The UK Bribery Act 2010, which came into force on 1 July this year, substantially extends the UK’s existing anti-bribery and corruption laws.
The Act provides the Serious Fraud Office (SFO) with the power to prosecute both:
Under the Act, bribery is defined as giving someone an advantage – financial or otherwise – to encourage them to perform their functions or activities improperly or reward them for having already done so.
How can Australian insurance brokers be affected?
Those with local UK businesses can clearly be caught. However, there are differing views over what the level of activity by foreign companies and individuals that don’t have local UK businesses that will be required before the Act comes into effect. For example, a combination of contacting UK customers, actively marketing products in the UK, and occasionally visiting the UK may be sufficient to catch an Australian entity.
Given this, it would be sensible for Australian insurance brokers with any meaningful operations, activities or connections in the UK to consider this and prepare accordingly.
Summary
The Act creates two general offences covering the offering, promising or giving of an advantage, and requesting, agreeing to receive or accepting of an advantage. It also creates a discrete offence of bribery of a foreign public official.
In addition, there is a new strict liability offence for companies that “fail to prevent” bribery by “associated persons” who perform services for them in business. This can include employees, agents, subsidiaries, and possibly joint ventures, contractors, sub-contractors, distributors or suppliers. The associated person can live or operate anywhere in the world and need not have any connection to the UK. This strict liability offence is subject to a defence of having “adequate procedures” in place to prevent bribery, which involves proportionate procedures, due diligence, communication, training, whistleblowing and monitoring, and review.
The Act does not prohibit reasonable and proportionate hospitality or promotional expenditure. Senior officers can be found guilty of an organisation’s offences if they were committed with their consent or collusion.
If an individual commits an offence under the Act, the maximum penalty is 10 years imprisonment and/or an unlimited fine. It is also an unlimited fine for a corporate offence.
Individuals and businesses can be subject to confiscation proceedings under the Proceeds of Crime Act 2002. Companies can also be disbarred from tendering for public contracts and directors can face disqualification proceedings.
There is also the obvious risk of reputational damage.
Impact on the insurance industry
Inappropriate remuneration arrangements between insurers, brokers and others in the insurance market can all be caught.
UK-based insurers and brokers will obviously be looking at the conduct of entities that are providing services on their behalf overseas – including in Australia – to ensure they don’t breach the strict liability offence.
Insurers and others must clarify whether they can discharge their statutory obligations in order to prevent bribery by relying on the checks and procedures of brokers, agents and/or lead insurers.
The UK equivalent of ASIC, the Financial Services Authority will also be relevant in these matters. While, it does not regulate the Bribery Act, its powers apply where authorised firms fail to adequately address corruption and bribery risks, including risks arising in relation to third parties acting on their behalf.
The FSA recently undertook a review of UK insurance intermediaries in relation to the Act and formed the view that they, “have historically approached this area of their business far too informally (especially higher-risk business) and that, at present, many firms would not be able to demonstrate that they have adequate procedures in place to prevent bribery, as required by the Bribery Act 2010. As such, there is a significant risk of illicit payments being made to win business.”
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