Private Equity Sound Bite: Anti-Bribery Procedures – What is ‘Adequate’?

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 The UK Bribery Act 2010 (the “Act”) has been described as “the most draconian anti-bribery law in the world” and “the Foreign Corrupt Practices Act on steroids”. It has far-reaching implications for any international business that comes within the very wide jurisdiction of the UK. Companies doing business in the UK, and British nationals or residents should be aware of its provisions. Given the multi-jurisdictional nature of private equity, the Act has particular relevance to the industry.

Since the Act came into force in 2011, there have already been prosecutions of individuals by the English courts. Senior company executives have recently been charged in connection with corporate bribery under the Act. We believe that there are several other cases against international companies in the pipeline.

It will be a defence to the corporate offence to show that the organisation has in place “adequate procedures” designed to prevent bribery. But adequacy is difficult to define and will vary from case to case. There is little doubt that businesses will need to have and operate a clear and comprehensive anti-bribery policy and procedures. The UK government has published guidance about the nature of such procedures. It endorses the following features:

• Top-level commitment

• Proportionate procedures

• Risk assessment

• Due diligence

• Communication (including training)

• Monitoring and review

It is impossible to prescribe ideal procedures in the abstract. However, a typical anti-bribery procedure will assess the risk of bribery in the business from the point of view of geography, the nature of customers, and the practices of a particular industry. The business will make clear that bribery is never acceptable. It will require checks on agents and representatives, limit and monitor expenditure on gifts or hospitality, monitor books and records, provide staff with appropriate training, and protect whistle-blowers who report concerns to management. The procedures should be properly resourced, robust and responsive to the assessed risk of bribery. They should be fully and visibly supported by senior management.

In our view, an effective anti-bribery procedure is characterised less by the specific details of the text and more by what happens in practice in the organisation. Procedures that are ignored as soon as they are inconvenient may be worse than useless.

Topics:  Bribery, Compliance, UK Bribery Act, White Collar Crimes

Published In: General Business Updates, Finance & Banking Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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