The Bribery Act promises to hit global supply chains hard. Liz Morrell reports on what retailers need to know
Retailers are constantly inundated with new and updated legislation and it is now the supply chain team’s turn to make sure it is up to speed. In April, the UK Bribery Act had been due to come into force. Retailers have been given some respite; the implementation has been delayed as the Government struggles to produce clear guidance. Nevertheless, the Act’s effects on the global supply chain will be profound.
When it comes into force, companies will be held to account in the UK for employee breaches of the act across the globe. Claiming ignorance of such actions won’t suffice as an excuse because retailers will remain liable whether they knew of the actions or not. More terrifying for retailers, the act also extends beyond their own employees to include liability for the acts of agents, consultants and joint-venture partners.
“Associated persons can be anyone. You don’t even need to be in a contractual relationship with them,” says Neill Blundell, head of the fraud group at law firm Eversheds.
He believes the UK Bribery Act will be one of the strictest anti-corruption laws in the world and will have a major effect on retailers’ businesses. “It’s the most significant piece of
criminal legislation for those acting globally since the Proceeds of Crime Act 2002,” he says.
Offences will include offering or paying a bribe, requesting or receiving a bribe, bribing a foreign public official and a new corporate offence of failing to prevent bribery. And the punishments are harsh - unlimited corporate fines and up to 10 years’ imprisonment for guilty employees.
Retailers need to know their supply chains inside out and be stricter than ever on how their associates are working. “Retailers will have to be extremely careful because if they are using agents and those people are committing bribery and corruption they are potentially caught by the act,” says Blundell.
Although the largest retailers should be well prepared, lower-tier retailers are less ready, says Anthony Woolich, partner at law firm Holman Fenwick Willan: “Where there will be difficulties is the smaller and medium businesses that don’t have the in-house resource,” he says.
Perran Jervis, head of retail at law firm TLT, says: “It’s very difficult for retailers to audit their suppliers, particularly if there is a long supply chain and it involves suppliers in foreign jurisdictions.”
For many retailers, competitive pressures will mean they are by default operating in high-risk jurisdictions. Global risk researcher Maplecroft produces a corruption and bribery index that shows the risks worldwide. Chief executive Alyson Warhurst says: “UK businesses have to be operating in, supplying and procuring from, and distributing into fast-growing economies to survive. In these locations top-down the legal system is poor and bottom-up corruption is systematic.”
She says the act signifies a major change for retailers. “It is becoming illegal for UK businesses to pay bribes and impossible for UK businesses to hide behind the shield of operations on foreign soil,” she says.
Some common ways of doing business will have to change. One is facilitiation payments, which help to get products through a port and are common practice across Asia and the Middle East.
Woolich says: “It won’t be acceptable because technically a facilitation payment will be an infringement.”
A retailer’s defence will be whether they have put adequate procedures in place or not. “You have to train your suppliers but also need to be able to show your systems were robust enough, that you checked your suppliers out and put defences in place,” say Blundell.
Although the actual implementation date is still unclear, Blundell says retailers must act now. “Companies will be left behind the game if they don’t build their programmes around those principles,” he says. “They need to understand where their risks lie - that’s probably the most important thing.”
The draft principles of the UK Bribery Act that retailers must adhere to, announced in 2010:
- Risk assessment
- Top level management commitment
- Due diligence of all parties involved in the business relationship
- Clear, practical and accessible policies and procedures
- Effective implementation of policies and procedures
- Monitor and review to ensure compliance and identify issues as they arise
- For more information visit Justice.gov.uk