A five-point plan to mitigate risk, from Lloyd Firth of law firm WilmerHale.
From 1 January 2021, the post-Brexit transition period is scheduled to end (subject to Covid-19’s impact on the negotiations), at which point the UK will leave the EU customs union and single market. In its place, the UK Government has confirmed it will introduce import controls and customs declarations requirements on EU goods, making the UK border a more burdensome and risky place for businesses that rely on or orchestrate the movement of goods across it.
One of the main risks is that companies – or third parties acting on their behalf – may seek to ease anticipated border friction (delays created by the collection of excise and customs duties and regulatory checks on goods flowing in both directions) by making a ‘grease’ or facilitation payment to expedite a routine government action. Regardless of their size or frequency, facilitation payments are illegal in the UK.
At present, most companies are grappling with the exceptional measures introduced by the Government to combat the threat of Covid-19. However, once this period of instability passes, companies engaged in procurement and supply chain management will be returning their attention to longer-term issues and should consider strengthening their policies and internal controls to guard against the risk of improper payments being made at the border.
Steps to mitigate risk at border control:
1. Firms should put in place a written policy making clear, on behalf of the board and senior management, that facilitation payments are prohibited. This should include a plain words definition of what a facilitation payment is and a commitment that employees who resist making such payments, and incur losses or delay in business performance as a result, will not be penalised. This policy should be provided to agents and other third-party intermediaries who act on behalf of the company.
2. A survey of front-line staff, and a risk assessment of the company’s business practices, should be conducted to determine how and where such payments are made or demanded, and the responses they received.
3. Also, companies can implement a number of internal financial controls to prevent facilitation payments, including to not pay or reimburse any expenses described as ‘miscellaneous’; audit all existing expenses described as ‘miscellaneous’, ‘service fees’ or ‘consulting fees’, and restrict and monitor the use of cash advances provided to employees. When facilitation payments are made, as they inevitably will be, ensure they are described appropriately, clearly recorded in the company’s accounts and reviewed by management and reported to the Board.
4. Tailored training can be provided to those employees deemed to be in high-risk areas of the business. The training should be periodic, tested and include case studies and negotiation skills training on how to resist demands.
5. Finally, companies should impose a contractual obligation on third parties acting on their behalf to comply with the company’s prohibition on facilitation payments, breach of which permits termination.