Case law: Small business fails to establish ‘adequate procedures’ defence in first defended Bribery Act prosecution

Commercial organisations, even if small, open-plan and run informally and/or on a family basis, should ensure they carry out formal anti-bribery risk assessments, introduce and monitor an anti-bribery policy, including staff training, adequate record-keeping, and appointment of a designated compliance officer, and regularly review the policy’s effectiveness, all proportionate to the size, type and complexity of the business, or risk a conviction for failure to provide ‘adequate procedures’ to prevent bribery.

After a director of a small, localised interior design company pleaded guilty to bribing a person at a property company to win refurbishment contracts, a legal action was also brought against the company itself under relevant UK bribery law. This says that a commercial organisation commits an offence if a person ‘associated’ with it bribes another person, intending to obtain or retain business, or an advantage in the conduct of business, for that commercial organisation. A person is associated with the organisation if it performs services for or on its behalf.

This means an organisation can be guilty of bribery if, for example, an employee of the organisation bribes someone with the requisite intention, even if the organisation knows nothing about it (a third party agent or, in some circumstances, a subsidiary company are other possible examples of someone associated with an organisation).

However, the organisation has a defence if it can prove it has ‘adequate procedures’ designed to prevent associated persons committing bribery - such as an effective anti-bribery management system which it maintains and enforces.

The company argued it had adequate procedures in place. It had only 30 employees, was run from a small, open-plan office, and had long-standing staff policies encouraging staff integrity, and transparent, open and honest dealings with third parties (this was set out on a poster prominently displayed in the open plan office). It had financial controls over payments out, which operated at several levels in the company, included anti-bribery clauses in a number of contracts it had entered into, and its systems had enabled it to spot and stop the largest of the director’s bribes from being paid. It argued that its size, organisation and culture meant it did not need complex, sophisticated or even express anti-bribery controls and procedures. The culture and ethos meant staff ‘just knew’ they should not bribe third parties.

The company had also carried out an internal investigation, self-reported the bribe to the police and appointed a new Chief Executive, who had brought in an anti-bribery and corruption policy. Two directors were sacked, and the company lodged a suspicious activity report with the National Crime Agency.

However, the court found that the company had failed to how that it had adequate anti-bribery procedures.

It is likely that the reasons for this included the lack of an anti-bribery policy at the time (particularly, that it had not taken any action as a result of the Bribery Act or related official guidance), the lack of a designated staff member to report bribery concerns to, lack of any anti-bribery training, and inadequate records of concerns.

Operative date

• Now

Recommendation

• Commercial organisations, even if small and run informally and/or on a family basis, should ensure they carry out formal anti-bribery risk assessments, introduce and monitor an anti-bribery policy, including staff training, adequate record-keeping, and appointment of a designated compliance officer, and regularly review its effectiveness, all proportionate to the relevant risk and the size, type and complexity of the business.

Case ref: R v Skansen Interiors Limited