HedgeWeek – The UK Bribery Act has been heralded by some as a tough new anti-corruption measure, and criticized by others due to the absence of clear guidance on how corporates should design policies and procedures to promote compliance with the Act\u2019s provisions.\u00a0 The Minister of Justice announced recently that implementation of the Act will be delayed to provide time for publication of additional guidance.\u00a0 While one hopes that the development of additional guidance will assist hedge funds and private equity funds in fine tuning their compliance programs, there is no reason to wait until final publication to begin implementing procedures.<\/p>\n
Overview of the Bribery Act<\/span><\/p>\n The Bribery Act applies both to bribery of public officials and private persons and prohibits the giving or receiving of a financial or other advantage to induce or reward a person to perform a \u201crelevant function\u201d (a function of a public nature or an activity connected with business) improperly.\u00a0 It also prohibits attempted bribery, or the mere offer or request of an inducement or reward.<\/p>\n The Act also outlaws bribery of foreign public officials. It prohibits giving or offering a financial or other advantage to a foreign public official with the intention of influencing the official in order to obtain or retain business.<\/p>\n In addition, the Act seeks to punish corporate organizations which fail to prevent bribery.\u00a0 When a person associated with the organization, including employees, agents and consultants, commits any of the offences described above, the organization is guilty of the offence of failure to prevent bribery unless it can show that it had \u201cadequate procedures\u201d in place to prevent bribes from being paid.\u00a0 Implementation of the Act has been delayed for three months to allow for time to better define what constitutes adequate procedures.<\/p>\n The Bribery Act provides for enormous extraterritorial reach.\u00a0 It will apply to offences by British nationals, corporates or persons ordinarily resident in the UK (regardless of whether the act or omission took place outside the UK) and to any act or omission which forms a part of the offence if such act or omission occurs within the UK.\u00a0 In addition, the corporate criminal offence of failure to prevent bribery will apply to commercial organizations that have a business presence in the UK (regardless of whether the bribe was paid in the UK or the UK part of the business was even involved in the bribe).\u00a0 Violation of the Act carries potential penalties of ten years in jail for individuals and an unlimited fine for companies.<\/p>\n Particular Risk Areas for Hedge Funds<\/span><\/p>\n Regardless of what specific definition of \u201cadequate procedures\u201d emerges, hedge funds and private equity funds should be prepared to implement anti-corruption compliance programs that include procedures tailored to their particular businesses and risk profile, training for employees and agents, and a process by which the compliance program can be audited.\u00a0 The three most common anti-corruption compliance risk areas for hedge funds and private equity funds are: (1) private equity investments, joint ventures and portfolio companies; (2) agents and consultants; and (3) travel, entertainment and gifts.\u00a0\u00a0 In transactions with state owned or controlled enterprises or sovereign wealth funds, these risks are even higher.<\/p>\n The challenge of monitoring and imposing controls governing the firm\u2019s primary operations as well as the interplay of portfolio companies, joint ventures, consultants and agents can be daunting.\u00a0 Ignorance of misconduct will not protect a parent or principal from liability.\u00a0 We offer some useful guideposts below.<\/p>\n Private Equity Investments, Joint Ventures and Portfolio Companies<\/span><\/p>\n Hedge funds should consider the following steps: identifying risks, planning the timing and scope of due diligence, drafting transactional documents that contemplate anti-corruption compliance, and engaging in post-transaction monitoring. It is critical to involve legal and compliance professionals at the outset of each deal.\u00a0 The firm could be exposed to liability in circumstances where an illicit payment took place prior to acquisition or where the firm\u2019s investment does not rise to a level where it has control of the portfolio company or joint venture.<\/p>\n Agents and Consultants<\/span><\/p>\n Agents and consultants are often necessary when transacting business in a foreign jurisdiction.\u00a0 The firm must conduct appropriate due diligence before entering into such relationships.\u00a0 This may include screening potential agents with respect to reputation, background and qualifications and requiring anti-corruption representations.\u00a0 Firms should also evaluate whether potential agents are providing services that are consistent with their expertise and are being paid at a rate commensurate with the market.\u00a0 The agent\u2019s assignment and any expenditures or payments to agents should be well-documented.<\/p>\n Travel, Entertainment and Gifts<\/span><\/p>\n Firm personnel should be educated with respect to the broad definition of what constitutes a foreign public official under the Bribery Act, the U.S. Foreign Corrupt Practices Act, and other relevant anti-corruption regulation.\u00a0 Expenditures for travel, entertainment and gifts should not be lavish or excessive.\u00a0 Even reasonable expenses for foreign public officials should be pre-approved by the compliance department, well-documented, and be for a legitimate business purpose.<\/p>\n By Carl Winkworth and William P. Barry<\/p>\n","protected":false},"excerpt":{"rendered":" HedgeWeek – The UK Bribery Act has been heralded by some as a tough new anti-corruption measure, and criticized by others due to the absence of clear guidance on how corporates should design policies and procedures to promote compliance with […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16022],"tags":[],"class_list":["post-21192","post","type-post","status-publish","format-standard","hentry","category-opinion"],"_links":{"self":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/21192","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=21192"}],"version-history":[{"count":2,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/21192\/revisions"}],"predecessor-version":[{"id":21194,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/21192\/revisions\/21194"}],"wp:attachment":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=21192"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=21192"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=21192"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}