Adequate Procedures, Facilitation payments - Written by on Thursday, June 9, 2011 0:14 - 2 Comments

EXCLUSIVE: Facilitation payments after July 1st: a six step solution

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UK law outlaws facilitation or so-called grease payments.

Yet, like it or not facilitation payments are a reality of doing business in some emerging markets.

Faced with this inherent contradiction the UK approach from July 1st is nuanced.

The nuanced approach

Richard Alderman, the Director of the SFO acknowledges the challenge and said recently:

“…I do not expect facilitation payments to end the moment the Bribery Act comes into force. What I do expect though is for corporates who do not yet have a zero tolerance approach to these payments, to commit themselves to such an approach and to work on how to eliminate these payments over a period of time. I have also said that these corporates should come and talk to the SFO about these issues so that we can understand that their commitment is real. This also gives the corporate the opportunity to talk to us about the problems that they face in carrying on business in the areas in which they trade. It is important for us to know this in order to discuss with the corporate what is a sensible process.

We continue to receive questions about facilitation payments and we have sought further clarity from the SFO.

The six step solution

The SFO have informed us that when considering the activities of a company which continues to make small facilitation payments after 1 July 2011, the SFO will be looking to see:

1.    whether the company has a clear issued policy regarding such payments,

2.    whether written guidance is available to relevant employees as to the procedure they should follow when asked to make such payments,

3.    whether such procedures are being followed by employees,

4.    if there is evidence that all such payments are being recorded by the company,

5.    if there is evidence that proper action (collective or otherwise) is being taken to inform the appropriate authorities in the countries concerned that such payments are being demanded,

6.    whether the company is taking what practical steps it can to curtail the making of such payments.

If the answers to these questions are satisfactory then the corporate should be shielded from prosecution.

 

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2 Comments

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Norman Marks
Jun 21, 2011 7:22

This is an important topic, and there is much more to be said. I have posted some links to guidance from some of the accounting firms at http://www.theiia.org/blogs/marks/index.cfm/post/Internal%20Auditors%20Should%20Understand%20the%20UK%20Bribery%20Act%20Even%20If%20They%20Are%20Not%20in%20the%20UK.

The key is that the company must take a risk-based approach and have controls to prevent bribes. Monitoring after the fact is not sufficient.

Barry & Richard
Jun 21, 2011 14:19

Agreed. The six principles are guidance from the SFO. If a facilitation payment is paid after July 1st the SFO have said these are the questions they will look at.

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