Lack of awareness about the Bribery Act amongst SMEs

The Bribery Act is a major piece of legislation that affects all businesses and yet many are unaware of its provisions. Our article looks at the statistics and shows how important an awareness of the Act is to companies.

The Bribery Act 2010 – a flagship piece of legislation of which all businesses affected by it would be aware?

Not if the results of a recent survey commissioned by the Ministry of Justice and Department for Business, Innovation and Skills are to be believed. They show a worryingly low level of awareness and understanding of the Act amongst SMEs in the export sector.

Awareness of the Bribery Act 2010

Only 66% of the SMEs surveyed had heard of the Act or were aware of its corporate liability for failure to prevent bribery. SMEs exporting to less developed regions, including the Middle East, Asia, Africa and South and Central America had a greater awareness of the Act compared to those who exported to developed regions including Europe, North America and Australia (58%).

Of those who were aware of the Act, eighty-one percent were also aware that it included offences which had been committed overseas, rather than just the UK.

Awareness of the Ministry of Justice Guidance

In March 2011, the Ministry of Justice published guidance to help companies understand the procedures available to them to prevent occurrences of bribery and other breaches of the Act. However, of the 66% of SMEs aware of the Act, three-quarters were not aware of this guidance. Of those who were aware of the guidance, three out of four had read it and almost nine out of ten found it to be useful.

One in three of the SMEs who were aware of the Act said that they had used guidance from sources other than the Ministry of Justice to better understand their duties under the Act. That guidance was from lawyers or solicitors (21%), other business consultants (15%) and trade or professional bodies (14%).

Anti-Bribery Measures

When it came to the risk of being asked for bribes, only a third of SMEs had carried out an assessment. This increased to 36% amongst those exporting to less developed regions and 52% for those exporting to China.

42% of the SMEs who completed the survey said that they had put bribery prevention measures into place but this statistic was vitiated by the fact that the definition of measures was ‘anything they thought helped to prevent bribery’.

Of those who had put ‘measures’ in place, half of those had drawn up staff policy documents or provided training on the issue.

94% of those SMEs who did have procedures in place had introduced them to control financial and commercial issues, whilst nearly nine out of ten had issued a top level statement that their companies do not win business through bribery.

Of the SMEs who had procedures in place, staff policy documents about bribery prevention were used by nearly half, whilst 44% used awareness training about the threats that bribery poses in the relevant sector.

Over seven out of ten SMEs who had heard of the Bribery Act believed that they had sufficient knowledge and understanding to put adequate anti-bribery procedures into place. 79% of SMEs who were aware of corporate liability for failure to prevent bribery believed they had the knowledge and understanding, whilst only 45% of those whose knowledge was limited to the existence of the Act believed they had adequate knowledge. Almost all (96%) of SMEs that had sought professional advice found the advice that they received useful and good value for money.

Bribery prevention procedures

Not all prevention measures cost money but some obviously do. The survey revealed that the average spend for companies on bribery prevention measures was around £2,730, although the average was inflated by a few companies who spent a large amount on prevention measures. The smaller the company, the less was spent on prevention measures.

Small Scale Solicitation

Encountered bribery, according to the survey, was rare, with only 6% of SMEs that exported reporting that their employees or agents had ever been asked for a bribe, as defined by the Act.

Nine SMEs mentioned that this had occurred in China, whilst three each reported occurrences in Russia and Saudi Arabia.

Effect on exports

The Bribery Act seems to have little effect on the ability or plans of SMEs to export. Nine out of ten SMEs said they had no specific concerns or problems related to the Act.

The Bribery Act – what are the offences?

Section 1 – offering or providing bribes

Section 2 – receiving bribes

Section 6 – bribery of a foreign public official

Section 7 – failure of a commercial organisation to prevent bribery

Penalties

Section 7 is a corporate offence and companies who find themselves prosecuted under it can face unlimited fines. Other offences under the Act apply to individuals and can be punished by prison sentences of up to ten years.

Conclusions

From the results of the survey, it can be seen that few SMEs understand the requirements of the Bribery Act and the risks of not complying with them. This means that they are also unlikely to recognise bribery in its multifarious forms. That failure of recognition rather vitiates the effectiveness of any preventative measures that might be taken. Similarly, the lack of awareness amongst SMEs means that they can underestimate the risk that they will become the focus of an investigation. It is often thought that the Serious Fraud Office concentrates on large companies and cases in the millions but this is not the case; the 2014 prosecution of two directors at Smith and Ouzman (who bribed officials in three African countries to the tune of over £400,000) demonstrates that no business can count itself safe from investigation and prosecution.

The results of the survey also show that there is a big difference between the level of protection that companies believe they have in place and the protection they actually have. A company which ignores the effective and informative guidance from the Ministry of Justice and does not take legal advice on their obligations under the Act is asking for trouble.

Published on 1st July 2015, the full text of the report can be found here.

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