Legal briefing | Environment & Regulatory, Anti-bribery & corruption | 06 Apr 2018

Bribery Update: are your procedures adequate?

Overview

In the first contested prosecution under section 7 of the UK's Bribery Act 2010 (the "Act"), a Londonbased interiors company has been found guilty of the 'corporate offence' of failing to prevent bribery.

BACKGROUND

In 2013, a director of Skansen Interiors Limited ("Skansen") bribed a project manager during a tender process to secure Skansen two refurbishment contracts, worth a total of £6 million. Skansen made payments of £10,000 to the project manager, with a further £29,000 promised upon completion.

Upon learning of the transactions, in early 2014, Skansen's newly-appointed CEO immediately commenced an internal investigation, implemented an anti-bribery & corruption policy, dismissed the managing director and reported the activity to the National Crime Agency and the City of London Police.

Despite self-reporting the incident and fully cooperating with the police investigation, Skansen was charged with failing to prevent bribery taking place within their organisation.

WHAT IS THE ADEQUATE PROCEDURES DEFENCE?

Under section 7 of the Act, companies face criminal prosecution if they fail to prevent bribery taking place within their business. It is a defence for Companies to argue they have in place "adequate procedures" to prevent bribery.

The Act itself does not define what "adequate procedures" are; a fact which has long been a source of unease for companies seeking to guarantee their compliance with the Act. Guidance from the Ministry of Justice, however, sets out six principles organisations can follow which may prevent bribery being committed on their behalf. These are:

  1. that anti-bribery procedures are proportionate to risk;

  2. top-level commitment from the board which fosters a culture of zero tolerance;

  3. risk assessments to understand the nature and extent of risk;

  4. applying due diligence on persons who perform services for the company;

  5. communicating these procedures throughout the organisation; and

  6. monitoring, reviewing and improving the procedures periodically.

Overview

WHY DID SKANSEN'S DEFENCE FAIL?

Skansen argued they had 'adequate procedures' in place on the basis of that fact that they were a small company, operating out of a single office with a few employees, such that they did not need a stand-alone anti-bribery and corruption policy or more sophisticated procedures.

Skansen argued they had a culture of compliance and provided their employees with general guidance, encouraging them to act with integrity and transparency in business dealings. They also had a series of financial controls within the company designed to prevent improper payments and clauses in their standard terms with suppliers explicitly prohibiting bribery.

Despite this, the jury found against Skansen.

It was noted that, since the Act came into force, Skansen had not taken action to reconsider their approach of how to minimise instances of bribery. Accordingly, they lacked several components that the Ministry of Justice guidance refers to, such as effective communication of bribery risk and procedures to employees, revising and monitoring procedures regularly, undertaking appropriate risk assessments and having a detailed stand-alone policy.

The CPS has drawn some criticism for opting to fully prosecute as opposed to considering a Deferred Prosecution Order, especially given the cooperation and self-reporting of Skansen. In response, the CPS has been clear that a message needed to be sent that companies must ensure their procedures are consistently reviewed and adequate.

WHAT LESSONS CAN BE LEARNT?

This is the first case of its kind which involves a company using the section 7 defence unsuccessfully.

Organisations would be prudent to reconsider their anti-bribery policies and procedures.

Overview

This case is notable given that the bribes were not substantial in value, the company self-reported and that it is a small organisation which operates in jurisdictions known to be low-risk for bribery and corruption.

Organisations would be prudent to re-consider their anti-bribery policies and procedures to ensure, as a minimum, they are complying the guidance set out by the Ministry of Justice.

In particular, records should be kept of risk assessments, training and continual monitoring activities. The lack of a 'paper trail' evidencing these activities will significantly weaken your position.

This case also highlights the need for adequate reporting procedures and the appointment of a compliance officer or equivalent.

Despite the fact that Skansen was a small company, the CPS was clear that in its view a separate, bespoke policy should have been in place.

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