News focus: An incentive to take action

21 May 2010

25 May 2010 | Andy Allen

Many procurement professionals believe the UK Bribery Act will not change the way they work. Andy Allen asks if they are burying their heads in the sand

When the old government drew up the Bribery Bill, bringing together piecemeal or outdated laws, the activities of companies competing for contracts overseas – rather than procurement departments back home – were the main focus.

The UK has been repeatedly criticised for not being tougher on corruption and the law makes it easier for companies or senior management to be prosecuted when bribes have been offered, paid or received.

But a study published by law firm Eversheds in April revealed a lack of awareness over the legislation. It found 60 per cent of the 700 executives responding did not know that failing to prevent bribery will be a new corporate offence. Nine out of 10 were unaware that the maximum jail sentence is 10 years, Eversheds found.

Part of the problem is deciphering how the Act will be interpreted. The government was scheduled to provide guidance in June or July but now there is talk it may be delayed until August before the act comes into force in October.

A survey of the SM100, however, found most respondents did not feel the need to change current practices.

Shaun Evans, supplier relationship manager at Co-operative Financial Services, reflects the view of many when he says: “I don’t see the anti-bribery law changing the way we currently work. We already have robust controls in areas of coercion, bribery, gifts and hospitality and whistleblowing.”

Karen Wontner, purchasing manager at Cardiff University, adds that she believes the major effect would be on suppliers.

Buyers often say that the use of e-procurement has reduced the risk of kickbacks creeping into the system. Andrew Gordon, partner in forensic services at PwC, says procurement is such an obvious area for fraud that most companies have put in place restrictive controls, stopping corruption or forcing it elsewhere.

So has the function become so well policed that bribery is almost extinguished? Or is procurement in denial?

Chandrashekhar Krishnan, executive director at Transparency International UK, says: “Large UK companies increasingly recognise bribery can be a problem and have adopted strong codes but there’s still a lot of work to be done if you look at UK plc as a whole.”

He thinks small and medium-sized organisations are less likely to have the right processes in place and are more likely to fall foul of the law, particularly when conducting business through an intermediary overseas – an area also covered by the law.

What about cases where the buyer is at fault closer to home? In 2007, former Ikea buyer John Brown was jailed after he received kickbacks of more than £1 million from suppliers. Under the new legislation companies in a similar position could also face prosecution for failing to prevent bribery, says Brent McDaniel, director at KPMG forensic. “Adequate procedures” to prevent bribery and corruption occurring provide a defence against prosecution under the new Act though it is still not clear exactly what such procedures should consist of, McDaniel says.

One of the grey areas of the new Act is its broad definition of bribery, which goes beyond the traditional cash in a brown paper envelope to encompass gifts and hospitality.

Robert Wardle, a consultant for law firm DLA Piper and former head of the Serious Fraud Office, says: “If somebody accepts a large gift the Act will consider whether they have acted improperly and against expectation.”

Once again, a robust policy on such matters is likely to prove to be a defence. And as Wardle stresses, most organisations will have learnt long ago that it is not in their interests to allow their buyers to have their judgment swayed by gifts and hospitality. In most cases they will have put in policies to prevent it.

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