The British Are Coming ... with New Bribery Rules
Verschoor, Curtis C., Strategic Finance
Since the Foreign Corrupt Practices Act (FCPA) was enacted in 1977, it had been considered the global gold standard for the prevention and detection of bribery of foreign officials. In recent years, the Securities & Exchange Commission (SEC) and Department of Justice placed new emphasis on enforcing this statute, with eight of the top 10 all-time FCPA violators earning their dubious distinction in either 2009 or 2010. At the very top, Siemens, Inc. disgorged $350 million in profits and paid criminal fines of $448.5 million, while KBR/Halliburton disgorged $177 million in profits and paid $402 million in criminal fines.
The newest tool in the global fight against bribery is the enactment of the U.K. Bribery Act of 2010 (the Act). After several decades of debate and drafting, the Act received final approval with the Royal Assent in April 2011. The high-sounding premise for the legislation indicates its context:
Bribery blights lives. Its immediate victims include firms that lose out unfairly. The wider victims are government and society, undermined by a weakened rule of law and damaged social and economic development. At stake is the principle of free and fair competition, which stands diminished by each bribe offered or accepted.
The application of the new U.K. statute is extensive, allowing for prosecution of an individual or company with links to the United Kingdom regardless of where the crime occurred. Failure of a commercial organization to prevent bribery committed on its behalf is also now criminal. The Act has been described as the toughest anticorruption legislation in the world and is now considered the new gold standard for prosecuting orruption. Penalties are severe, including up to 10 years of imprisonment, fines of unlimited amount, the potential for property confiscation, and disqualification of directors of involved organizations.
The Act defines bribery as offering an advantage intending to persuade or reward someone to perform duties improperly. The advantage may be either financial or nonfinancial. The law applies to persons associated with any company that employs U.K. citizens, provides any services to a U.K. organization, or has an office in the U.K. Thus many U.S. organizations will be subject to its provisions. U.K. officials have indicated they will initiate enforcement actions involving corrupt acts wherever they might occur.
One of the significant differences between the definitions of bribery in the FCPA and in the Act concerns facilitating payments. These minor gratuities of relatively small amount paid to functionaries to speed their handling of a routine transaction are specifically allowed by the FCPA and differentiated from payments made to obtain business. There is no such exclusion in the Act. Guidance to the Act notes that "exemptions in this context create artificial distinctions that are difficult to enforce, undermine corporate anti-bribery procedures, confuse anti-bribery communication with employees and other associated persons, perpetuate an existing 'culture' of bribery and have the potential to be abused."
Another difference between the two statutes is the Act's scope, which involves its application to bribery or attempted bribery activities involving any entities or individuals. The FCPA is directed only to the crime of bribing a foreign public official, but the U.K. law has no such limitation. Further, the Act applies to transactions between entities or individuals in either the public or private sector.
The Act specifically mentions that acts of hospitality could be considered a bribe. But the Guidance to the Act notes that bona fide hospitality and promotional expenditures that seek to improve organizational image, better present products and services, or establish cordial relations are recognized as an established and important part of doing business, and it isn't the intention of the Act to make such behavior criminal. …