Author: Azizur Rahman
25 February 2014
4 min read
According to more than half of accountants, The Bribery Act has failed to give businesses the confidence and will to prevent and tackle corruption. In this article, we consider why they may have this perception…and whether it’s a fair one.
More than half of accountants surveyed in a poll by the Association of Chartered Certified Accountants (ACCA) agreed that the Bribery Act has not given confidence to businesses looking to take on corruption.
About 51% of the accountants asked agreed with this statement when it was put to them by ACCA. ACCA itself put this response down to a lack of awareness.
But the survey produces other, equally thought-provoking statistics. For example, a fifth of the accountants asked think that businesses have been more willing to mis-state their financial reports to cover-up corruption and fraudulent activity since the onset of the financial crisis. And only 43% of respondents said they considered anti-bribery issues when looking at international opportunities. If the survey paints any kind of picture, it is one in which preventing bribery does not seem to be in the foreground.
This becomes clearer when you consider that the survey also shows that 48% of accountants think SME's are definitely likely to face risk of bribery and corruption in their business dealings. Just 27% believe SME’s are unlikely to face any risk. If these figures seem a little alarming, it appears you are not alone in feeling this way.
ACCA’s head of SME policy, Rosana Mirkovic, said: "It is a concern that only 43% of respondents believe bribery risk is routinely considered by SME’s when thinking of doing business internationally, despite almost half of respondents believing bribery and corruption is most likely to manifest in the negotiation of contracts involving cross-border trade."
Just 17% of UK accountants believe the Act has given confidence to SME’s to tackle corrupt practices while 49% believe there is insufficient guidance about bribery and corruption available for SMEs. Compared to the rest of the world, the UK is most sceptical about the possibility of SME’s understanding the legal frameworks for bribery and corruption. Only 24% of the UK’s accountants surveyed thought that SME’s understand the legalities, compared to 68% of accountants in Central and Eastern Europe.
ACCA's findings form part of a global report into attitudes towards bribery and corruption in a number of countries and regions, including sub-Saharan Africa, Singapore and Central and Eastern Europe. But for the purposes of this article, it is the survey’s figures in relation to the UK that we should concentrate on.
If the survey is to be taken at face value, we have a situation where the Bribery Act is not giving companies the confidence and the means to tackle corruption. If anything, according to the survey, it is encouraging them to “cook the books’’ to prevent corruption being detected rather than providing the stimulus to identify it and root it out. And if you are an SME, you are regarded as being at risk of bribery and corruption – yet completely under-equipped to either prevent, identify or tackle it. Not an ideal situation when the sheer scope of the Act is considered.
From the moment it came into effect on July 1 2011, the Bribery Act has covered all companies of all sizes either based in or with a close connection to the UK. All such companies can be prosecuted under the Act in the UK for bribery that was perpetrated on its behalf anywhere in the world. Prosecutions can be brought against a company if the bribery was by its staff, an intermediary, third party or trading partner acting on its behalf. ACCA’s survey is interesting reading as we approach 2014 because it was the SME’s and some larger companies who feared a few years ago that the Bribery Act would outlaw innocent business practices such as hospitality. It did not. And at the time, the Serious Fraud Office (SFO) made it clear that hospitality or promotional expenditure which is “reasonable, proportionate and made in good faith’’ is a legitimate part of doing business and is not intended to reward “improper performance’’. SME’s and their bigger colleagues, therefore, had nothing to fear if they were conducting business legitimately.
ACCA, however, seems to indicate that SME’s have not maintained an interest in the Act’s powers – with companies of all sizes preferring to view it as a reason to conceal rather than confront corruption. Would this be a massive mistake?
Companies investigated under the Act have to be able to show that they had "adequate procedures" in place to identify the risks of bribery and to prevent it happening. If they cannot show this, they face prosecution under the Act, with punishments that can include unlimited fines and up to ten years imprisonment. Any senior figure in a company who can be shown to have turned a blind eye to bribery can be prosecuted personally. The risks, therefore, are not worth taking. The ACCA survey suggests that cooking the books is being used as an ill-judged means of avoiding the implications of the Act. But even the briefest examination of the Act will show that the penalties it carries make trying to hide corruption a high-risk strategy.
Some in the SME lobby have argued that their limited resources prevent them developing and maintaining such procedures. But if the Act makes anything abundantly clear it is that companies small and large have to make sure they are fully aware of the bribery risk in whichever business sectors and locations they trade in. Their staff, business associates and potential or existing trading partners have to be assessed as potential bribery risks.
As a legal firm that has advised corporations and organisations of all sizes on issues relating to legal compliance, we feel we can safely say that all companies require detailed, on-going and continually monitored anti-bribery procedures. We are writing this at a time when national and international agencies are cooperating more than ever around the globe and have technological resources that make information sharing quicker than could ever have been imagined a decade or so ago. In the UK, the SFO is making statements that indicate it can gain extra funding from the government as and when it needs it, the new FCA is setting out a pro-active agenda and, from next year, Deferred Prosecution Agreements (DPA’s) will be in place to ensure authorities can seek admissions of guilt without all the time, cost and risk of a criminal trial.
Hindsight is a wonderful thing. Drawing up procedures to ensure legal compliance does not often seem the sexy option for companies. But, unfortunately, many such companies do come to realise the benefit of taking decisive, proactive action to prevent wrongdoing when it is too late. That is when the authorities have uncovered the wrongdoing and are considering bringing charges – when the company is facing prosecution for something that could have been prevented, identified or eradicated with a little forethought and compliance.
Expert legal advice minimises the risk of prosecution. And the earlier it is sought the more effective it will be – far more effective than trying to hide wrongdoing or being ignorant of its risks.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.