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Failing to prevent bribery – a legal update for commercial organisations and the 'adequate procedures' defence

Posted on 13 March 2018

Failing to prevent bribery – a legal update for commercial organisations and the 'adequate procedures' defence

Section 7 of the Bribery Act 2010 (the Act) holds commercial organisations strictly liable for failing to prevent persons associated with them from committing bribery on their behalf. However, a defence is open to them if they are able to demonstrate on a balance of probabilities that, despite a particular case of bribery, they had ‘adequate procedures' in place to prevent persons associated with them from bribing.

Since March 2011, guidance by the Ministry of Justice has been available regarding types of bribery prevention procedures that organisations should adopt (Guidance). However, whilst this Guidance included a series of case studies detailing how commercial organisations could ensure compliance, there has been some uncertainty as to how the 'adequate procedures' defence operates in practice.

Last week saw the first contested prosecution under section 7 of the Act as an interior design company, Skansen Interiors Limited (SIL), was found guilty of failing to prevent bribery involving one of their former directors, Stephen Banks. Mr Banks had previously pleaded guilty to bribing an individual at a Manchester property company in order to secure refurbishment contracts.

What procedures were in place?

During the two day trial at Southwark Crown Court, the jury heard that SIL was a small, localised business operating in a handful of cities from an open plan office that was described as smaller than the trial courtroom. They further heard that that company had a series of historic policies encouraging staff to conduct their dealings with third parties with transparency and integrity (although no specific anti-bribery policy was in place at the time of the misconduct). SIL had argued that it had adequate procedures in place as it had effective multi-level financial controls, had used standard-form anti-bribery clauses in a number of its contracts and had been able to stop the payment of the largest bribe from being made.

In addition to the above procedures, SIL conducted an internal investigation and immediately self-reported the misconduct of its former managing director to the City of London Police. SIL had appointed a new CEO who introduced an anti-bribery and corruption policy, summarily dismissed two directors and filed a suspicious activity report with the National Crime Agency.

Despite all of this, the jury found that SIL had failed to establish that this amounted to 'adequate' anti-bribery procedures.

When will bribery prevention procedures be considered 'adequate'?

Unfortunately there was no judicial direction given as to what constituted 'adequate procedures' or why SIL fell short of this standard. However, the CPS' submissions provide some insight into what factors may have been relevant to the jury in returning a guilty verdict. The prosecution argued that:

  • SIL held incomplete compliance records and had no designated compliance officer that staff could report concerns to;
  • SIL failed to enact any specific procedures (such as an anti-bribery policy) to react to or comply with the changes in the law brought about as a result of the Act or the Guidance; and
  • There was no evidence of active staff training to ensure that staff had read or been reminded of SIL's historic policies.

What lessons can be learned from R v Skansen Interiors Limited?

Whilst the decision to convict may seem harsh, there are practical lessons SMEs wishing to avoid being found strictly liable for failing to prevent bribery can learn:

  1. Ensure a risk assessment has been conducted and an anti-bribery policy is in place that meets the risk and is proportionate to the size, nature and complexity of the business;
  2. Any anti-bribery policy should regularly reviewed to respond to changes in the law and circumstances and be communicated to staff (with a paper trail to back this up) and with regular training which should be documented; and
  3. Independent reporting channels, where possible to a designated compliance officer, should be established to allow staff to share their concerns without the risk of retaliation.
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