Articles & Updates

The idea of a charity, or at least a charity that operates in an ordinary manner and acts in the public interest, committing an offence of bribery would generally be thought to be implausible.  However, following the Bribery Act 2010 (Bribery Act) coming into force on 1 July 2011 this perception does not reflect the actual risks.  Whilst there are some practical reasons meaning that the prosecution of charities for failure to comply with the Bribery Act is less likely than the prosecution of other organisations, due to a reluctance to find that it is in the public interest, there are real reasons why charities should ensure that they comply with the Bribery Act.

The Bribery Act broadly creates four main offences:

(i) the giving or offering to give a bribe;

(ii) requesting, agreeing to receive or actually receiving a bribe;

(iii) the bribing of a public official to obtain a business advantage; and

(iv) a new corporate offence of failing to prevent bribery by an associated person.

It is clear that a charity can be held liable for each of the first three offences if someone who is a “directing mind” of the charity gives or accepts the bribe.

Whether the fourth corporate offence applies to charities has been the topic of some debate.  This is because the offence requires the organisation to be a “commercial organisation…carrying on business”.  However, the corporate offence is likely to apply to any incorporated charity despite the “business” of the charity being for the public benefit rather than for a private benefit.  A charity or third sector body will be caught if it engages in a commercial activity regardless of its charitable intentions.

Charities are rightly worried about liability under the corporate offence as this could mean that they are held to be liable for failing to prevent an offence committed overseas by a third party that is neither UK resident nor a UK company.  The concept of an associated person is extremely wide and includes anyone who performs services for the charity.  This could include contractors, commercial partners and employees.

There is, however, a defence available to this corporate offence by demonstrating that “adequate procedures” have been taken to prevent bribery.  It is therefore important for charities to ensure that they have these “adequate procedures” in place.
 
There is undoubtedly less chance of a charity being prosecuted for a bribery offence than a non-charitable organisation due to the overwhelming feeling that it would not be in the public interest to do so.  However, the Ministry of Justice has refused to fetter its discretion to prosecute and will not remove the possibility of a charity being prosecuted for such an offence.

There are however reasons, other than the need to avoid prosecution, for a charity to comply with the Bribery Act:

(i) people who are associated persons of the Charity may ask for such compliance as a condition of continuing to deal with them;

(ii) benefactors and contributors often expect high standards from charities and for charities to lead the field in terms of compliance;

(iii) reputational damage to charities for non-compliance can be disastrous.  This could destroy a charity’s reputation to the extent that it inhibits or prevent the charity from bringing in funds in the future and the government’s increased focus on transparency is likely to further increase scrutiny; and

(iv) in some respects charities may operate in high risk areas, for example they may operate in certain high risk physical locations, have frequent contact with public officials or use agents or partners in other jurisdictions.  Another high risk area that charities may be involved in is the giving or receiving of corporate hospitality or gifts.

An additional reason for charities to be concerned is that the corporate offence of failing to prevent bribery will apply to charity subsidiaries and a charity will need to ensure that its subsidiaries have “adequate procedures” in place to prevent bribery.

There are severe consequences for committing a bribery offence.  On conviction the penalty is up to ten years’ imprisonment and/or an unlimited fine for an individual or an unlimited fine for a corporate body.  Moreover directors can be disqualified from acting as directors and charity trustees can be deemed unable to act as trustees.  A charity could also be prevented from applying for public contracts and funding streams.

Exactly what each charity should do in order to prevent bribery varies on a case by case basis but as a general rule a charity should seek to do at least the following to ensure that it and any of its trading subsidiaries have adequate procedures in place:

(i) Carry out a risk assessment and due diligence.   This should involve considering relationships with third parties and any joint ventures.  When entering into new arrangements a charity should also consider what contractual protections should be included in any written agreement.

(ii) Senior responsibility.  Compliance with anti-bribery legislation should be supported and pronounced by those in senior positions and in the case of a charity, its trustees.  It is also recommended that someone is designated to oversee and monitor compliance with anti-bribery measures.

(iii) Anti-bribery policy.  Put in place an anti-bribery policy which covers bribery generally as well as concerns specific to the organisation and monitor compliance with the policy.  Compliance with this policy should be mandatory and the policy should be communicated and available to all.

(iv) Employment contracts and whistleblowing policies should be reviewed and if there is no whistleblowing policy this should be put in place to ensure that staff can easily report bribery and do so confidentially.

(v)  Monitoring.  There must be safeguards to identify any potentially irregular activity and any breaches should be dealt with accordingly.

(vi) Training.  Training and the implementation of the measures is a key part of compliance and should be given to all staff and not just those who join the organisation.

Clearly, despite a natural assumption that charities will not commit bribery offences, the Bribery Act is a real issue with potentially severe consequences for charities in the UK.  In light of this charities should be aware of the risks posed and take action in order to ensure compliance. 

To discuss this issue further or for more information, please contact Richard Hill, Corporate Solicitor on 0161 909 4986 or email richard.hill@pannone.co.uk