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Anti-bribery guidance in SME supply chains

The Bribery Act 2010 applies to individuals and all types of companies whether large, small or medium enterprises. Whilst the latter two”have more limited resources of time, money and people to combat bribery and corruption in supply chains, the law still applies and the consequences of non-compliance can be significant.

SMEs should have in place an anti-bribery and corruption policy internally for its staff and with supply chains?to ensure compliance with the law and to promote ethical trading. To draft such policy, as a starting point, an assessment should be carried out to consider the risks exposed to supply chains and how the SME plans to combat it. For example:

” Are the countries in which the SME does business at high risk from bribery and corruption?
” Is the sector that the SME operates its business in exposed to bribery?
” Are contracts with suppliers and other business partners suitable in relation to the payment terms and the services to be provided and is it recorded accurately?
” What would the SMEs” customers expect it to do to counter bribery?

The aim of the policy is to address and counter any risks identified in the assessment. For the policy to be effective and enforceable, it should be communicated to staff by giving training and could even be incorporated into contracts for’supply chains. Behaviour should thereafter be monitored and the policy enforced where required.

It is not always easy to spot bribery or corruption as they are often conducted covertly but the following circumstances should ring alarm bells:

Gifts ??Whilst it is generally accepted that gifts may be given in the course of business to, for example, mark special occasions or encourage good relations, it could also be abused and used as a method of bribery. For example, whilst cupcakes given out to mark a business” tenth year anniversary would be acceptable, an expensive gift given at the time a deal or contract is to be signed would almost certainly not be.

Entertainment ??Similar to gifts, offers to attend lavish entertainment may be perceived as bribes especially if they are frequently offered. This is different to offers to attend events to generally build or maintain business relationships, such as lunch/evening networking drinks unless they are unnecessarily lavish. Again, consideration as to the value, appropriateness and frequency of offers for entertainment should be taken into account.

Favours ?“Is anyone in the supply chain providing services for free or as a favour” Whilst favours may be given as a gesture of goodwill, they can also impose an obligation for a party to return the same and therefore not necessarily act in the best interests of the business.

Contract terms ? Are the payment and/or commission terms transparent and appropriate for the services to be provided It may be suspicious if a party in the supply chain is paying over the odds or providing a vast amount of services for little in return. Also, are there any odd payment structures e.g. payments to an offshore account” Again, this may be suspicious if no valid explanation is given. The terms should be properly recorded and understood.

If there are signs of bribery it is important SMEs address it head on and take action to enforce its policies. For example, termination rights in contracts with agents, suppliers, contractors could be enforced together with any other remedies provided in the contract. Additionally, if the act of bribery involves anyone within the SMEs” business, such as employees, disciplinary procedures should be followed and re-training to other staff may be required.

The risk of not enforcing policies on anti-bribery and corruption could be significant if an SME is found guilty of an offence under the law. An individual found guilty of an offence under the Bribery Act 2010 can face imprisonment of up to ten?years and/or a fine. In addition to this, the company may also be found guilty and receive a fine.

The reputational loss and damage, however, would be immeasurable. SMEs could be blacklisted as other businesses and suppliers may not want to do business with an unethical company. Any contracts or licences could be terminated as a result.

Ayesha Chandegra is a solicitor in the commercial and corporate team at SA Law


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