The Bribery Act: why charities should be concerned

The Bribery Act might seem like the last thing your charity needs to be concerned with but its remit extends much further than you might expect and could have ramifications for a number of charities, especially those working overseas.

The Bribery Act received Royal Assent in April 2010, and was expected to become law in October of that year. As a result of the change in Government, its implementation was delayed until July 2011. However, as has been widely reported, the Ministry of Justice has been subject to intense lobbying as a result of concerns that the scope of the Act, which imposes criminal penalties, is unclear in some areas and potentially prejudicial toUKpersons doing business abroad. The concerns that have been raised include: to what extent Charities fall within the scope of the Act, whether fundraising events could give rise to a bribery offence and the constraints that will be imposed on Charities operating overseas.

The 2010 Bribery Act creates four offences in relation to:

Bribing another person
Being bribed
Bribing a foreign public official
A commercial organisation failing to prevent bribery

The first three offences may be committed either if the act of bribery takes place in the UK, or if the act takes place abroad and the person committing it has a close connection with the UK. This includes aUKcitizen or resident or aUKincorporated company.

The basic bribery offence is expressed in very broad terms as: offering, promising or giving a financial or other advantage to another person, which is intended to bring about or reward impropriety, or when the acceptance of that advantage is known to be improper. “Financial or other advantage” is not defined in the Act, and is potentially very broad in scope.

Accordingly, the Act could be relevant to corporate entertainment and fundraising initiatives and in certain circumstances making donations. It is also potentially of great significance to Charities operating overseas; taking one example, facilitation payments (small payments made to public officials to facilitate matters such as customs clearance) would be treated as a bribe.

The Ministry of Justice has published Guidance relating to the fourth offence of failing to prevent bribery. This offence is committed where a person associated with a commercial organisation established or with a place of business in theUK(and see below as to whether this could perhaps include certain charities) and bribes another person in theUKor overseas, intending to obtain or retain business or a business advantage for that organisation. The commercial organisation has a defence if it can show that it had in place adequate procedures designed to prevent bribery, and the Guidance published by the Ministry of Justice describes the preventative measures that a commercial organisation could be taking. If implemented these should allow an organisation to rely on the adequate procedures defence.

The Guidance is based on six broad management principles, which are stated to reflectUKand international good practice. They do not propose any particular procedures in themselves, but are intended to be used as a flexible guide to deciding what procedures are right for an organisation, taking into account its size. The six principles are:

Proportionate procedures
Top level commitment
Risk Assessment
Due diligence
Communications (including training)
Monitoring and review

A commercial organisation would be advised to adopt an anti-bribery strategy, have appropriate guidelines and procedures in its staff handbook or on a stand alone basis, review its terms of employment and allocate responsibilities for implementation and monitoring. Although there is no requirement under the Act for a commercial organisation to take these steps, it would clearly be prudent to do so, both as a matter of good corporate governance and also to be able to rely on the defence to the offence of failing to prevent bribery, should the need arise.

The Charity Law Association, in its response to the consultation conducted by the Ministry of Justice on the Act, highlighted the uncertain scope of the offence of failing to prevent bribery. A “relevant commercial organisation” is a body or partnership carrying on a business and incorporated or formed in theUKor just carrying on business there. Unincorporated charities, such as unincorporated associations and charitable trusts, will fall outside the scope of the offence (although persons involved with them could still commit another bribery offence). The cautious view is that incorporated charities (for instance charitable companies) may fall within the scope but there is room for debate, particularly on the question whether they are carrying on business.

David Goepel, Head of Charities & Non-profit

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