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Here it is: the "FCPA on steroids"

RiskRisk Management

On 1 July the new UK Bribery Act came into force, and with it a number of much-discussed uncertainties. Some legal experts have nicknamed the act the "FCPA on steroids", referring to the nature of its vague composition, which covers all kinds of illicit business activity. "Technically speaking, a cup of coffee bought with the wrong intentions can be a criminal offence under the act," was a comment made by one lawyer recently who represents clients dealing with bribery investigations.


As my colleague Jonathan Webb recently noted, to make things more complicated still, the act penalises the receipt of, payment of and failure to prevent, bribes, but what some still seem to underestimate is that all of the above now constitute corporate offences. This means that the companies that fail to put in place procedures that prevent bribery may be found guilty of a criminal offence in the UK if any of their associates conduct a bribe on their behalf. Procurement is particularly susceptible to this regulation, as it deals with hundreds, if not thousands of suppliers, sub-suppliers, agents, contractors and other business partners.


Another uncertainty surrounds the extraterritorial impact of the act. Regulators have made it clear that they will pursue both UK and non-UK companies. This translates into the following reality: a foreign company looking to conduct any part of its business in the UK could be prosecuted under the act for failing to prevent bribery, even if the bribery took place outside the UK and involved non-UK individuals. As this represents significant additional business risk to foreign organisations, concerns have been raised that the new legislation will cause the UK to lose out on business, at least in the short term.


However, here is a caveat, which has not yet been widely reported. The Serious Fraud Office (SFO), the government regulator for the Bribery Act in the UK, is facing some serious budget issues. While it is, at the moment, largely operated using government funds, in a few years’ time it will move to a self-funding model, whereby it will be required to find substantial chunks of its funding from the fines accrued. That said, cynics believe that the SFO may be tempted to pursue only the biggest, most lucrative breaches of the act, yet again undermining the true application and impact of the new legislation on business practices.


Despite the qualms that persist around the UK Bribery Act, companies, and procurement in particular, cannot afford to be reactive. The question they need to answer rather quickly is "Do we invest now or pay later?". A forthcoming PIU white paper will investigate which measures companies can and should put in place to minimise the risk and impact caused by (potentially) fraudulent actions.

Maggie Slowik
Posted by Maggie Slowik

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