Features
3 Jul 2012

The Bribery Act: one year on

Jonathan Middup, partner at Ernst & Young, looks back on the first year of the UK Bribery Act to see how companies are adjusting

This week marked one year since the Bribery Act became enforceable. Despite fears about the legislation damaging competitiveness, increased compliance costs and an onslaught of cases against businesses, there has not yet been a high profile prosecution. This had led to businesses beginning to question the SFO’s enforcement appetite.

Our Global Fraud Survey 2012 showed that only 26% of executives consider that UK enforcers are willing to prosecute cases of bribery and corruption, and are effective in securing convictions.

After the hiatus of the Act being debated passed and finally becoming enforceable, a year without a corporate prosecution feels to some like a phoney war.

A year without a corporate prosecution feels to some like a phoney war

Jonathan Middup

However despite the lack of prosecutions, it is wrong to say that the law has had no impact. The Bribery Act has had a far-reaching effect and become embedded in compliance programmes. It has meant that businesses have paid attention to facilitation payments, third party relationships and corporate entertainment, and it has seen allegations of bribery and corruption treated far more seriously than in the past.

This is seen in attitudes to bribery and corruption. Our fraud survey questioned executives, counsels and finance chiefs and has produced encouraging evidence that attitudes are changing in the UK.

Whilst it is remarkable that 4% of UK responses to the survey agreed that cash payments could be justified to help to win or retain business, this has reduced from 8% of UK responses in 2010. By comparison, global responses in 2012 revealed that 15% of businesses considered that such payments could be justified and 11% of respondents from Western Europe. 


Insofar as perceptions of the level of bribery are concerned, 14% of UK responses in 2012 thought that corrupt practices happen widely in business in this country, and only 2% thought it common in their sector.

As was the case in previous years, the UK perception of levels of bribery and corruption in this country are lower than the average of responses from the rest of the world - where 39% of global responses think bribery is common in their country.



These findings are consistent with our long-standing observation that people are inclined to think of bribery and corruption as something that tends to happen elsewhere – be that another sector or another part of the world. 



In fact as our UK Bribery Digest shows, which analyses actual completed bribery cases against individuals and companies and is out this week, there were five completed prosecutions against UK companies in 2012 (under older bribery laws).

Despite much attention about the need for companies to battle foreign bribery and corruption risks as opposed to risks at home, the analysis finds that four of those five completed cases in 2012 have involved domestic wrongdoing. It also shows that while businesses have been concentrating on monitoring their contact with public officials, three of the five cases involved ‘business-to-business’ bribery.

The best protection for companies that want to combat bribery within the organisation is to work out where the risk lie and concentrate controls on those areas. Blanket compliance such as low-threshold hospitality registers or untargeted training can be wasteful and may not provide the protection businesses need. However, it would be a mistake to take no action. Those businesses that point to the lack of prosecution and hang back with their compliance programmes are short-sighted.

Getting it wrong on compliance can hurt a business deeply and it’s always much easier to comply with this type of legislation from the start, rather than trying to contain any damage at a later date. Businesses not taking the right action now to encourage a culture of integrity are only likely to be storing up difficulties for the future.

 

Jonathan Middup is partner at Ernst & Young Fraud Investigation & Dispute Services

 

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