or poor systems of governance compared to advanced countries. And they take advantage of them. Organisations and individuals who engage in foreign bribery and corruption contribute to the theft of funds from Governments and their people who can least afford it. Bribe payments made by an organisation are often recovered by increasing the price of the goods or services it provides. Every dollar paid by a foreign government for over priced goods and service is one less dollar available to be spent on the health care, education and public safety. Any organisation or person who engages in foreign bribery is responsible for the growth in human misery and suffering it causes, particularly amongst the poor and children.
Preventing bribery and corruption is not just the responsibility of Governments and organisations. Governments can only do so much. And there is a limit to the measures that a company or organisation can implement to prevent itself from engaging in bribery and from becoming a victim itself from corruption. Everyone has a responsibility to combat corruption. It is the decent and right thing to do. And all members of humanity are impacted in some way by corruption. We all want clean air. Clean water. Clean Food. And a safe and secure environment to live in and raise our families. Corruption has denied these essential rights to billions of people on the planet and left unchecked will also impact on developed countries as well. It already is in many parts of the developed world. The migration of people from Africa, the Middle East and Asia is not due entirely to war. Corruption resulting in the deterioration of essential services and a loss of opportunities has forced people to seek opportunities in developed countries. These people must move to survive. They have no other alternative. It is the visible human cost of corruption.
The risk to any organisation of being caught in a corruption scandal is ever present regardless of the local and foreign environment they operate or interact with, or the ABC risk management plan that is in place. Corruption does not discriminate, it can affect anyone anywhere, including in jurisdictions which are considered to have low corruption.
Within organisations, preventing bribery and corruption is not just the responsibility of the board and the Chief Executive Officer. While they ultimately are accountable for the actions of their company, it is the duty of every person at every level in an organisation to prevent bribery and corruption. It does not fall solely on the shoulders of staff working in an anti-bribery & corruption role. They can only advise, assist and monitor compliance against existing guidelines of an anti-bribery corruption management plan. But they cannot do it alone and it cannot be done effectively without everyone having ownership and every person in the organisation playing their part. Every person needs to be a manager and a leader in combating corruption regardless of their role in an organisation.
And it should not stop there. Organisations no tolerance for bribery and corruption need to extend to contractors and all third parties engaged by it. Illegal acts involving corruption by contractors and third parties can and do bind a company particularly in relation to foreign bribery.
But it’s not just the risk of corruption occurring by staff and contractors of an organisation. An organisation itself can be a target of corruption. Organised crime and competitors will seek to steal trade data and client information by bribing staff and contractors engaged to service or operate a company’s services or equipment.
Corrupt staff and contractors have caused significant loss and reputational damage to organisations via the theft of data and trade secrets. Having greater knowledge in preventing corruption that goes beyond mere awareness is an attribute being demanded by organisations today.
While, those firms operating in the defence, financial and telecommunications industries face the threat from foreign intelligence services who are sanctioned by their governments to undertake bribery and corruption to obtain sensitive information of value to their defence. Foreign intelligence agencies that employ corruption techniques (particularly grooming), to identify vulnerable staff and contractors so as to corrupt them and obtain information. In other words, no amount of due diligence conducted on staff, third parties and organisations can completely safeguard an organisation from the threat of organised crime, competitors or foreign governments.
In response to international criticism of UK handling of foreign bribery cases, the UK Government passed the UK Bribery Act on 1 July 2010. The Act modernised the law on bribery in the UK. And today, the UK Bribery Act is regarded as setting the gold standard in preventing foreign bribery and corruption. So, what does the UK Bribery Act mean to you? Other than containing several offences to prosecute those who commit bribery, it represents a clear statement from the UK Government that it will not tolerate bribery being committed by UK companies, firms or citizens. It is in a way a statutory code of conduct which has a wide reach beyond the UK.
The Bribery Act has near global jurisdiction applying to a body which is incorporated under the law of any part of the United Kingdom and which carries on a business there or elsewhere. The Act is unique amongst global anti-foreign bribery law in that it does not distinguish between bribery and facilitation payments large or small.
However, the most important aspect of the Bribery Act which is designed to prevent UK firms from engaging in foreign corruption is the offence of bribing a foreign government official and the offence of failure by a commercial organisation to prevent bribery. The Act establishes liability for UK companies for acts of corruption committed by persons acting on behalf of the company, for example by an employee, agent or subsidiary. This means that a UK firm could be held liable for the offence of bribing a foreign government official where the act of bribery is committed by a subsidiary, an agent of the organisation or an employee. This could have very serious consequences for any UK commercial organisation operating in countries with weak governance.
However, with modern day communication systems, payment methods and logistic networks, a UK commercial organisation could engage in acts of foreign bribery from anywhere in the world including in the UK or in Singapore for example. The organisation does not have to be operating in a weak foreign jurisdiction to commit the act of bribery. Inducements could be communicated by email to a foreign government official, accepted by text message and the bribe paid into an account held by a company controlled by a related third party in a secrecy jurisdiction.
Knowing that it is almost impossible for any organisation to completely prevent bribery being committed “in its name”, the Act has on offer a defence for commercial organisations who have been charged with the offence of failing to prevent bribery. Under the Bribery Act, a commercial organisation has a defence available to it if it can prove it had ‘adequate procedures’ to prevent a bribe being paid on its behalf.
The Act requires the UK Secretary of State to publish guidance about procedures that is relevant to the offence. Advice on what might constitute an adequate procedure can be found on the Ministry for Justice webpage. But in the end, what constitutes an adequate procedure/s is a matter for a UK court. A commercial organisation operating offshore either directly, with a physical presence in a country or indirectly using e-commerce systems, cannot afford to be complacent about the procedures it has put in place to prevent foreign bribery. Prevention of bribery, like any crime requires ongoing monitoring and due diligence. And when it comes mounting a legal defence to a charge of failing to prevent bribery, how many adequate procedures are enough to prevent a jury reaching a verdict of GUILTY?
A commercial organisation could target harden itself from being both a perpetrator and a victim of bribery, by implementing measures that go beyond what is recommended by the UK Ministry of Justice. Training staff in how to recognise a bribe, particularly a bribe concealed in a complex web of transactions routed through various international business companies and in grooming techniques used by criminals and foreign intelligence agencies would be just some additional measures it could implement. Another important measure would be to implement International Standard ISO37001 Anti-Bribery Management Systems. The introduction of ISO37001 in 2016 was an important milestone in the prevention of corruption globally and should be considered by all UK commercial organisations building adequate procedures into their anti-bribery and corruption risk management plans.
Malkara Consulting will be delivering a workshop designed to meet the needs of UK companies, who are covered by the UK Bribery Act. The prime focus of the workshop is the defence provision of “adequate procedures” available under the UK Bribery Act to the offence by commercial organisations of failing to prevent bribery. The workshop will outline advice published by the UK Government on what is meant by adequate procedures but supplement that information with practical recommendations on bribery prevention gained from extensive experience operating in high risk situations and high-risk markets. The Act will be briefly explained and its provisions mapped against the adequate procedures advice issued by the UK Government to identify where they can enhance an organisation’s anti-bribery & corruption risk management plan.