Why failing to have an anti-bribery policy is a risky strategy

When the UK’s bribery laws were amended last summer, for the first time in over a century, it raised many questions about business practices. While the media focused on whether companies would still be able to take clients to Twickenham, most businesses were taking a careful look at their anti-bribery policies and asking the government what they would need to do to comply.

The main difference was the introduction of a new corporate offence of failing to prevent bribery. Under the new laws, UK companies are required to take proactive steps (adequate procedures) to stop bribery occurring anywhere in their organisation, including suppliers, third parties and intermediaries. A failure to do this could lead to company directors facing unlimited fines and a jail sentence of up to ten-years if they were prosecuted for corrupt practices.

The old excuse that a supplier may have ‘exceeded their remit’ in obtaining customs clearance or acquiring a permit will no longer form a defence. Moreover, this is the case not just under UK law, but also under US and most other European laws as well. In 2011, every Foreign Corrupt Practices Act or US Securities and Exchange Commission investigation involved the payment of bribes via third parties. Not only are companies that get caught in this way facing heavy fines, they are also subject to boycotts by other businesses and a subsequent loss of revenue.

It is clear that in order to be fully protected, UK companies should be conducting robust due diligence on suppliers, particularly those operating in high-risk areas. Freight forwarders carry out activities that are particularly at risk from corruption. The sector has already seen high profile prosecutions and companies losing contracts once corruption was discovered.

From the work that GoodCorporation has carried out in this area over the last ten years, we know that a failure to publish an anti-corruption statement is likely to indicate that little or nothing is being done inside the company to prevent bribery. Indeed, that is why the Ministry of Justice referred to the communication of anti-bribery policies in their Guidance, stating; “top level management commitment to bribery prevention is likely to include communication of the organisation’s anti-corruption stance”. Clearly, this should be one of the first things to check.

Concerned by the lack of publicly available information on anti-bribery policies and facilitation payments, GoodCorporation conducted research to see how many leading international logistics companies had published policies or statements.

The results were alarming. A third of companies had no published anti-corruption policy and more than half had no statement on facilitation payments.  

This places both the logistics companies and and their clients at risk from a successful prosecution should corruption be discovered, as without such statements their anti-corruption procedures could be deemed inadequate.

So how can companies using these services protect themselves?

¢  Assess the risk according to the nature of the goods being moved and the final destination

¢  In high-risk situations undertake due diligence on the service provider in the following manner:

¢  Check their published policies on bribery and facilitation payments via their website and other documents. If these cannot be found, alarm bells should start ringing

¢  Send a questionnaire requesting information on internal systems and controls (these would not be publicly available). In particularly high-risk areas, consider doing this in person

¢  Carry out spot-checks on procedures to ensure that policies are implemented on the ground

¢  Even if ethics statements can be found on the website or in tender documentation, ask for a contract to be signed agreeing to abide by your standards, particularly in relation to facilitation payments.

¢  Communicate your own-zero-tolerance policy on facilitation payments

With the Bribery Act making it easier for prosecutors to bring about charges, these weak processes in such a vulnerable industry are a cause for real concern. Freight forwarders operate in some of the world’s most ethically challenging environments, making logistics one of the areas most exposed to corrupt practices. Working with a company that is failing to actively tackle corruption is a high-risk strategy that should be avoided at all costs.

This article first appeared in LLoyds Loading List on August 20