Commercial organisations attempting to comply with the UK Bribery Act 2010 face a real dilemma when it comes to facilitation payments.
Facilitation payments are unofficial payments made to public officials in order to secure or expedite the performance of a routine or necessary action. Sometimes referred to as 'grease' payments, they are usually made to obtain something to which the commercial organisation is already legally entitled, for example getting goods released from customs.
Under US legislation there is an exemption within the Foreign and Corrupt Practices Act which allows small payments of this nature. There is no such exemption in respect of facilitation payments under the new UK Bribery Act.
However, it should be remembered that they were illegal under previous legislation at common law and simply remain so under the Bribery Act. Despite this, in practice, such payments, mostly to foreign public officials, have been made for many years by commercial organisations, usually not willingly, but simply to get things done.
Under the new legislation any small bribes paid to facilitate routine government actions abroad could trigger the offences of bribing a foreign public official and the corporate offence of failing to prevent bribery. There is a defence available of having adequate procedures in place to prevent bribery, but this is only available in respect of the corporate offence.
The Government, and particularly the Serious Fraud Office (SFO), has made it clear that it expects commercial organisations to stamp out such payments. Whilst a commendable stance, it does little to assist UK companies conducting business abroad for which facilitation payments are a very real every day problem.
When the guidance on adequate procedures was published by the Government in March 2011, there was some attempt to address these concerns. In it was recognition that the eradication of facilitation payments was a national and international long term aim and that it would require economic and social progress and a sustained commitment to the rule of law in certain parts of the world to overcome them. Nonetheless, there was an expectation that commercial organisations would strive to eradicate such payments, thereby accepting that the passing of the new legislation was not going to stamp out the problem over night.
Commercial organisations therefore faced a dilemma. If such payments were made they would be illegal and, if documented, technically they would provide a prosecutor with clear evidence of an illegal act. However, by not recording them, the organisation would be going against the primary principle of being open and transparent in respect of all transactions, which is the cornerstone of any Bribery Act compliance programme.
SFO director Richard Alderman has recognised this challenge and said recently that he did not expect facilitation payments to end just because the Bribery Act had come into force.
His expectation is that a commercial organisation would have a zero tolerance approach to these payments and commit itself to eliminating them over a period of time.
He suggested a six step solution to compliance in this area and what he would be looking for to see whether there are adequate procedures in place:
- whether or not the company has a clear issued policy regarding such payments
- whether written guidance is available to relevant employees as to the procedure they should follow when asked to make such payments
- whether such procedures are being followed by employees
- if there is evidence that all such payments are being recorded by the company
- if there is evidence that the proper action, collective or otherwise, is being taken to inform the appropriate authorities in the countries concerned that such payments are being demanded
- whether the company is taking all practical steps it can to curtail the making of such payments
Guidance has also been issued to crown prosecutors in this area stating what factors they should take into account when considering whether or not it would be in the public interest to prosecute a commercial organisation for making such payments. Factors in favour of prosecution include:
- large or repeated payments
- payments that are planned for or accepted as part of a standard way of conducting business, therefore indicating that the offence was premeditated
- a failure by employees to follow a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested
There is a clear requirement for commercial organisations to ensure they have policies in place clearly informing employees of the stance that should be taken with regard to facilitation payments. Such a policy will include permission for such payments should the payer be in vulnerable position arising from circumstances in which any payment is demanded. The recording of the demand and the reporting of the payment to relevant authorities need to form part of the audit trail if adequate procedures are to be established.
Quite clearly, to ensure adequate procedures are in place, the issue of facilitation payments needs to be tackled. Turning a blind eye to such payments is not the answer.