The Company used independent distributors to sell its products and then rewarded particularly effective distributors with perks such as vouchers for holidays. When some of the distributors started passing this perk on to senior employees of the end customers, Scottish prosecutors stepped in arguing that this constituted a bribe under the Bribery Act 2010. In an out-of-court civil settlement, the Company agreed to pay £212,800 to the Civil Recoveries Unit, this amount being the purported gross profit enjoyed by the Company as a result of the bribes. Despite the large fine, the Company's directors might count themselves lucky that they avoided criminal sanctions by self-reporting the matter to the authorities.
Who should be concerned?
The Bribery Act imposes an obligation on relevant commercial organisations to prevent associated persons from engaging in bribery.
A relevant commercial organisation is any body corporate or partnership which is either registered in the UK or conducts business in the UK.
An associated person is any person who performs services for or on behalf of the organisation in any capacity whatsoever i.e. employees, agents, subsidiaries etc. This definition is deliberately wide and is designed to cover any person who might commit a bribe on the organisation’s behalf. If an associated person engages in bribery on the organisation's behalf then the organisation can be found guilty of a criminal offence.
Protecting against associated parties' actions
Organisations are not always responsible for associated parties' bribery. If an organisation can show that it had adequate policies and procedures in place designed to prevent associated persons from engaging in bribery, this can be a defence. What constitutes adequate procedures will depend on the size and nature of the relevant organisation.
Government guidelines dictate that organisations should adhere to the following six principles:
- Proportionate anti-bribery procedures. These procedures must take account of the nature, scale and complexity of the organisation's activities.
- Top-level commitment. Top tier management must be committed to preventing bribery and must foster an anti-bribery culture within their organisation. This means not just communication but also active involvement.
- Assessing risk. Periodic, formal, recorded risk assessments are vital.
- Due diligence. Due diligence procedures must be proportionate and risk based.
- Communication. This involves training and informing associated persons of the organisation's anti-bribery procedures.
- Monitoring and review. Organisations need to be constantly alert and willing to change policies where necessary.
The authorities acknowledge that not all bribery can be prevented. If an organisation can show it has adhered to and implemented the six principles in a manner appropriate to its specific business then it should be able to put forward a strong argument that it has complied with its duties under the Bribery Act.
As outlined above, the Glenrothes cabling company avoided criminal sanctions by taking advantage of a Scottish self-reporting initiative. Under this initiative, if an organisation reports the bribe(s) itself and can show that steps have been taken to avoid a recurrence and that prosecution is not in the public interest, it may face civil rather than criminal sanctions.
The recent case serves as an important and timely reminder that organisations should regularly review their anti-bribery policies and procedures to ensure compliance with the Bribery Act and, in particular, that they are taking the appropriate steps to try to prevent acts of bribery occurring in their supply chains.
At Morton Fraser, we regularly advise clients on compliance with the Bribery Act. If you'd like to find out more about how we might be able to assist your organisation, please contact us on the details below.