Don’t mess with the Bribery Act

SMEs may need help getting to grips with the Bribery Act, but they ignore it at their peril

Transparency International’s Global Corruption Survey 2013 reports that 27 per cent of respondents paid bribes to public officials in the past 12 months. In the UK, this was 5 per cent – a five-fold increase since 2010. This is a powerful reminder of the extent of the problem facing businesses, globally and nationally.

Earlier this year the House of Lords SME Select Committee concluded that the Bribery Act 2010 had been met with “confusion and uncertainty”, with SMEs saying it is too onerous and prevents them from entertaining clients and trading overseas. These comments either suggest a misunderstanding of the act or a complaint that it is succeeding in deterring bribery.

The City of London Police and the British Standards Institute recently announced an initiative to provide training to help SMEs understand the act. This might help in getting a more targeted message across.

However, SMEs should not expect to be spoon-fed “adequate procedures”. Even police guidance will not provide guarantees to avoid prosecution. UK judges who assisted the UK OECD Bribery Working Group last year suggested companies could be convicted even if they follow government guidance. Corporates must consider for themselves how they can reduce their bribery exposure, not simply follow generic templates.

Until there have been judgments interpreting the act uncertainty will remain, but it has had many positive effects already. We have seen more awareness among clients of bribery issues and more interest in improving controls. Many have sought to introduce controls where they previously had none. We have also seen a rise in the internal reporting of concerns, which in turn helps corporates identify further areas for improvement.

That encouragement to develop controls is seen by some as red tape is a concern – the purpose is to help reduce the risk of bribery to enable better, more effective and more profitable business, and to allow problems to be dealt with. The benefits of minimising risk through controls may only be fully appreciated when those who have chosen not to do so are subject to investigation and prosecution.

To obsess about the act is to overlook the fact that corruption is a growing problem and the fight is international. Most countries outlaw corruption and many criminalise facilitation payments. Many have recently strengthened their laws, including corporate defences (such as in Italy and, to some extent, Portugal) or offences (Russia) in relation to anti-bribery controls. The act is far from unique.

Notwithstanding the challenges SMEs face in dealing with demands for bribes, they must be alive not only to the risks the act presents, but also to local attitudes in the countries in which they operate. While enforcement may be patchy, it is unwise to ignore the act or local laws and risk exposure, with all that may entail for reputation, business and liberty.

CMS London associate Amy Smart assisted with this article