1. What types of corruption risk exist in the United Kingdom?
Despite having strong institutions to check corruption, the United Kingdom (UK) is not altogether immune from it. Corruption has been growing in several areas, with some critics citing factors such as inadequate anti-corruption training of procurement staff in key government agencies, insufficient financial resources allocated for effective prosecution of bribery, and ineffective information-sharing across all government agencies and relevant institutions.
As acknowledged by the UK’s first National Risk Assessment (NRA) conducted by the UK Treasury and Home Office, the country’s law-enforcement response to money laundering has largely been weak for an extended period of time. The report cited particular difficulties in dealing with the transactions of foreign offshore companies that set up business in the UK but conceal beneficial ownership information. In addition, the UK’s NRA revealed the anti-money laundering (AML) vulnerabilities in London’s real estate industry – emphasizing the low level of compliance with AML standards and the lack of sufficient legal authority for government enforcement.
2. How might foreign businesses be affected by corruption and the UK’s anti-corruption controls?
In general, encountering corruption is not a high risk for businesses operating in the United Kingdom. The UK is well ranked on the TRACE Matrix – which measures business bribery risk by country – placing 19th out of 197 countries.
Companies operating in the UK should understand, however, that they are subject to the 2010 UK Bribery Act, which is considered one of the world’s most stringent anti-bribery laws in existence. Both commercial bribery (bribery between commercial enterprises) and public forms of bribery (bribery of government officials) are prohibited under the law, as is a company’s failure to prevent bribery. Companies seeking to comply with the law must also endeavour to prevent and detect inappropriate payments by associated third parties, including agents, consultants and joint-venture partners worldwide. Moreover, unlike other legislation, such as the U.S. Foreign Corrupt Practices Act, the UK Bribery Act does not make any exceptions for facilitation payments (payments to expedite the performance of routine governmental operations).
3. In which sectors are companies most vulnerable to corruption?
Often captured by headlines, businesses that are involved in sports can encounter various types of corruption, including spot-fixing, match-fixing, use of illegal drugs, vote-rigging and common forms of bribery. In addition, there have been incidents involving public institutions, such as the UK Border Agency, police and the prison service, being targeted by organized crime groups. Companies dealing regularly with those agencies may wish to develop extra precautionary measures.
4. How can foreign companies operating in the UK best protect themselves against corruption risks?
Businesses operating in the UK should be familiar with the regulatory expectations under the UK Bribery Act for establishing a system of compliance and internal controls. The principles underlying such a system are outlined in the UK Ministry of Justice Guidance to the Act, and include the development of proportionate procedures, top-level commitment, risk assessments, due diligence, communication (including training), and monitoring and review. Companies that establish they have developed such controls can use an “adequate procedures” defence under the Act, if they are charged with corrupt activity.
In relation to risk-based due diligence and monitoring of third parties, companies are strongly advised to work only with reputable business partners. They should carefully screen their intermediaries, as well as require evidence of a compliance program and completion of anti-bribery training. Working with TRACE Certified companies can provide companies with the assurance that their third parties have completed a rigorous due diligence process based on international standards.
5. What anti-bribery compliance support is available in the UK?
The website of the Serious Fraud Office (SFO), responsible for enforcement of the UK Bribery Act, provides access to several useful links to support anti-bribery compliance. In particular, the SFO website offers information regarding corruption indicators, definitions of corruption, various reporting mechanisms of corruption, and the official guidelines related to facilitation payments, “adequate procedure” defence, and prosecuting bribery in the UK.
The TRACE Resource Center, available to TRACE members, offers numerous webinars and guidance to help businesses better understand the relevant UK laws and regulations related to both commercial bribery and bribery of foreign public officials.
TRACE also recently launched TRACEpublic, the first global register of beneficial ownership information, which allows companies to share and search for beneficial ownership information at no cost. The database supports the efforts of companies seeking to conduct business ethically.