John Smart, fraud investigation and dispute services leader, Ernst & Young
Opinion: UK business remains unprepared for Bribery Act
11 July 2011
31 January 2014
2 December 2013
23 September 2013
30 April 2014
3 June 2014
While we seem to have been on an eternal countdown to the twice-delayed implementation of the Bribery Act, its passing on 1 July finally marked the advent of greater regulatory scrutiny of UK companies.
But despite having years to become compliant, the evidence suggests that organisations’ HR, training and recruitment policies remain woefully underdeveloped, leaving them vulnerable to fines and convictions under the act. This is particularly concerning for lawyers and general counsel advising clients and their own organisations on compliance.
Despite the greater regulatory scrutiny, there is a persistently high level of UK employees willing to behave unethically. In addition to the significant minority prepared to offer cash payments outlawed under the act, around one in six employees would offer personal gifts or services to win business, according to a recent survey of large UK companies by Ernst & Young. The survey of more than 2,300 employees also found that the majority of UK organisations remain unprepared for the new legislation, with compliance programmes significantly underperforming.
You don’t have an effective business strategy unless everyone from the chief executive to the ’shop-floor’ staff understands what compliance means for them. These results highlight a lack of improvement in the corporate response to fraud and corruption that is surprising given the tougher enforcement of anti-bribery legislation in the UK. A declining focus on anti-fraud measures and a lack of understanding regarding the processes, structures and training around bribery dramatically increases the risks of bribery at a time when it has never been higher on the UK business agenda.
Management teams are committed to anti-bribery, which is great, but this hasn’t translated into meaningful corporate policies programmes as the training, guidance and understanding of bribery risks across companies just isn’t there. Reinvigorating the commitment by management and their boards to provide appropriate training, processes and structures should become an urgent priority, and will certainly be appreciated by all employees and stakeholders alike.
Lawyers advising on the implications of the act should focus upon the following urgent steps to ensure compliance:
- Get your processes right. Businesses should appoint an ethics or compliance officer and undertake a risk assessment to give that officer a clear picture to work from. It is important to learn from incidents where ethical standards may have been breached, keep records and log any concerns.
- Know exactly what’s going on in your client’s organisation, especially if it operates in countries where corruption is common. It could be a shrewd move to employ a risk assessment adviser to examine your overseas operations.
- Work out what organisations can and can’t offer to their clients: you are required to judge whether or not a gift or corporate entertainment counts as ’appropriate’. For instance, it might be acceptable to take a top broker out for lunch, but not to fly them first-class to New York.
- Train employees. Make sure they understand the act by giving adequate support and guidance, focusing on real-life situations rather than the policies. Organisations should retain materials used, to show that they’ve taken training seriously.
- Demonstrate the message of zero tolerance. Discuss the issues at a board meeting and ensure the minutes reflect the fact that you have added anti-bribery measures to your code of conduct.
The time for deliberation is past. Organisations must adapt to the new anti-bribery agenda or face serious regulatory, reputational and financial consequences.