Sunday, May 22, 2011

The Bribery Act: An alternative perspective

Guest Post from Tiffany Kemp, Devant Limited

Here in the UK, there has been much excitement about the implementation of the new Bribery Act, which comes into force on the 1st July 2011. “Experts” have appeared from nowhere, training courses abound, and consultants around the world have woken up to the enticing smell of new revenue opportunities. As compliance officers worry about how to implement and monitor yet more legislation in their ever more complex business environments, plenty of specialists are sharpening their pencils, ready to leap into the breach.

But does the new Act deserve the hype?

In the midst of the hysteria, Michael Volkov, a Washington DC-based attorney, recommends a deep breath and a large pinch of salt.

Volkov’s view is that the analysis of the Bribery Act should not focus on how it is different or more strict than the US Foreign Corrupt Practices Act, which has been a key topic of discussion in international legal circles. Instead, he urges us to focus on a few key issues –

• How will the Serious Fraud Office exercise its prosecutorial discretion?

• What resources will the SFO have to carry out its mission?

• How much will political/business forces be able to restrain SFO enforcement?

He suggests that the most sensible approach is to assume that the SFO will act reasonably, build a track record of effective enforcement of the law, and focus on egregious cases of bribery, particularly those involving UK companies or non-UK companies that disadvantage UK companies. While the law can potentially be stretched to cover a number of far-out scenarios, commentators and law firm marketing agents forget that the SFO will exercise prosecutorial discretion, and will do so with political forces carefully monitoring each enforcement action.

As Volkov suggests, we are currently operating in a vacuum – there is no strong historical precedent for successful prosecutions on the part of the SFO, and to some extent, they will be making it up as they go along. While the SFO has signalled its intention to enforce the Bribery Act aggressively, there are rumours that it has been given a budget of only £2million for enforcement actions. Given the enormous costs associated with researching and bringing a fraud action to trial, the chances are that this fund won’t stretch far in terms of bribery actions either.

So we can be sure that the SFO will spend its limited budget carefully and with a keen eye on the political and economic consequences. Michael Volkov predicts that some of the first cases will involve violations by non-UK companies that have acted corruptly to the disadvantage of other UK companies. He notes that “there is no better way to build support from the UK business community than to prosecute some of the foreign competitors.” “Like any government office”, he adds, “the SFO will act to justify its existence and its mission. How? By bringing strong and unquestionable cases involving serious violations, where the connection to the UK is unassailable.”

From a practical perspective, I’ve been battling with the lower level compliance issues personally, on behalf of Devant clients, and encountering some genuine difficulties. Many of our clients use overseas sales agents and resellers, to help them penetrate markets beyond the reach of the UK sales force. By necessity, this means dealing with individual agents and companies located in distant territories, where English is often not the primary language of business.

So how does a business conduct due diligence on a potential agent in Saudi Arabia, Oman, China or even as close to home as Hungary? I predict that the global financial and compliance search sector will quickly find a new market in the UK, providing British companies with the resources they need to ensure they are meeting their Bribery Act obligations with new appointments. In many territories, however, this information just isn’t available, and businesses will continue to appoint agents about whom they actually know very little.

Companies will need the services of the experts, the consultancies and their compliance teams to help them build a framework in which bribery becomes as unacceptable as drink-driving after a liquid lunch. And they will, of course have to take action to manage their risk in this area as effectively as the tools at their disposal allow.

While I, like Volkov, am convinced that compliance with the new Act is a must, I do believe that only the most significant global players, acting clearly in defiance of the law, are likely to be hauled up in front of the SFO. As Volkov observes, “companies need to make sure they do not get caught as a test case – any company caught as a ‘guinea pig’ in an enforcement action will suffer.”

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