Bribery controls lack bite, report finds
UK businesses are failing to implement adequate anti-corruption controls three years after the UK Bribery Act came into force, making new scandals “almost inevitable”, according to a report by GoodCorporation. More than a third of 3,000 anti-corruption controls assessed by the company were deemed inadequate, along with 67% of due diligence procedures. Many of the anti-bribery measures recommended by the Ministry of Justice are not being successfully adopted, states the report, ‘Combating corruption: are businesses doing enough?’
A clear gap is also emerging between the companies that are doing best in this area and those with inadequate procedures, GoodCorporation found, with good companies outperforming weaker companies significantly in areas such as anti-corruption due diligence. Leo Martin, director of GoodCorporation – which checks and measures corporate behaviour in a range of industries – said many companies were failing to take a broad enough view of possible corruption risks in the supply chain, and needed more external engagement.
“Too many companies are doing bits of what is required, rather than seeing the whole picture,” he told Ethical Corp. “There has to be an outward focus, i.e. much more communication with the supply chain and vetting/due diligence where necessary. Not doing these two things has often led to falling short in specific areas, such as training of sales staff or dealing with governments.”
Glaxo Smith Kline’s bitter medicine
The cost of failure can be high, both financially and to reputation. Glaxo Smith Kline (GSK) and its subsidiaries are under investigation by the UK’s Serious Fraud Office (SFO) and US Department of Justice for activities that may relate to its operations in China and elsewhere.
In September a court in China fined the UK pharmaceuticals giant almost £300m after finding it guilty of bribery. The record penalty followed allegations that GSK paid out bribes to doctors and hospitals in order to have its products promoted. GSK’s former head of Chinese operations, Mark Reilly, was given a suspended three-year prison sentence. Other GSK executives also got suspended jail sentences. Chinese authorities first announced they were investigating GSK in July 2013. The company was accused of making about $150m in illegal profits.
The SFO is likely to be focusing on whether GSK breached section 7 of the UK Bribery Act, which came into force in July 2011, by not having “adequate procedures” in place to prevent bribery, an offence for which no prosecutions have yet been brought by the SFO against any company. “It is clear from our evaluation that many businesses are failing to implement adequate procedures to prevent bribery,” Martin said. “As a result we predict that a wave of new corruption scandals is almost inevitable.”
To fall foul of the Bribery Act, a person must have either committed a relevant crime inside the UK or acted elsewhere in a way that would have constituted a crime in the UK. For a prosecution in the latter case, the person must have a “close connection” to the UK, which includes being a British citizen, resident or protected person, or a company incorporated in the UK, or a Scottish partnership.
The law covers offering, giving or promising an advantage or requesting, agreeing to receive or accepting an advantage.
Businesses are more at risk from corruption by third parties than in any other area of their operations, making due diligence checks vital, Martin said. However, the fact that some businesses are starting to get it right shows what can be achieved and that the goal is attainable, he added.
After anti-corruption due diligence, the hardest area to get right was communication and training (50% inadequate), followed by government and regulatory affairs (45% inadequate) and human resources (42% inadequate). Robert Barrington, executive director of Transparency International UK, said: “The message from this GoodCorporation report is that an encouraging number of companies have made a good start. This is in line with Transparency International’s own research on UK companies. But is also true that for most companies there is more to be done.”