Bribery & corruption: even more risks for corporate Directors and Officers

The new act imposes even more risks on corporate Directors and Officers

The new Bribery Act received royal assent in April and replaces the fragmented Prevention of Corruption Acts of 1889 to 1916.  Under the Act, a financial or other advantage will be considered a bribe if it induces a person to behave improperly or rewards a person for the performance of such a function or activity.

More detailed guidelines will be published later this year but in the meantime, uncertainty exists.  It is felt that the aim of the new Act is to catch big business but at the moment it applies to all businesses, large and small.  The person giving the bribe, the one accepting it and companies who are involved can all be prosecuted.  Penalties can be imprisonment up to 10 years and/or fine.

The major source of information for information is likely to be whistleblowers, especially from rival companies who are upset about losing a contract or not obtaining one.  Favourable treatment in sentencing will be given to whistleblowers.  This means it could be worthwhile businesses reporting their own misdemeanours if they become apparent to mitigate any potential bribery charge.

A defence for businesses will be that they have adequate procedures in place to prevent bribery.  Adequate is not defined and will depend upon the context at the time.  It is not expected that normal entertainment, gifts or commissions would be a bribe but excessive ones could well be.  Whilst it is unlikely, there will be rigorous enforcement of the new Act, it will be used to highlight certain practices or the worse examples of inducements.  Businesses should put adequate procedures in place and ensure all staff are aware of the issue both in giving and receiving inducements.

A standard Directors and Officers Insurance policy should provide cover for any costs in defending any accusations under the Act but this would not cover any fines.  If they have not done so yet, this is another reason why businesses should take out this type of insurance.