Comments from ACCA to the Ministry of Justice, November 2010.
As a body ACCA is committed to the promotion of ethical business behaviour and in our recent paper 'Risk and Reward: Tempering the Pursuit of Profit' we identified this issue as being integral to the effective regulation of business activity. We have worked with Transparency International to produce a set of anti-bribery guidelines for SMEs and have carried out our own survey of the impact of bribery within the SME sector in the UK. We very much welcome the enactment of the Bribery Act 2010 and the decision to consult publicly on the guidance to be issued in respect of the new corporate offence.
We consider that the proposed guidance contains much which will help businesses to put in place controls which will assist them to make use of the statutory defence under s7. The proposal to adopt a principles-based approach to the guidance will help ensure that it is sufficiently generalised and flexible to be applicable to the many different sizes and types of organisation which will be subject to the new offence. There may well be criticisms that the document as drafted contains no interpretation of what is 'adequate' and avoids advising entities on how to devise the mechanics of their own arrangements; but provided the key features are identified we believe this should be sufficient to form a credible basis for securing compliance with the statutory requirement.
Our main reservation about the draft is that it tends to veer away from its specific remit of helping commercial organisations to defend themselves against allegations of infringement of s7 and strays into more general guidance on combating bribery. The principal example of this tendency, in our view, occurs in the coverage of third parties whose conduct may be taken into account in the process of planning anti-bribery controls. The draft discusses business parties and public office holders (principle 1) and contractors and suppliers (principle 3). This is despite the fact that the statutory definition of 'associated person' - who amount to the only class of persons who can cause a commercial organisation to commit the s7 offence - is a person who performs services for or on behalf of an organisation. We would certainly agree that a comprehensive anti-bribery strategy should address the risk posed by such parties. But we query whether those more remote parties are covered by the statutory definition. If they are not, then for the guidance to encompass them will needlessly add to the length of the document and further complicate the task faced by subject organisations. We believe that if the guidance adopts a more focused approach, and concentrates more closely on its specific statutory remit, the guidance could be made clearer and, possibly, shorter than it is at present, always bearing in mind that the longer the guidance is the more likely that organisations will come to regard it, in practice, as prescriptive or authoritative. If the text could be made more concise and focused, one option would be to add to the guidance an additional reminder that the guidance is not meant to amount to a comprehensive set of guidelines on combating bribery and that all businesses are encouraged to consult and consider signing up to appropriate external guidelines.
Language and style
In some respects we consider that the drafting could be improved. A good example of this comes in the first paragraph at the top of page 12 of the document, where there is a reference to organisations 'wishing' to prevent bribery being committed on their behalf. Another example concerns the reference, under principle 3, to contractors or suppliers that 'may have a reputation for bribery'. This is a loose term which suggests entities should consider relying on anecdotal information, rather than on factual information linked to a proven track record of involvement in bribery. While we understand the reasoning for the regular use of the form 'may' in this document, we suggest that the reliance on this term be reconsidered, especially where the action being discussed involves steps which follow virtually automatically from the preceding principle - for example, under principle 5, the narrative says 'organisations may wish to consider planning how to bring their high-level anti-bribery commitment to life'.
Relevance
In similar vein, under principle 3 the draft suggests that organisations may wish to be advised of relevant civil, administrative and criminal law and the existence of procedures for reporting bribery to the relevant local authorities. Again, this suggestion is very sensible in the wider context but it does not seem directly relevant to whether or not an entity's arrangements are 'adequate' under the specific provisions of s7.
Principle 2 - The top level commitment
We agree with the proposal to stress the importance of securing board level commitment to bribery. As with any corporate policy, if a commitment to combating bribery is to be effective, it needs to have the full and genuine commitment of the board (or equivalent). With regard to the wording of the supplementary narrative, there is a reference to the effect that communication of the organisation's commitment may be made to its subsidiaries. Given the assumption that organisations will be responsible for the behaviour of those that they effectively control, we suggest that the guidance should provide not only that there will or is likely to be an expectation that this will happen, but that entities are or likely to be expected to insist that their commitment is replicated by their subsidiaries.
Principle 3 - Due diligence
We have referred already to the way that the draft appears to adopt a wider understanding of relevant third party than is provided for in the Act. Unless the draft is made more specific, organisations may feel compelled to carry out more extensive, and costly, due diligence work than they may actually need to do in order to present a satisfactory defence under s7. In considering this aspect of anti-bribery controls, it needs to be borne in mind that due diligence becomes more difficult to undertake effectively as the level of control and influence an entity has over third parties reduces. For example, an entity may decide to send a questionnaire to a supplier or prospective supplier to obtain information about its practices, but that other party will be free not to co-operate. The guidance should not give the impression that business links with parties over which an entity does not exert effective control should be discontinued purely because of a failure to complete this sort of process.
Principle 4 - Clear, practical and accessible policies and procedures
We agree it is vital for the supporting narrative to this principle to include a reference to internal whistle-blowing procedures. It might be useful to add the point that for such procedures to be credible they must carry no adverse consequences for the person reporting.
Principle 5 - Effective implementation
We welcome particularly the reference to effective policies and practices needing to be reflective of the practical business issues that the subject organisation actually faces. It does not make sense to impose uniform ethical rules or principles which have the effect of conflicting with the right and duty of commercial organisations to pursue profit.
Responses to specific consultation questions
Q1 Are there principles other than those set out in the draft guidance that are relevant and important to the formulation of bribery prevention in commercial organisations?
The six principles appear to us to be appropriate. If there is one other aspect that could be incorporated in the document it would be a concern to involve the workforce in the organisation's anti-bribery framework. The draft rightly identifies the need for the board (or equivalent) to take the initiative, and for procedures to be clearly communicated to employees and others. But any effective system requires not solely an awareness of rules and policies imposed from the top but a genuine understanding of them and commitment to them. This involves a practical application of the importance of ethical conduct throughout the organisation's activities, including recruitment and training. Perhaps this point could be incorporated into principle 5.
Q2 Are there any procedures other than those set out in the draft guidance that are relevant and important to a wide range of commercial organisations?
Guidance on detailed procedures should not form part of this document.
Q3 Are there any ways in which the format of the draft guidance could be improved in order to be of more assistance to commercial organisations in determining how to apply the guidance to their particular circumstances?
It might be useful for the guidance to include a summary of the range of circumstances which organisations' anti-bribery controls may need to encompass. This would cover the identification of parties who fall within the statutory definition of 'associated persons'. Such a summary could try to identify the range of circumstances likely to be more applicable to small businesses and larger businesses respectively.
Q4 Are there any [other] principles or procedures that are particularly relevant to SMEs?
No, but the document should feature a 'bottom up' approach which avoids giving the impression that the smallest businesses should follow procedures which are only likely to be relevant to larger businesses.
Q5 In what ways, if any, could the draft guidance be improved in order to provide more assistance to SMEs?
While we accept that draft makes clear that it is intended to be flexible and responsive to circumstances, we suggest that the narrative under the individual principles needs in places to be more explicit about this point about the implications for SMEs. For example, under principle 1, the narrative says that organisations should consider using external professionals to carry out risk assessments: if organisations are not to be put to needless expense there should be some recognition that very small and unsophisticated businesses are not expected to carry out 'expert' assessments. Then under principle 6, the narrative says that smaller organisations might look to, inter alia, auditing controls to pick up irregularities. It must be recognised that small companies are no longer required by law to have an audit and most do not choose to have them. There should be no suggestion in the guidance that small businesses should have their accounts audited purely in order to attain the standard of controls expected by the Bribery Act.