In the UK, there’s a perception that bribery and corruption are crimes which take place elsewhere in the world; as the home of queuing and cricket, neither are offences which we need to worry about.
This is not true: at the start of 2018, PWC reported that 23% of organisations in the UK had experienced bribery and corruption, up from 6% in 2016.1
Even though much of the increase is thought to be due to greater transparency from the organisations surveyed, it still confirms that bribery and corruption do impact industries in the UK.
The hospitality industry is not immune from bribery. Due to the prominence of cash payments, lack of formal controls and the ease with which providing complementary services can occur, the hospitality sector has a unique exposure to bribery risks.
As an example, hotels frequently book taxis for their guests. For taxi companies, securing a steady stream of fares from a hotel can be lucrative which in turn creates the temptation for firms and drivers to offer hotel staff significant incentives for sending fares their way. Those incentives could be free rides or significant cash payments made to the receptionist or concierge.
Not all incentives for making referrals of work amount to a bribe. It’s not illegal for Company A to provide ‘free’ or discounted services to the employees of Company B as part of a wider commercial agreement between Company A and Company B.
Similarly, legitimate hospitality and promotional expenditure are well established ways of doing business in the UK which are not illegal.
However, there is a line beyond which offering incentives for referrals is no longer a legitimate business activity and instead it begins to look a lot like bribery. Where that line sits isn’t always easy to determine.
WHAT IS A BRIBE?
It might seem obvious, but it’s worth considering what behaviour constitutes a bribe and is a criminal offence.
The Bribery Act 2010 is the UK’s primary law concerning bribery. It came into force 14 years ago and its aim was to be the toughest anti-bribery law in the world. For a law with such lofty ambitions, it’s fairly straightforward. The Act creates two general offences:
(1) the offence of bribing another person; and
(2) the offence of being bribed.
Generally speaking, to be guilty of one of the two general offences, there must be three elements:
i. An offer, promise, request or agreement to receive money or other similar advantage (the bribe);
ii. The bribe must relate to the performance of a person’s job; and
iii. The bribe must be connected to the improper performance of that job.
Ignorance of the law is not a defence to a charge of bribery: it’s irrelevant whether you knew that the activity was a bribe or not. The offences are also intention focused which means that just attempting to bribe someone is enough to be guilty of an offence.
The two general offences are drafted very broadly so that they capture everything which could conceivably be a bribe and to minimise the risk of a defendant escaping conviction on a technicality.
As such, an awful lot of commercial activity could potentially fall within the scope of the two general offences but it is for the prosecutors to decide which cases it is in the public interest to pursue.
If an individual is found guilty of either of the general offences they could face up to 10 years in prison, receive a very hefty fine (there is no limit on the maximum fine they could receive) and be disqualified from acting as a company director for 15 years. As an example, in 2016 two men received prison sentences of three years and 20 months respectively for offering a £500 bribe to a council officer to secure a taxi contract worth £1 million.2
BUSINESSES FAILING TO PREVENT BRIBERY
That’s not the end of it. As well as the two general offences described above, it is also a criminal offence for a business to prevent others from making bribes on its behalf.3
Where an employee or agent attempts to make a bribe for the benefit of the business they represent, the individual would be guilty of the general offence and the business could also be guilty of ‘failing to prevent bribery’.
If the business is found guilty of failing to prevent bribery, there is no limit on the size of the fine it could receive. It could also be barred from bidding on public contracts as punishment.
The good news is that a business can defend itself from prosecution if it can show that it has in place ‘adequate procedures’ to prevent bribery. We’ll look at what amounts to adequate procedures below.
BRIBERY IN THE HOSPITALITY INDUSTRY
To return to the taxi / hotel example, a bribe could occur where a taxi firm attempts to bribe hotel staff who are responsible for booking taxis on behalf of guests. The arrangement could work by individual drivers giving their mobile numbers to hotel staff and the staff contacting those drivers each time a guest needs a taxi. In return the driver could give the staff an agreed payment per fare (such as £10 per airport drop-off) or it could give staff free taxi rides.
It is not true that bribes of this nature are too small to be of concern. Firstly, there is no minimum value of a bribe for it to constitute a criminal offence. Secondly, it is never a victimless crime especially if the cost of the bribe is passed on to the hotel guest through higher taxi fares or where the hotel guest is kept waiting unnecessarily for a particular driver to take the job.
THE LINE BETWEEN LEGITIMATE ACTIVITIES AND A BRIBE
There can be a fine line between legitimate business activities and a bribe. For example, where a taxi firm is providing hotel staff with free taxi rides the first two elements of a bribe are present: the employee is receiving an advantage (the free ride) and the advantage relates to the employee’s job.
The key question is whether the free ride is intended to persuade the employee to perform their role improperly.4 If the provision of free rides is part of a wider transparent commercial arrangement between the hotel and the taxi firm (see Formal Contracts as an Adequate Procedure below), then it may be a legitimate business activity. If not, then it would at least have the appearance of a bribe.
When considering whether an activity if legitimate or it constitutes a bribe, the following factors should be considered:
- Intention: Would a reasonable person think that the offer is trying to influence the recipient to perform their job improperly? If there isn’t an intention for the employee to perform their job improperly, no offence will have been committed. For example, giving a tip isn’t a bribe as it’s a bonus for a job well done.
- Timing: What are the background circumstances to the offer of an advantage or benefit? Is the offer being made close to an award of a contract with the risk that the offer could be viewed as an illegitimate way of influencing the decision?
- Transparency: If employees are receiving any benefits from business contacts, they must be reported internally. If everyone in an organisation knows about the receipt of benefits from third parties, those benefits can be monitored and it’s less likely that the recipient will perform their job improperly as a result.
- Self-awareness: How does the situation look to those on the outside? Put yourself in the shoes of the reasonable man and consider whether the scenario looks like typical business dealings or looks like something more suspect.
STEERING CLEAR OF BRIBERY
To avoid bribery, or even the appearance of bribery, businesses need to make sure that they have in place ‘adequate procedures’ which are designed to prevent bribery. Implementing adequate procedures have two advantages:
- They help organisations ensure that legitimate business activities don’t stray anywhere near bribery territory; and
- If an individual gives a bribe on behalf of the business, having adequate procedures in place to prevent bribery act as a defence to the criminal offence of failing to prevent bribery.
What constitutes “adequate procedures” will depend on the circumstances of the business but they could include:
| POLICIES & PROCEDURES | Having an internal system in place for reporting suspected bribery is essential, even for small business. If anyone needs anti-bribery advice or to report concerns, they need to know where they can turn. |
| FORMAL CONTRACTS | Where Company A offers benefits to the employees of Company B as part of a broader arrangement between the companies, the terms of the agreement must be set out in a formal written contract. The contract should specify the scope of the benefits which are offered and exactly what Company A receives in return. |
| RECORD KEEPING | Keeping a central record of benefits received and given keeps everything transparent and out in the open. |
| CONFIDENTIAL REPORTING | Having an internal system in place for reporting suspected bribery is essential, even for small business. If anyone needs anti-bribery advice or to report concerns, they need to know where they can turn. |
| RISK ASSESSMENT | Risk assessments are essential to determine the nature and extent of exposure to potential risks of bribery. The assessment should highlight vulnerabilities and mitigation steps. For example, offers and requests for bribes often occur in face to face meetings so if negotiations take place through a transparent process without face to face meetings of individuals, the potential for bribes decreases. |
| COMMITMENT, COMMUNICATION AND TRAINING | Having management clearly communicate a message of zero tolerance to bribery. Including through training, lets employees and business partners know what is expected of them. |
| DUE DILIGENCE | Conducting due diligence on your employees, agents and business partners ensures you know who is representing you and who you’re doing business with. |
| MONITORING AND REVIEW | It’s not enough to carry out the above steps once, you need to keep practices under review and improve as necessary. FINAL |
FINAL THOUGHTS
Being convicted of a bribery offence isn’t the only risk to a business. The appearance of a bribe or being the subject of an investigation into bribery can also have a significant impact on your reputation which could be irreparable.
One of the keys to avoiding bribery, or even the appearance of bribery, is identifying where your organisation could be susceptible to the giving or receiving of bribes and ensuring that systems and checks are implemented to mitigate those vulnerabilities.
ABOUT THE AUTHOR
Jon Moore is a partner at Carbon Law Partners specialising in anti-bribery and compliance.
References:
1 PWC’s Global Economic Crime Survey 2018: UK Findings – https://www.pwc.co.uk/forensicservices/
2 https://www.surrey.police.uk/news/prison-for-two-men-who-attempted-to-bribe-county-council-employee/
3 There is also an additional offence for bribing foreign public officials which isn’t relevant for this article.
4 Although it’s worth highlighting that the advantage doesn’t have to be given to the same person that performs the job improperly to be guilty of a bribery offence.
To find out more, call TMS on: 01223 622126
