David Foley presents a mid-term report on legislation that has had a major impact on our profession.
July 2016 marked the fifth anniversary of the introduction of the Bribery Act 2010 – ‘the Act’ – a piece of legislation which, it could be argued, had been a long time coming. Its counterpart across the Atlantic, the Foreign Corruption Practices Act (FCPA), had been used to great effect some time before there had been calls for the UK to update its own ‘corruption’ legislation, but its development wasn’t a simple process. However, it has now passed beyond its difficult birth and initial teething problems and now finds itself a fully developed piece of compliance legislation.
After the Act’s introduction – admittedly a stalled start resulting in eventual roll out in 2011 – not all voices were complimentary regarding the its arrival. UK plc was thought to be placed at a significant disadvantage in contrast to our non-UK competitors, and would be a difficult place to do business, as nothing would get done without some degree of facilitation; the new child was viewed as a potential disruption to doing business.
It is not possible to put a figure on the scale of corruption, but it is in the billions, and potentially in the trillions. Estimating corruption levels is a tough task with many studies compiling varying statistics. However, the common theme is that the sums involved are eye-watering. Additionally, the human impact of corruption has led to deprivation and developing countries, in particular, being stripped of their assets as corporations attempt to corner the marketplace for their own benefit.
Therefore, the concept of having the legislation is not resented by the majority, except for those who seem threatened by the consequences of getting caught out by the specific offences that the Act created. It was also welcomed by those involved in the law enforcement environment, as it provided simplistic, defined offences which the general public could understand and relate to.
Excitement and trepidation There was much excitement and trepidation following the introduction of the Act, with law enforcement believing that there was likely to be a deluge of persecutions, whereas many scratched their heads over interpreting the parameters of the Act. There were instances of scaremongering, such as the removal of the Christmas gift of a pen or a sandwich at lunchtime client meetings, and business development generally started being analysed through a different lens. Some of these stories caused cynicism across organisations, with several taking the approach of sitting tight on the basis that their business wasn’t at risk of bribery, and even if they were, given the limitations of prosecution resource within the Serious Fraud Office (SFO), it was unlikely that they would ever end up in the target sights of law enforcement.
Many ticked the box as part of a compliance exercise, whereas some took the social conscience approach, wanting to do the right thin,g and really invested in resource, projects and ongoing monitoring systems to take effective measures to get themselves away from harm.
The cynical bunch remained confident until the first conviction by the SFO took place in 2014. Since then, there have been many high profile cases, with notable household and prestigious names caught in the sights of the SFO and prosecution authorities. While this is not good news, it does mean that organisations have reconsidered their position and have moved from their initial position of doing very little, to getting the topic onto the agenda for discussion and real consideration.
Further developments have taken place, such as the introduction of ‘deferred prosecution agreements’, which provide another perspective that organisations need to take note of.
The introduction of ‘The Six Principles’ provided a framework from which an organisation could review its risk exposure to incidents of bribery, and act accordingly. From these six principles an organisation can tailor its compliance approach and review both its on-going actions and past practices. This was helpful guidance, but it does require an organisation to apply the model in a bespoke way. There is no one-size-fits-all, which many will appreciate.
Common areas for improvement From my experience of working with organisations of differing sizes, from across a range of sectors, while there has been a range of different approaches, appetites and investment, there are some common areas where improvements have occurred, with greater scrutiny on the following:
gifts and hospitality
conflicts of interest
pre-contract procurement and tender procedures.
In summary, all of this is a step in right direction; indeed some may say it is a giant leap from where we started out. It is not clear really what was expected from the introduction of the Act, given the different impacts it had on businesses, law enforcement and the public.
Even five years on, it is probably too early to state whether the Act has been a success. Many see it as a work in progress with much still to achieve. It has enormous potential, all of which is within the control of the organisation applying the Act’s principles in how it conducts its business.
What is certain is that the Act is now firmly in the minds of compliance functions, the general public have a greater awareness of the Act and suppliers have to reconsider how they conduct their business development activity.
Therefore, in true mid-term school report style: reasonable effort to date but could work harder to reach its potential.
David Foley is a risk assurance director at RSM, providing proactive and reactive counter-fraud services to large corporate and not for profit organisations.