Governments in the UK and internationally are increasing their focus on bribery and corruption. The UK's Serious Fraud Office ('SFO') and Financial Services Authority ('FSA') have prosecuted and/or taken enforcement action against firms for involvement in corruption, or where internal systems and controls (to prevent bribery) have been found to be inadequate. In addition to the risk of criminal proceedings against senior management, firms also face substantial financial penalties for mis-managing bribery and corruption risk.

The Bribery Act 2010 (enters into force in April 2011). For activities undertaken by a commercial organisation (operating in the UK or internationally, but having a UK nexus), the legislation, includes:

• Criminal offences associated with offering, promising or giving of a bribe and requesting, agreeing to receive or accepting of a bribe.
• A discrete offence of bribery of a foreign public official (in order to obtain or retain business).
• A corporate offence for firms that fail to maintain adequate procedures to prevent bribes being paid by persons associated with the corporate.
• A criminal defence where a firm can demonstrate that it has adequate procedures in place to prevent bribery.

Identifying latent risk in new ventures and acquisitions
Investors and senior management considering funding or entering into new business opportunities should consider bribery and corruption risk. Only by completing appropriate due diligence and identifying potential risk before closing a deal, will investors be in a position to assess legacy risk/issues, and be sufficiently informed to take appropriate steps and mitigate identified risk.

Unsighted investors can fall foul of Police, SFO or FSA investigations involving pre-contract or historic issues. Inadequate due diligence can lead to a firm suffering large financial penalties, with on-going compliance programmes running for several years, causing substantial diversion of senior management time and resource.

How to demonstrate adequate procedures are in place to prevent bribery
FCRM's anti-corruption due diligence programme includes, consideration of:

• Bribery and corruption risk in how business is transacted.
• Review of client policy and procedure (including reporting to senior management).
• Risk associated with gifts, hospitality, entertainment, donations and other forms of payment.
• Staff awareness of anti-corruption arrangements.
• Residual risk in associated persons (i.e. employees, agents, consultants and representatives, particularly where deliverables or value-for-money from associates beyond the organsiation's control enviroment may lack transparency.
• Testing propriety and transparency of payments, use of suspense accounts and miscellaneous journal entries.
• Risk in business development, marketing activity and other arrangements with representatives of foreign governments, bodies or agencies.
• Red-flags which might indicate, or lead an organisation being exposed to an increased risk of bribery or corruption allegations.

An effective Compliance Programme reduces corruption risk when designed to prevent and detect violations or breaches before they occur. Such programmes include:

• Tone from the top - High level Policy Statement or Code of Conduct endorsed by senior management.
• Guidance - Compliance Manual with written standards and guidelines for all employees, contractors, agents, etc,.
• Accountabilty - Designated senior manager responsible for oversight, monitoring and compliance arrangements.
• Education - Training and awareness for directors, management, employees and relevant contractors / agents.
• Alert mechanism - Confidential telephone hotline for reporting details of suspected breaches.
• Assurance - Independent reporting to Senior Management (i.e. The Board) and the Audit Committee (e.g. Results of Internal Audit reviews/compliance-based testing).

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To request further information about FCRM´s Anti-Corruption Services click-here, or to launch your local email application click here.