Bribery Legislation Holds Global Implications

U.K. Consolidates Old Laws with Bribery Act 2010

By Richard Hurley, Ph.D., J.D., CFE, CPA;Tim Harvey, CFE

richard-hurley-80x80.jpgtim-harvey-80x80.jpg Global Fraud Focus 

A new law is coming to the United Kingdom that might ultimately affect fraud-fighting communities around the globe.

The new U.K. Bribery Act 2010, which received Royal Assent on April 8 of last year and is due to become law in April, creates the controversial offense of “Failure of Commercial Organisations to Prevent Bribery.” An important point for CFEs is that Section 7 of the act reads that an organization has to prove that it had in place before an offense adequate procedures designed to prevent persons associated with it from undertaking such conduct.

This section also says a commercial organization is guilty of an offense if a person associated with that organization bribes another person intending to obtain or retain business or to obtain or retain an advantage in business.

A person associated with an organization (defined by Section 8) is a person who performs services on behalf of it. This could be an employee but also an organization’s agent or subsidiary. Section 7 not only covers U.K. companies but any other incorporated body from any other country that carries on business or part of a business in any part of the U.K.

The new act requires government to provide guidance on the legislation, which is scheduled to be published in January, prior to implementation.

When other countries realize that the U.K. has power to prosecute anybody financially connected with any U.K. organization – not just employees – who is allegedly committing bribery outside of the U.K., they might report the offense to U.K. authorities. This would cause an investigation to begin.


Consider the following case history (that we’ve adapted a bit) provided by the U.K. Ministry of Justice as a practice exercise under proposed guidance accompanying the Bribery Act 2010: Let’s say you’re a fraud examiner for a U.K. company in a tender exercise (a bidding process) for a contract to operate a liquified natural gas (LNG) plant in the nation of “Beneficia.” To demonstrate your proven track record as front runners in LNG expertise and your sensitivity to local environmental, social and community issues, the management of your plant in the city of Altruria make arrangements to host a Benefician government delegation.

The Benefician energy minister and an entourage made up of members of his family, private secretaries, senior officials, and members of their families travel first class to Altruria and stay in a five-star hotel at your company’s expense.

The visit is organized around a few days of tours and seminars at the plant, but the energy minister says he’s ill and postpones the first day of the visit. However, he actually is quite well and goes shopping with the rest of the entourage. Over the next few days, the Benefician delegation makes short cursory visits to the LNG plant but spends most of the time in leisure activities before abruptly returning to Beneficia unannounced.

Shortly afterwards, your Altrurian management, which has received a tip from contacts in Beneficia that your tender is “looking good,” approves payment of a number of high value “expenses” incurred by the Benefician delegation in Altruria. A competitor in the tender exercise lodges a formal complaint with the Benefician and U.K. authorities claiming that in seeking to be awarded the contract, your company bribed the Benefician authorities with lavish hospitality.

Under the Bribery Act 2010 and proposed guidance your U.K. company would need to satisfy authorities that it had adequate procedures in place to avail itself of a statutory defense, and it should have considered the following questions raised by the guiding principles.

Principle No. 1: Risk Assessment  

Do your procedures provide for a regular assessment of bribery risks associated with hospitality and promotional expenditure that extends across all operations and to your business partners?

Have you undertaken any assessment of the risk of bribery associated with the LNG sector and, in particular, did the assessment benefit from any survey of any sectoral anti-bribery codes of conduct or industry standards and the existence of industry focused anti-corruption alliances in the LNG sector?






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