Insights & Reports > Kroll Global Fraud Report

Companies need to be aware that new regulation also covers consultants and agents

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Richard Abbey

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Corruption remains a major risk issue for international businesses. Companies may face pressure to engage in unethical or corrupt practices in many emerging markets – and some developed ones – but they are also seeing increased scrutiny from regulators and governments who are making a priority of stamping out corruption within the global economy.

In the past, the United Kingdom has been criticized for its attitude toward the prosecution of companies and individuals responsible for corrupt acts within its borders and abroad. British corporations, their directors, and overseas entities doing business in the country, however, will soon see a major change in attitude from the authorities. Richard Alderman, head of the Serious Fraud Office (SFO), has clearly indicated his office’s commitment and determination to investigate and punish entities found guilty of bribery. Several United Kingdom companies and individuals have been prosecuted or fined in the past year, and the SFO is actively encouraging whistleblowers to provide evidence of the wrongdoing, as opposed to just reporting it.

More important, the SFO is taking great steps to persuade companies aware of involvement in corrupt acts to “self report” – a model already used by authorities in the United States. In return for self-reporting, businesses receive more lenient disciplinary treatment than if the SFO becomes aware of the offense through other means. How successful this approach will be remains to be seen. Therefore, some organizations appear willing to take the risk of the issue not being uncovered. As the SFO makes examples of more firms, however, this attitude might change.

The Government has also published details of a draft Bribery Bill, which, if passed, will come into force in 2010. The bill currently sets out the following general offenses:

• to offer, promise, give, or request an advantage;
• to agree to receive or accept an advantage;
• a specific offense of bribery of a foreign public official;
• negligent failure by a commercial organization to prevent bribery.

The maximum penalty in the first three offenses is ten years imprisonment. In the last offense, the penalty in the imposition of an unlimited fine. The bill also contains an extra-territorial jurisdiction clause to enable the prosecution of bribery committed abroad by United Kingdom residents, nationals, and companies.

The Bribery Bill sets out that the fourth offense will take place when:

• a person performing services for the commercial organization bribes another person;
• the bribe is in connection with the commercial organization’s business; and
• another person connected within the organization with responsibility to prevent bribery negligently failed to do so.

Importantly the person offering the bribe need not be an employee, as the law would also apply to consultants or agents.

Corporate directors will need to put in place adequate controls and procedures in order to demonstrate that all reasonable steps have been taken to prevent or minimize the opportunities for corrupt payments by employees or agents. Advisable steps may include, but not be restricted to:

• implementing a robust compliance program which states the company’s attitude and policy toward corrupt payments, and communicating this to all staff, agents, consultants, and contractors globally;
• regularly training staff in the relevant national regulatory acts and internal compliance policies;
• demonstrably maintaining adequate books, records, and internal controls at all subsidiaries to minimize the risk of corrupt payments;
• maintaining a clear trail of due diligence and vetting of agents and consultants used to win business; and
• conducting regular risk audits of sales departments dealing with high risk business opportunities or operating in high risk jurisdictions.

The United Kingdom is tightening up its anti-bribery regime. Companies need to take note.