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Home » Home Affairs, Policy

Ensuring that the Bribery Act delivers

Submitted by on 23 Nov 2010 – 12:02

By Chandrashekhar Krishnan, Exectiuve Director, Transparency International UK

On 8 April 2010, a new Bribery Act was passed into law – with a delicately achieved, all-party consensus – at the very last minute before the end of the parliamentary session and the 2010 general election. The Act is one of the toughest in the world and has far-reaching implications for the way UK and foreign companies (with UK links) do business.  Those who pay bribes either in the UK or overseas will now face very severe sanctions.

Unfortunately, there remains some unfinished business.  The new Act introduces an offence of corporate failure to prevent bribery, unless a company can prove that it had ‘adequate procedures’ in place to prevent bribery. However, the Act can only come into force after the Government has issued official guidance on ‘adequate procedures’.

It was originally envisaged that the official guidance would be issued in July 2010, but the new coalition Government announced its publication would be deferred until early 2011 to allow time for yet another round of consultation.  Companies do need guidance that clarifies some grey areas in the Act but this could have been finalised without further delay.  Disappointingly, the Bribery Act will not now come into force until April 2011.   Meanwhile, under the guise of consultation, attempts may be made to water down the Act by those keen to pursue ‘business as usual’ mistakenly believing that it is alright to pay bribes in countries where sanctions against corruption are weak.

But bribery is a crime. There are real victims.  It disproportionately affects the poor and is a persistent threat to development and democracy. For example, in developing countries, bribery raises the cost of connecting a rural household to a water network by as much as 30%. That’s the equivalent of inflating the cost of achieving the UN Millennium Development Goal on water and sanitation by more than US $48 billion – nearly half of annual global aid outlays.

Moreover, strong anti-bribery laws can help companies reduce their costs. Companies themselves estimate that bribery adds at least 10% to the cost of business transactions overseas. What’s more, for those companies that are already conducting business ethically, the introduction of strong anti-bribery laws levels the playing field.

Transparency International UK welcomed the new Bribery Act because it marked an historic step change in the UK’s fight against corporate bribery. Now we will be working to ensure that this autumn’s consultation does not result in weakening any of the new law’s fundamental provisions and undermine its potential.

If the UK puts its own house in order with a strong Bribery Act that is underpinned by best practice ‘adequate procedures’, it will be in a better position to encourage good governance in countries that receive UK aid. The UK will also be able to use its influence to encourage major emerging economies to stop their own companies paying bribes.

The new Act means that companies must embed ethical practices throughout their organisations or face potentially disastrous consequences – unlimited fines on companies and prison sentences of up to ten years for directors. The best defence for companies is to adopt and enforce policies for zero tolerance of bribery supported by robust anti-bribery systems.

To help companies meet these challenges and prepare for the Bribery Act’s commencement next April, Transparency International UK – supported by FTI Consulting, Inc., the global business advisory firm, and Halcrow, the international infrastructure consultancy – has recently published detailed Guidance on developing and maintaining good-practice anti-corruption procedures.

It is based on the well-established Business Principles for Countering Bribery and other Transparency International tools that companies all over the world are already using to benchmark their anti-bribery systems.  The Guidance includes case studies, sample policies and a step-by-step implementation checklist. It can be downloaded from http://www.transparency.org.uk/working-with-companies/adequate-procedures

Companies following the Guidance will, in the view of Transparency International, have implemented ‘adequate procedures’ for compliance with the Bribery Act.

This July, there was good news on the UK’s anti-corruption record from Transparency International’s latest progress report on compliance with the OECD anti-bribery convention. For the first time, the UK is among the 7 most active enforcers of the convention. This welcome turnaround in UK performance reflects the recent surge in activity by the enforcement authorities who have now brought 10 cases – up from zero in 2008.

Two things are needed now to sustain the UK’s new-found reputation for being tougher on foreign bribery. One is for the UK law enforcement authorities to be given additional resources to sustain a higher level of enforcement activity. The other is for the Bribery Act to commence next April – without dilution or further delay. These will be two key measures by which the new government’s anti-corruption credentials can be judged.