When the UK Bribery Act came into force in 2011, companies all over the world had no choice but to pay attention. The Act gives the Serious Fraud Office sweeping powers to prosecute bribery anywhere in the world, as long as a company or its employees has a link to the UK. And the penalties for violating it are a maximum of 10 years’ imprisonment and an unlimited fine. There’s also the potential for confiscation of property and disqualification of directors.

Areas of Risk

The Bribery Act also introduced a strict liability offense for failing to prevent bribery and placed the burden of proof on companies to show they have adequate procedures in place. Two years later, many companies are still working towards compliance.

The two greatest risks companies face under the Act have to do with gifts and hospitality practices and third party relationships, says Meric Bloch, Compliance Officer at Adecco SA and an author and speaker on compliance and workplace investigations.

“There are other risk areas, but I think those are probably the two greatest in terms of what could go wrong as well as the number of violations you might encounter,” he says.

Red Flags

When it comes to gifts and hospitality, companies need to be careful. While gifts and hospitality are an acceptable part of the business world, lavish entertainment is certainly a red flag, says Bloch. He gives the example of an executive flying a potential customer to the Bahamas to deliver the sales proposal there and make a weekend of it.

“If it’s a legitimate business trip to your company offices and you need to bring the customer with you, that’s entirely legitimate,” he says. “But not when the meeting’s over on Friday and you pay for the guy and his wife to stay for the weekend and play golf.”

Third Party Risks

There are always risks when companies need to use third parties who are acting on their behalf, especially in foreign countries.  “A perfect example would be that you need to send some employees to work on a company project in a foreign country,” says Bloch. “The foreign country requires visas. So you hire a local agent to go to the government and get the visas for you. And in that country the way you get visas is by a facilitation payment, a grease payment,” he says.

Facilitation payments are illegal under the UK Bribery Act and the only defense is paying a bribe to avoid a physical threat. So third party due diligence is more important than ever when conducting business in foreign countries that have a culture of bribery.

Rules of Reason

When it comes to setting rules, you have to do what works for the company, says Bloch. If your company is in a very regulated industry you already have a rules-oriented culture. Companies with a more flexible corporate culture may leave a bit of discretion to employees, using what Bloch refers to as the “rules of reason”.

When employing the rules of reason, gifts and entertainment should be open and transparent and done in the name of the company, rather than an individual, explains Bloch. There should be disclosure requirements, gift registries, more than just expense account reporting, he says.

There’s a simple way to employ the rules of reason, which boils down to basic ethics. Ask yourself the following, suggests Bloch: “Would your mother be proud of you if she found out you did this? Would you be embarrassed if you saw it on the front page of the New York Times?"