Bribery Act 2010: Supplier Compliance Audits

Fulcrium offers a range of supplier audit and compliance services that help clients to proactively manage, and reactively respond to, their supplier bribery and corruption risks. We also help design control frameworks to ensure due diligence is performed over third party firms to mitigate undue risk.

If you want expert anti-bribery and corruption supplier / supply chain compliance audits then contact us today.

The UK Bribery Act 2010: “Adequate procedures”
The Bribery Act 2010 came into force on 1 July 2011, and was described by many as the ‘toughest anti-corruption legislation in the world.’ Under that Act, bribery by individuals is punishable by up to ten years’ imprisonment and/or an unlimited fine.

If the firm is found to have taken part in the bribery or is found to lack adequate procedures to prevent bribery, it too could also face an unlimited fine.

A conviction for a bribery or corruption related offence would have severe reputational and/or financial consequences for the firm.

The Act created a new corporate offence of failing to prevent a bribe from being offered, given or received on its behalf. This applies to business conducted in the UK and abroad, and it applies to suppliers and other third parties working for the company.

Acts of bribery or corruption are designed to influence an individual in the performance of their duty and incline them to act in a way that a reasonable person would consider to be dishonest in the circumstances.

Bribery can be defined as offering, promising or giving a financial (or other) advantage to another person with the intention of inducing or rewarding that person to act or for having acted in a way which a reasonable person would consider improper in the circumstances. Corruption is any form of abuse of entrusted power for private gain and may include, but is not limited to, bribery.

Bribes are not always a matter of handing over cash. Gifts, hospitality and entertainment can be bribes if they are intended to influence a decision.

If faced with an allegation of wrong-doing under the Act, the only defence a firm can point to is that it developed adequate procedures to prevent this taking place.

The Six Principles 

The six principles covered by the Ministry of Justice guidance can be summarised as follows:

1. Proportionate procedures
Bribery prevention procedures should be:

  • Proportionate to the risks faced and the size and complexity of the business
  • Clear, practical, accessible, properly implemented and enforced

2. Top-level commitment
Top-level management should:

  • Take responsibility at the board level for bribery prevention
  • Foster a zero-tolerance culture toward bribery

3. Risk assessment
The risk assessment should:

  • Consider both internal and external risks
  • Be performed periodically and documented

4. Due diligence
Due diligence should be:

  • Conducted on parties performing services for or on behalf of a business
  • Proportionate and risk-based

5. Communication
Communication and training:

  • Should ensure that bribery prevention policies and procedures are embedded and understood throughout the business
  • May include external communication and a secure, confidential and accessible “speak up” procedure

6. Monitoring and review
Regular monitoring and review should:

  • Evaluate the effectiveness of current bribery prevention procedures
  • Identify and implement necessary improvements

Key Internal Risk Areas
Bribery can be a risk in many areas of the firm. Below are the key areas you should be aware of in particular:

  • Excessive gifts, entertainment and hospitality: can be used to exert improper influence on decision makers. Gifts, entertainment and hospitality are acceptable provided they fall within the firm’s Corporate Entertainment Policy.
  • Facilitation payments: are used by businesses or individuals to secure or expedite the performance of a routine or necessary action to which the payer has an entitlement as of right.
  • Reciprocal agreements: or any other form of ‘quid pro quo’ are never acceptable unless they are legitimate business arrangements which are properly documented and approved by management. Improper payments to obtain new business, retain existing business or secure any improper advantage should never be accepted or made.
  • Actions by third parties for which the firm may be held responsible: can include a range of people i.e. agents, contractors and consultants, acting on the firm’s behalf. Appropriate due diligence should be undertaken before a third party is engaged. Third parties should only be engaged where there is a clear business rationale for doing so, with an appropriate contract. Any payments to third parties should be properly authorised and recorded.
  • Record keeping: can be exploited to conceal bribes or corrupt practices. The firm must ensure that it has robust controls in place so that records are accurate and transparent.

Key Supplier and Supply Chain Risk Areas
If you have framework agreements in place with large suppliers, your key risks are:

  • Active and Passive Bribery
  • Risks when interacting with domestic and foreign public officials
  • Bribery in the Supply Chain through employees, agents or subsidiaries
  • Assurance of the Adequacy of Companies’ Internal Procedures in preventing bribery
  • Money Laundering
  • Fraud
  • Overcharging
  • Not performing up to documented standards

It is important for companies to have in place a comprehensive compliance procedure. However, companies often place too much emphasis on providing anti-bribery and corruption training to employees, but fail to set-up adequate measures for monitoring and assessing non-compliance issues or risks of bribery and corruption activities.

It is critical for companies to have regular audits in place so that their leadership personnel can address matters of non-compliance or risks of bribery and corruption while strengthening the training of employees for areas that are highly exposed to risks of non-compliance.

If you want expert anti-bribery and corruption supplier / supply chain compliance audits then contact us today.