Andrew Maclay is a Director in the Forensics Services team at BDO, the accountancy firm. The opinions expressed are his own.
There’s been intense debate in recent weeks about the government’s decision to delay the implementation of the Bribery Act. While some commentators and particularly the Organisation of Economic Cooperation and Development (OECD) argue that the government must stop deliberating and introduce ‘the Act’, others suggest that it is the wrong time for such far-reaching legislation. What is clear throughout the reams of media coverage around this issue, however, is that there is still a significant degree of uncertainty about the effects of the anti-bribery legislation on certain organisations.
This is particularly pertinent for those organisations that the act was not primarily aimed at, but who are as much at risk of falling foul of the new legislation as any. As a result the non-governmental organisation (NGO) sector is one that is increasingly under the spotlight. Oxfam’s finance director Bob Humphreys, in his organisation’s response to last year’s Bribery Act Consultation, voiced his concern around whether charities and NGOs would be liable if they were to pay bribes, officially known as facilitation payments, in emergency situations.
What happens next time there is an earthquake or refugee disaster after the act comes into force? Will the humanitarian response by UK charities be stopped at the airport as charity officials on the ground are no longer able to pay the facilitation payments needed to get their aid unloaded and through military checkpoints as fast as they would like? Will the aid workers no longer be able to connive in the percentage of sacks of “free” rice or maize creamed off by the community leaders in charge of refugee camps?
So how exactly will the NGO sector be affected and how can organisations begin to prepare for life once the Bribery Act is in force?
There is a new criminal corporate liability offence for a commercial organisation (which includes charities which are limited companies) failing to prevent bribery by an associated person, wherever in the world the bribery takes place. This applies to anyone acting under your authority - your employees, agents, intermediaries, joint ventures and foreign subsidiaries will all fall under UK law. This means that NGOs and charities could be caught up in an investigation into a partner private company, which may then lead to a reputational or prosecution risk.
NGOs are particularly at risk because of the fact that they often operate in high-risk areas, often liaising with government officials and local representatives in regions where approaches to governance and the law differs to that of the UK. For an NGO, its reputation is key, as this unlocks future donations – so they cannot risk being tainted by bribery. This is a significant issue, as the act will see an extension of the UK’s extra territorial criminal jurisdiction for actions taken anywhere in the world.
It’s worth reiterating that the greatest risk for any organisation will be if it is unknowingly involved in bribery somewhere in the world when it does not have adequate procedures in place. That said, the Government is not trying to catch people out. In fact, if you can show your organisation has adequate procedures in place to prevent bribery and did everything reasonably possible to try to prevent the occurrence, then you should not be liable for the actions of an errant employee or agent acting on your behalf.
With this in mind, it is interesting to note that Transparency International UK recently conducted research which suggested that among NGOs, where anti-bribery procedures do exist they are ‘of variable quality’ and would not constitute ‘adequate procedures’ as laid out under the ‘Bribery Act’. This is, of course, an area that the government is still to provide greater clarity on, but what could NGOs be doing now to ensure that they are prepared?
The team at BDO have developed a tool to test how compliant you are. This is based on work done by Transparency International, which is the leading NGO in this area. The key is identifying the weak spots and then embedding the rules and regulations into every member of staff. If necessary, you should look into anti-bribery training for all your staff, to ensure the procedures are being upheld at every level.
There is also good practice guidance available from various sources, including the OECD Working Group on Bribery and the SFO itself. Organisations should take steps immediately to be ahead of the game and demonstrate best practice in good corporate governance. If you do not possess the in-house skills, experience and knowledge to undertake a thorough internal review, you must obtain expert external advice as soon as possible. This will minimise risks that you may not even know exist.
It is also important for NGOs to be aware of the potential implications of being caught up in a Bribery Act-related prosecution. Punishments for guilty conduct are increased to up to 10 years for individuals. Directors and senior officers may also be personally criminally liable if it can be shown that their company committed a bribery offence with their consent or connivance. Moreover, a successful prosecution for corruption can lead to automatic debarment from both EU and US government procurement opportunities. Under UK procurement law, an NGO convicted of a bribery offence is debarred from participating in future public contracts.
Consequently, trustees of NGOsare likely to become increasingly aware of the organisational and personal risks created by the Bribery Act, and may wish to see rapid action in reducing the risks.
The Bribery Act falls within a global context of increasing international enforcement activity. The Serious Fraud Office (SFO) has committed additional resources to investigating corruption and has announced its determination to work with foreign prosecutors to bring offenders to justice. The Act exceeds even the extra-territorial reach of the equivalent US legislation.
At the same time, the government is increasingly focussing on aid effectiveness, which is likely to increase scrutiny of how NGOs operate when in receipt of public funds. An increase in the auditing of aid and development expenditure may reveal discrepancies and leave NGOs open to a bribery investigation. Whistleblowers may be particularly keen to point out failings in NGOs who the public often expect to have a higher level of ethics than the corporate sector.
As a new dawn of anti-bribery arrives, there will be changes beyond the immediately obvious. Whatever happens, good behaviour must appeal to all levels, be embraced, and then rewarded. A zero tolerance policy must be upheld. The Bribery Act is a move that can only be supported by any reputable organisation – it should encourage us all to be better corporate citizens and to follow practical, accessible and robust procedures.
The act will play a role in permanently changing corporate culture, and this is as important for NGOs as it is for multinational companies – it is therefore crucial that each and every member of staff understand how their actions may impact on the company they are representing. The concept of culpability is an important message to drill down through any organisation, no matter how big or small.