Getting serious about bribery

Over the summer Deloitte polled some 1,200 business professionals to ask a simple question: Were respondents concerned about the UK Bribery Act?

Seems not, with just under 10 percent of respondents calling it a concern. More worrying was the discovery that only one-quarter of business folk said they bothered to revise their anti-corruption programmes to comply with the law. For private equity firms either based in the UK or holding stakes in UK companies, that can be a problem; with the clear solution being to continue enhancing portfolio companies’ compliance policies on an as-needed basis. 

But firms may want to expend a little more energy on the matter, and review their own compliance policies, in light of recent developments. Last month the UK’s Serious Fraud Office (SFO) – the government arm responsible for enforcing its Bribery Act – issued much tougher guidance relative to the message being given in July 2011 when the law first took effect. For example the SFO is now taking a zero tolerance approach to “facilitation payments” – money given to foreign officials to move routine business matters along. Under previous leadership the SFO said it would not prosecute businesses making facilitation payments so long as they demonstrated a commitment to their elimination over the long-term.  

Another major change is the SFO’s stance on self-reporting. Previously firms that self-reported possible Bribery Act violations could expect to be rewarded with civil penalties, rather than criminal prosecution. Today the SFO says that self-reporting businesses are given “no guarantee that a prosecution will not follow” and “each case will turn on its own facts”. Law firm SJ Berwin describes the changes as SFO director David Green “signalling his intention to take a more aggressive, prosecutorial approach to cases of bribery and corruption”. If so, Green may be responding to criticisms from the Organisation for Economic Co-operation & Development which in May said the SFO’s reliance on civil recovery orders to settle bribery cases resulted in less judicial oversight and can come with confidentiality agreements that prevent the disclosure of key information after a case is settled. Of course with more transparency comes greater reputational risk for those firms, or their portfolio companies, forced to defend themselves in court. 

SFO: cracking down on corruption

Whatever the reason, the industry can expect more prosecutions from the SFO at a time when many feel corruption is on the rise in popular emerging markets such as Asia. Business professionals may not yet be taking the SFO serious, but GPs, especially those who are actively involved in the management of their portfolio companies, should ensure that they do. 

Indeed private equity funds and their portfolio companies should go beyond just adopting a typical code of compliance, including putting in place appropriate financial controls relating to gifts, expenses and corporate hospitality. Proper staff training, continual monitoring and the establishment of clear reporting lines between staff and senior management is also advisable, as is designating a single person to be responsible for overseeing all anti-bribery compliance matters (likely the chief compliance officer). Fortunately the industry has already begun taking these steps, but with the UK getting tougher on enforcement, the need to implement robust anti-corruption policies has only gotten all the more serious