Managing bribery risks

By Elizabeth Tower

December 9 2021 is International Anti-Corruption Day (IACD), and this year’s theme, “Your right, your role: Say no to corruption”, highlights everyone’s responsibility in tackling corruption. In the lead up to this important day, CourtHeath explores bribery, a significant aspect of corruption.

The Tenth Principle of the United Nations (UN) Global Compact states that businesses should work against corruption in all its forms, including extortion and bribery, while the target of the Sustainable Development Goal 16.5 is to Substantially reduce corruption and bribery in all their forms. These goals provide an incentive to incorporate responsible business practices that address corruption and bribery into business strategy and operations.

The global fight against corruption is gaining momentum. Tougher regulations on bribery have emerged globally, with the UK and the USA leading the way.?

UK Guidance

In 2010, the UK enacted legislation that modernised the law on bribery. According to the UK Ministry of Justice, bribery (very generally) is defined as “giving someone a financial or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so. So, this could cover seeking to influence a decision-maker by giving some kind of extra benefit to that decision maker rather than by what can legitimately be offered as part of a tender process.”

Key points of the UK Act, which came into force on 1 July 2011, include:

• The Act deals only with bribery – not other forms of white collar crime
• An organisation may be liable for failing to prevent a person from bribing on its behalf but only if that person performs services for the organisation in business. It is unlikely therefore that an organisation would be liable for the actions of someone who simply supplies goods to an organisation
• There is a full defence if the organisation can show it had adequate procedures in place to prevent bribery. But an organisation does not need to put bribery prevention procedures in place if there is no risk of bribery on its behalf
• Hospitality is not prohibited by the Act
• Facilitation payments are bribes under the Act just as they are under the old law.

The UK Ministry of Justice Guidance on the Bribery Act 2010 (UK Guidance) distils procedures into the following six principles, which are broadly mirrored in Australian Guidance:

1. Proportionate Procedures
2. Top-level Commitment
3. Risk Assessment
4. Due Diligence
5. Communication (including training)
6. Monitoring and review.

The UK Guidance has been highly influential and businesses in the UK, as well as many businesses around the world, have developed and improved their anti-bribery compliance systems with reference to the document.

Effects of Bribery on business

Bribery can have devastating effects on business, with legal and or commercial consequences. Businesses may face commercial consequences, including but not limited to:

• reputational damage
• increased insurance costs
• difficulty obtaining finance
• loss of business partners and strained relationships with business partners
• difficulty recruiting and maintaining staff.

Businesses can also face significant legal penalties under Australian and international law. Furthermore, new Australian legislation has been proposed to create a corporate offence of failing to prevent foreign bribery. The proposed offence would hold a business liable if an associate bribes a foreign public official.

The UN Global Compact Network Australia states: “To avoid legal liability, a company will need to demonstrate that it had adequate procedures in place to prevent its associates from committing foreign bribery. Once in effect, this offence will have serious implications for Australian businesses operating overseas, particularly in industries and countries with high bribery risks.”

Implementing an anti-bribery policy

It has never been more important for businesses to have an anti-bribery policy. Foreign anti-bribery checks and balances need to be proportional and effective, and they should not just exist on paper but also be put into practice. The Global Compact Network Australia proposes the following anti-bribery plan, which mirrors the UK’s approach:

• Management and senior employee commitment to developing, implementing, and promoting anti-bribery policies
• Thorough and ongoing risk assessments to determine a business's bribery risk profile
• Performing comprehensive due diligence when entering new business relationships and contexts
• Effective and confidential reporting and investigation mechanisms
• Clear communication and training on bribery prevention policies for all employees and associates
• Regular monitoring and review of anti-bribery policies and procedures, adjusting where appropriate.

“Anti-corruption measures are not only about avoiding legal liability. Corruption, including bribery, has a significant impact on economic and social development and the environment, disproportionately impacting the world’s poorest communities. It also threatens the reputation of businesses, undermines fair competition and raises the cost of doing business,” says the Global Compact Network Australia.

Having an anti-corruption and anti-bribery policy in place helps businesses protect their reputation and advocate for human rights.

Resources

• Are your anti-bribery procedures adequate? (Global Compact )
• Australia’s Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019
• Bribery Act 2010: Ten Years On by Alice Lepeuple & Josef Rybacki, WilmerHale
• Corruption begets more corruption: IACD19 (CourtHeath blog)
• Fighting Bribery in Business (Global Compact)
• Perceptions of corruption in Victoria (Research paper, 2013)

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A participant in the?UN Global Compact, CourtHeath seeks to raise awareness about the Sustainable Development Goals and the principles of the Global Compact with business and government organisations in Victoria.

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IMAGE:?Used under licence from?shutterstock.com