The first ever contested failure to prevent case gives us a first glimpse into how prosecutors (and in turn a jury) may assess the adequacy of procedures. How would your company’s procedures measure up against this benchmark?
The first contested “failure to prevent” case, in which a company sought to rely on having adequate procedures in place, concluded with a small British refurbishment company being found guilty. Despite now being dormant, it was decided to be in the public interest to try the case and in doing so sends out a strong message that companies of all sizes should be considering whether they have what might constitute adequate procedures in place.
The case is not the typical headline-grabbing events often associated with bribery enforcement action but they give a first glimpse into how prosecutors (and in turn a jury) may assess the adequacy of procedures.
The facts outline that the former managing director of Skansen Interiors paid bribes in two payments to a former project manager at a real estate company totalling £10,000, as well as another that was not paid, to secure contracts worth £6 million for the refurbishment of offices in London.
In its defence, the company argued that it had adequate procedures in place. The jury disagreed and a guilty verdict was returned. Skansen Interiors argued that since it operated a localised, domestic-focused business out of a small, open plan office, consisting of no more than 30 staff, it did not require substantial controls. It explained that while it did not have a separate anti-bribery and corruption policy, it had various policies to ensure that business dealings were conducted in an ethical, open and honest way and not paying bribes was simply common sense. They argued that the financial controls that might be expected at a smaller company were in place and company contracts included provisions in relation to bribery.
While the case did not provide companies with explicit guidance on what constitutes adequate procedures, it at least provides some clarity on what are not adequate procedures.
Some of the many lessons that can be learnt from this particular case include the need for:
In addition, the decision that it was in the public interest to prosecute a company that had since become dormant sends out a strong message that:
The case serves as a stark reminder of the need for companies of all sizes to periodically revisit their anti-bribery and corruption programmes. How would your company’s procedures measure up against this benchmark?
KPMG LLP have a dedicated anti-bribery and corruption team. If you have any questions or would like to discuss, please contact Annabel Reoch.