How to avoid receiving the Rolls-Royce treatment: The need for proper Anti-Bribery policies and procedures

Both these cases were brought under the UK’s 2010 Bribery Act (“the Bribery Act”) and are notable for being the first major cases involving the new bribery offence where UK companies can be found guilty of failing to prevent bribes being paid on their behalf.

This offence, (known as the section 7 offence), rightly caused concern when introduced as it enables the UK’s Serious Fraud Office to prosecute companies operating in the UK where a bribe has been paid on their behalf anywhere in the world even if the company being prosecuted knew nothing about the bribe and did not authorise it. So, for instance, a rogue employee of a foreign subsidiary or a rogue consultant or middleman could lead to a company that operates in the UK carrying the can and receiving a conviction and fine for bribery in the UK under the Bribery Act.

Both Rolls-Royce and Sweett Group were found to have failed to prevent bribes being paid on their behalf by middlemen/employees of foreign subsidiaries. In the case of Rolls-Royce, moreover, the bribery was clearly longstanding, involved a number of employees and authorisations of improper payments by persons in the UK as well as elsewhere.

For the Sweett Group, they felt the full force of the section 7 offence, even though there was no suggestion that the UK parent company itself was aware that bribes were being paid on its behalf by an employee of its UAE subsidiary.

How can Companies protect themselves?

Under the Bribery Act, it is a defence to the section 7 offence of failing to prevent bribes being paid on your behalf if a company has “adequate procedures” in place designed to prevent bribes being paid.

In the run up to the Bribery Act being introduced, many companies rushed to put in place an Anti-Bribery Policy. However, it is becoming increasingly clear that simply having a policy is not sufficient. A company must have proper procedures in place, including financial controls, to prevent bribery and due diligence processes before entering into contracts with third parties, if it is to be able to rely on the adequate procedures defence. It must also train its staff worldwide and ingrain the anti-bribery message in the company’s culture.

In the case of Sweett Group, the company was unable to rely on the adequate procedures defence as accounting firm KPMG had produced two reports for the company during the relevant period when bribes were paid, notifying the company of numerous weaknesses and failings in their anti-bribery systems and financial controls. Sweett Group had however failed to implement changes to their policies and procedures. As a result, Sweett Group pleaded guilty as they had no viable defence of adequate procedures.

In the case of Rolls-Royce, a number of different anti-bribery policies were introduced over the years, paying lip service to the concept but in practice bribery was a longstanding issue over a 24 year period. Whilst Rolls-Royce agreed to accept its £671 million fine to avoid being prosecuted and did not therefore go through a trial, it is clear that it did not consider itself to have any viable defence to the bribery allegations, based on the fact that bribery occurred for a number of years and the fact that bribes were being paid was known about by senior management and possibly even at Board level.
In short, having a policy will count for nothing if the culture and the financial and other controls are not put in place and regularly reviewed, to seek to prevent bribes from happening.

Conclusion

All companies carrying on any part of their business in the UK that fail to have in place not just an anti-bribery policy, but also adequate financial and other controls and a genuine proactive anti-bribery culture, actively promoted top down by the Board, are running the risk of a bribery prosecution to which they will have no defence.

If you require assistance in putting in place an anti-bribery policy and adequate procedures, please contact us. We have worked with many companies to ensure their policies and procedures are adequate. Alternatively, if you have a policy and procedures that you are concerned may not be adequate and would like us to review them, please contact us: