The UK’s departure from a single market under Brexit on 31 January 2020 marked a historic new era for the UK. Since leaving the EU Customs Union and Single Market with the EU, trade has been negatively impacted and further complicated by COVID-19.
UK businesses are eager to replace lost trade with the EU by striking agreements with far-flung nations. But along with new alliances comes uncertainty about the UK’s future trading relationship with the EU and beyond.
The forging of new agreements with foreign states has heightened concern over vulnerability to bribes and corrupt dealings between public officials and third-party supply-chain intermediaries. In fact, one in four UK businesses experienced bribery and corruption in the last three years.
Brexit recovery exerts new pressures for anti-bribery in UK
The United Nations Convention against Corruption (UNCAC), enacted in 2005 provides a primary bulwark against anti-corruption, though it is not a comprehensive solution to a global problem. EU member nations have established other anti-corruption conventions but the consensus has been that far too little is being done.
International pressure on EU-based businesses to implement robust anti-bribery and anti-corruption laws across their supply chains continues to grow.
With the UK economy focused on rebounding, new and complicated import and export restrictions are sure to spawn impatience among some trading parties. Could this convergence of developments spur an increase in bribery and corruption for the UK? What are some prescriptive measures warranting consideration moving forward?
A paradigm for fighting bribery and corruption
The UK Bribery Act 2010 was passed in 2010 and came into force later in 2011. It resulted from increasing global pressure on the UK to address a perceived lack of commitment to anti-bribery law enforcement and to increase coordination among the multiple investigative bodies tasked with addressing the issue.
The act is extra-territorial, meaning that a UK citizen, resident, or UK based organisation could be held liable for the offense of bribery under this Act regardless of where the offense took place.
Concerning foreign officials, a person commits bribery in promising to give any financial or advantage with the intention of: Influencing the Public official in the performance of their functions as a public official to obtain or retaining business advantage as a result.
The Act highlights four types of corruption:
- Functions of a public nature
- Activities connected with a business
- Activities performed during a person’s employment
- An activity performed by or on behalf of a body of persons
An adjunct of the UK Bribery Act is the Criminal Finances Act 2017, which aims to prosecute organisations that fail to prevent tax evasion by employees. Political contributions, facilitation payments, and hospitality expenses are subject to discretion. However, these can be penalised in instances where the intent is deemed to be improper.
The penalties under the UK Bribery Act comprise a range of actions, depending on the seriousness of the offense. Penalties for business organisations found guilty of bribery or corruption range from unlimited fines to imprisonment for up to ten years.
The fines are relative to the violations but are usually between 100% to 300% of the profitability of the Act. The Serious Fraud Office (SFO), the primary body investigating corruption, can use its powers to recover property obtained. There are other concerned agencies with enforcement powers.
In response to the 2010 Bribery Act, the British Standards Institution introduced guidelines for an Anti-Bribery Management System, encouraging businesses to implement compliance programs across their operations. In addition to this, the Secretary of State is obliged to publish guidelines around these systems.
Legal defense options
Under the UK Bribery Act, the implementation of compliance programs prior to the fact is regarded as the only legal defense in instances where the organisation had taken adequate steps to prevent bribery and corruption.
The SFO’s policy on self-reporting has been unclear at times in terms of prosecutorial intentions but it does issue guidance on cooperation. Self-reporting and identification of wrongdoing are encouraged, as well as preserving evidence and providing material. This can lead to a Deferred Prosecution Agreement, but the outcome will be uncertain and DPA’s are not guaranteed. Specialist advice is advisable as the process can be intrusive and expensive.
Taking measures against bribery and corruption
UK businesses face a myriad of complicated and critical risk-oriented questions in the coming year. Questions organisations must answer include:
- What should we self-disclose?
- What model should we follow in formulating due diligence questionnaires?
- What obligations might we have?
- What about political contributions, facilitation payments, and other related practices?
- What is the risk of follow-on investigations?
- Which is the most relevant anti-corruption legislation?
- What are the wider, corollary implications for international supply chain integrity?
A new draft Directive announced by the Foreign Secretary advances sweeping changes to due diligence laws, and these will help in the fight against bribery and corruption. It is not a silver bullet in tackling corruption, however. Pressures on UK businesses and their international trading partners to surmount red tape as recovery gains speed will only grow. Understanding the bigger picture and the details that comprise it should be a priority for UK businesses preparing for these changes.