Now that we finally have a date lined up for the Bribery Act to come into force, and the Ministry of Justice (MoJ) has published its guidance on the Act, I thought I’d refresh my memory on what it’s all about.
After making a quick mental note to cancel that lunch I’ve arranged with a sovereign wealth fund contact (just in case it might be thought that some fine wining & dining were intended to persuade her to send some work my way), I starting thinking about the approach the Government is taking to this legislation. There are some reassuring messages in the MoJ’s guidance to the Act. In Justice Minister Ken Clarke’s own words:
…combating the risks of bribery is largely about common sense, not burdensome procedures.
But I just don’t buy it. The section 7 offence (failure of commercial organisations to prevent bribery) is the part of the Act that’s most worrying businesses in – or connected to – the UK. Section 7 contains only one stated defence: where the organisation proves it had adequate procedures in place to prevent bribery. In this context, it is inevitable that firms will end up adopting potentially burdensome procedures, as having ‘adequate’ anti-bribery measures is their only sure-fire way to avoid liability.
The guidance tells us earnestly there is no intention to create additional red tape for business, but rather that any procedures should be proportional to the risks facing that organisation. It’s all very well talking about common sense and proportionality, but when you start imposing serious criminal penalties on business professionals for failing to prevent someone else’s criminal activities, it’s not exactly easy to give a proportionate response.
Those involved in the fund management industry (and others) are rightly concerned about their and their firms’ reputation, not to mention their liberty. So they ask lawyers like us: “how do we avoid liability?” In response – faced with imprecise legislation and ambiguous guidance – we design lengthy and ‘all-singing all-dancing’ compliance procedures which, because well known law firms wrote them, unavoidably become best practice.
Our clients are already asking for Bribery Act wording be included in their investment management agreements (often to their own detriment) because they fear being held accountable for not having adequate measures. I can understand their concern. After all, if a firm is facing a charge under section 7, how easy will it be to prove to a court that procedures were indeed adequate when, with the benefit of hindsight, they clearly didn’t actually succeed in preventing bribery?
The Government would say I have it all wrong; that firms should tailor their procedures to each client and their respective risk of bribery. While an admirable aim, that’s just not how these things work. Clients won’t want to pay large sums to advisers to provide bespoke anti-bribery manuals. They want something ‘off the shelf’, and everyone tends to copy what others have done: so each time another lawyer or consultant thinks of another paragraph of verbiage to add to their anti-bribery policy standard form, it will gradually be copied around the City until it’s universal.
Of course, it’s not meant to be all about some written procedures tucked away in a compliance manual but rather about top-level commitment and how those procedures are carried out in practice. Yet we operate now in a business environment where there is increasingly a written policy for everything, and who wants to be the compliance officer whose anti-bribery procedures are deemed inadequate because that extra paragraph of verbiage was considered irrelevant to the business?
So, while I don’t disagree that it’s in all our best interests to tackle the scourge of bribery (which Ken Clarke tells us “blights lives”), does the City really need yet another spool of red tape to add to the reels coming out of Brussels, Westminster and Washington DC? Doesn’t additional compliance simply encourage an ever-growing box-ticking mentality rather than the deep-rooted cultural change which Government feels is needed?
I can’t help but think we’ve been through this all before with anti-money laundering (AML) legislation: another example where potential criminal liability can be imposed on professionals for failing to tackle the criminal behaviour of others. In a recent blog, Jonathan Goldsmith, secretary general of the Council of Bars and Law Societies of Europe (CCBE), gave some interesting statistics on the the number of reports that lawyers in different EU member states were making to the authorities in respect of potentially suspicious transactions under AML legislation. The number of such reports made by UK lawyers in 2009 was 4,761, dwarfing those of all the other member states (32 in Spain, 16 in Germany, 2 in France and 3 in Italy).
Much of the reasoning Jonathan gives for this apparently extreme reaction by British lawyers could easily be applied to the effect that I believe the Bribery Act will have on business:
high penalties foreseen by the UK legislation; … a committed enforcement policy from the authorities;… a very broad definition … and a certain ambiguity in the interpretation of UK law…
These factors are already leading to UK business adopting an overly precautionary approach to the Bribery Act, irrespective of the real risks of bribery in their business, and particularly so in the financial services sector where “compliance” has long been a feature of life.
While I’ll admit I have no statistics on this, it would not surprise me if there has been no marked reduction in the incidence of money laundering since we all became obliged to take copies of passports and utility bills, and report suspicious transactions to the authorities. Likewise, I am yet to be convinced that the insertion of an additional chapter in firms’ compliance manuals will have any meaningful effect on the international community’s continuing efforts to rid the world of bribery.