FCPA Compliance and Ethics Blog

March 30, 2011

UK Bribery Guidance Released: An Initial Look at the Quick Start Guide

Filed under: Bribery Act — tfoxlaw @ 8:19 am
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The long awaited final Guidance on the UK Bribery Act was released today. It provides a wealth of guidance for the compliance professional whether a company is located in the UK, US or anywhere else in the world. This will be the first of several articles we will present on the Guidance. We will begin with the Quick Start Guide. Other releases today were the Guidance and Joint Prosecution Guidance.

The Quick Start Guide notes that they key points of the Bribery Act are:
• The Bribery Act only deals with bribery and not other forms of white collar crime.
• A company will only be vicariously liable for the acts of third parties if such illegal conduct was performed on behalf of a company.
• A company does not need to put anti-bribery procedures in place if it has no risk of bribery.
• Corporate hospitality is not prevented by the Bribery Act.
• Facilitation payments are still illegal Bribery Act, just as they were under prior UK law.

The Quick start notes that a company does not commit the offence of failing to prevent bribery if it can show that it had ‘adequate procedures’ in place to prevent bribery. The scope and parameters of adequate procedures will depend on the bribery risks a company face and the nature, size and complexity of a business. So, a small or medium sized business which faces minimal bribery risks will require relatively minimal procedures to mitigate those risks.
The Quick Start lists six general guidelines designed to assist a company to determine what steps it will need to take to determine the scope of its adequate procedures decide what, if anything, a company need to do differently:
1. Proportionality. The action a company should take should be proportionate to the risks a company face and to the size of a the business. So a company might need to do more to prevent bribery if it is a large organization, or if a company is operating in an overseas market where bribery is known to be commonplace, compared to what a company might do if it is a small organization, or is operating in markets where bribery is not prevalent.
2. Top Level Commitment. Those at the top of an organization are in the best position to ensure their organization conducts business without bribery. A company will want to show that it has been active in making sure that all employees (including any middle management) and the key people who do business with a company understand that it does not tolerate bribery.
3. Risk Assessment. Think about the bribery risks a company might face. For example, a company might want to do some research into the markets which it operates and the third parties it deals deal with, especially if a company are entering into new business arrangements and new markets overseas.
4. Due Diligence. Knowing exactly who a company is dealing with can help to protect a business from taking on people who might be less than trustworthy. A company may therefore want to ask a few questions and do a few checks before engaging others to represent a company in business dealings.
5. Communication. Communicating anti-bribery policies and procedures to staff and to others who will perform services for a company enhances awareness and helps to deter bribery by making clear the basis on which an organization does business. A company may, therefore, want to think about whether additional training or awareness appropriate or proportionate to the size and type of its business.
6. Monitoring and Review. The risks a company faces and the effectiveness of procedures may change over time. A company may want, therefore, to keep an eye on the anti-bribery procedures so that they keep pace with any changes in the bribery risks a company may face when, for example, a company enters new markets.
The Quick Start goes on to provide guidance on risk assessment, due diligence and the use of third party consultants in the creation of anti-bribery policies and procedures. Every practitioner needs to be aware of these releases and should review them to determine their impact your company.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.
© Thomas R. Fox, 2011

SEC Sweeps Sovereign Wealth?

Ed. Note-today we host a Guest Blog from our Colleague Mary Shaddock Jones, Assistant General Counsel and Director Of Compliance at Global Industries, Ltd.

I recently read an article by Cadwalader, Wickersham & Taft, LLP regarding the Security and Exchange Commission’s (“SEC”) delivery of letters of inquiry to at least 10 hedge funds, banks and private equity funds requesting information about the firms’ interactions with sovereign wealth funds.  From all accounts, the SEC may be looking into whether or not the financial institutions interaction with the sovereign wealth funds was conducted in accordance with the Foreign Corrupt Practices Act (“FCPA”).

By now, no one paying attention to the FCPA should be surprised by yet another industry wide investigation.  Beginning in 2007 we saw industry wide investigations in the oil and gas industry with both the U.N. Oil for Food Program in Iraq and the use of an international freight forwarding company in West Africa.  In addition, the Medical Device and Pharmaceutical industries have both been part of an industry wide sweep.  Every industry, every company, every individual and every board member that operates internationally must WAKE UP!

Since the Sarbanes-Oxley (“SOX”) Act became law on July 30, 2002, U.S. reporting companies have to investigate and self report any potential violations of U.S. law, including the FCPA.  On top of all of this the Dodd-Frank legislation has broad application across industries based on the authority granted to the Securities and Exchange Commission (SEC) and applies to all SEC registrants as well as entities regulated by the Commodities Futures Trading Commission (CFTC). The Dodd-Frank Act permits whistleblower awards of 10-30 percent of the amount of monetary sanctions in cases where they exceed $1 million. To receive the monetary award, the information provided must be “original,” essentially meaning that it must be obtained from the whistleblower’s independent knowledge or analysis only and not known to the Commission from any other source.  The information can apply to any type of securities law violation including insider trading, fraudulent financial reporting, and Foreign Corrupt Practices Act (FCPA) violations. It is well published that in the last several years FCPA fines and penalties have as large as hundreds of millions of dollars for an individual case.  10-30 percent of hundreds of millions is a lot of money!

What does all of this mean to every industry, every company and every individual and every board member of a public company that operates internationally?  Don’t wait for the SEC and/or DOJ to come knocking at your door with their broom.  Start at the top: review your risks, review your compliance program, and review your internal controls.  Do you have a clean house?   If not, spring cleaning should be on the top of your to-do list!

There was an excellent article written on February 8, 2011 by Elizabeth Ising and Amy Goodman from the law firm of Gibson Dunn & Crutcher, LLP in Boardmember.com reflecting the top 11 Legal and Regulatory Tips for Board of Directors in 2011.  Not surprising, the top three tips were: (1) Understand the company’s business and industry and be active in strategic planning; (2) Engage in regular risk oversight; and (3) Encourage robust compliance programs that have adequate resources.

During hard economic times, companies are looking to be as efficient in their operations as possible.  There is nothing wrong with this strategy- in fact it is admirable.  However, don’t lose sight of the fact that an FCPA investigation, much less any fine or penalty, will cost your company millions of dollars. I work in the energy industry and I have experienced what happens to companies during these sweeps. If you do not have a robust compliance policy and procedure in place and/or can not document it, you may be in for a long and costly ride. So put your money to good use and invest upfront in a solid compliance program before the dust storm enters your house.

Mary Shaddock Jones is Assistant General Counsel and Dir. Of Compliance at Global Industries, Ltd. Mary can be reached at maryj@globalind.com. The views and opinions expressed here are her own and not necessarily those of her employer.


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