Quickpoints
Bribery Act 2010 - What do you need to know?
30th August 2011
The Bribery Act 2010 came into force on 1st July 2011. The Charity Commission has recently issued updated guidance, contained within its Compliance Toolkit, which confirms that it expects trustees to comply with the law on bribery and to implement good practice in accordance with their duty to protect the property and reputations of their charities.The Act
Bribery is defined as offering, promising or giving someone a financial or other advantage in order to encourage them to perform their functions or activities improperly, and includes where it is known or believed that the acceptance of the advantage in itself constitutes improper performance. It also means, from the recipient’s point of view, asking for or agreeing to accept a bribe.
The Act creates four criminal offences:
- Bribing another person;
- Accepting a bribe;
- Bribing a foreign official; and
- For “relevant commercial organisations”, which will include many charities, failing to prevent bribery.
The penalty for breaching the Act is a maximum term of imprisonment of ten years and/or a fine (which is unlimited in relation to the commercial organisation offence).
What is a relevant commercial organisation?
The definition of “relevant commercial organisation” under the Act catches any company registered in the UK that “carries on a business” in the UK or elsewhere. There is no requirement for the objects of the company to be "commercial". Despite the reference to a company, it is also possible that trusts and other unincorporated charities could be caught, for example, if they have a corporate trustee or member. The guidance makes clear that a “common sense approach” will be adopted in cases of this sort.
Similarly, a common sense approach will applied to the phrase “carries on a business”, so that charities awarding contracts to suppliers or providing paid-for services, for example, may also be caught by the Act.
How will it affect your charity?
Corporate Hospitality and benefits to donors
The Act does not criminalise reasonable and proportionate hospitality. The guidance states that the prosecution would need to show that any hospitability offered was intended to induce conduct that amounts to a breach of an expectation that a person will act in good faith, impartially or in accordance with a position of trust or that there is an intention that hospitality amounting to a financial or other advantage will influence an official in his official role and secure business or a business advantage.
Establish what your organisation can and cannot offer stakeholders/donors – individual organisations must decide whether or not a gift or corporate hospitability counts as ‘appropriate’. The guidance states that, unsurprisingly, the more lavish the hospitality offered, the greater the inference that there may be an inappropriate intention.
Facilitation Payments
Charities might encounter corruption wherever they operate. However, in some parts of the world, bribery is deeply embedded within cultures as a way of getting things done, and charity officials might be tempted to adopt and conform to the prevailing customs of a country/area. However, the guidance makes clear that trustees should avoid any situation where there is an expectation of a gift or payment in return for an advantage of any kind.
Charities working internationally, especially if operating in countries where corruption is common, should therefore carry out a thorough risk assessment of their overseas operations.
The Ministry of Justice’s guidance (MoJ) (see below) confirms that there is no exemption in respect of facilitation payments. The guidance suggests that, where making such a payment to protect against loss of life, limb or liberty, such payments will not be prosecuted despite the wording of the Act. However, where it appears that such payments are repeated, systemic and accepted as part of the way of doing business, known of by senior management and made in breach of a company’s policies, then the guidance states that the Serious Fraud Office would look to prosecute.
Use of Agents/Partners
It is common for charities to use agents or partners to oversee their activities and work, since they often do not have the infrastructure to do so themselves, for example, where a charity is working overseas. Appointment of agents or partners may include recruiting staff to work on the ground locally.
The Commission’s Compliance Toolkit (Chapter 2) provides guidance on the “Know Your Partner” principle and on how to ensure that appropriate due diligence checks are carried out when selecting and working with partners.
This is an area where charities are particularly exposed to risk and will need to manage it accordingly, including by following such guidance.
Transactional considerations
This is a commonly encountered external risk – certain types of transaction give rise to higher risks e.g. charitable or political donations, licences and permits and transactions relating to public procurement.
Reputational issues
The potential damage to a charity’s reputation, if it is for any reason associated with bribery, may be severe and could result in a loss of confidence and support from donors and the wider public. In addition, a charity accused or convicted of bribery offences could find that future funding and contracts are jeopardised, compromising its credibility and reputation.
Third party expectations
Third parties, whether other charities, donors, grant-makers, local authorities or general commercial organisations, are increasingly requiring confirmation from a charity that it has procedures in place in order to comply with the Act and/or an undertaking from a charity that it will comply with all anti-bribery legislation. Charities may find that they are required to satisfy such third parties in order to be able to carry on “business as usual” with them.
What steps can you take to prevent bribery?
The MoJ has published guidance to assist organisations in preparing and implementing anti-bribery policies and procedures and when engaging with partners.
The guidance sets out six principles by which “adequate procedures” are to be informed by, which are briefly discussed below:-
Proportionate procedures
The charity’s procedures to prevent bribery should be proportionate to the bribery risks faced and to the nature, scale and complexity of the charity’s activities. A risk assessment of the charity’s activities should be carried out as an initial step – this should help inform the charity’s procedures.
Top level commitment
It is obviously important for trustees and senior managers to be committed to anti-bribery, but this has to translate into meaningful programmes such as policies, training and an understanding of the risks of bribery across the charity at all levels. A message of zero-tolerance must be communicated.
Risk Assessment
The charity must assess the nature and extent of its exposure to both internal and external risks of bribery on its behalf by persons associated with it. An assessment should be carried out periodically, it should be well informed and documented.
Due diligence
A proportionate and risk based due diligence exercise should be performed in relation to people who perform or will perform services on behalf of the organisation, in order to mitigate identified bribery risks.
Communication (including training)
Policies and procedures not only need to be put in place but also embedded within the charity and understood throughout the charity.
Monitoring and review
Procedures put into place by the trustees should be monitored and reviewed, with improvements being made where necessary.
Charities must take action now, if they have not already done so, to put adequate procedures in place. Adequate procedures will, of course, depend upon the size of the charity, the types of activities that it is engaged in, and the risks identified following completion of the recommended risk assessment carried out by the charity.
For detailed advice on the Bribery Act 2010 and how it may affect your charity or organisation, please contact your usual Stone King contact or Tom Murdoch on 020 7324 1750, tm@stoneking.co.uk.
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