International - Written by on Monday, May 23, 2011 23:28 - 1 Comment

The Bribery Act & incentives

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We are frequently asked if incentives are outlawed under the Bribery Act.

Our reply is that in the UK, generally speaking, while on the face of it they are not it is important to understand how they are working and make sure that they are transparent in order to ensure that money or other incentives given are not in fact bribes.

An example of an incentive might include a voucher, gift or other incentive for people working for a company, or in some cases even a third party retailer from a product manufacturer or service provider, to reward sales.  In a basic form a commission is an incentive.

Extrapolating the example, a commission in itself is not a bribe.  However, there are plenty of cases where commissions hide a bribe or multiple bribes.  A typical example would be an inflated commission from which a sales agent takes his cut before using the balance to pay others kickbacks.  So. There is risk.

An industry exists in providing incentives to lucky employees and others.

While the legality of these sorts of arrangements can be subject to different regulations in different jurisdictions at the recent 2011 International Medical Device Industry Compliance Conference the Director of the SFO, Richard Alderman, gave his take from an English law perspective.

“Incentive payments. These are a common feature of many industries…I know that a number of companies and a number of industry organisations have been looking at this issue in order to see whether there are risks when the Bribery Act comes into force. We have had a number of meetings in the SFO with corporates and industry bodies about this issue. We have been able to talk through the issues and offer reassurance.

Clearly, these incentive payments are normally designed for commercial reasons and are commercially justifiable. There are risks though. What we have been talking about with corporates is the need for transparency and, in particular, the need to know where the money goes and the fact that it is justifiable. We also talk about the need for a senior person at the corporate’s head office to have visibility of what is happening and to be satisfied that what is happening is justifiable.”

Sound advice, and if a business wants to be above criticism it should follow these guiding principles.

 

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