Don’t be partners in crime
Landlords must review their anti-corruption procedures and that of their partners or risk a large fine, says Kerry Gwyther, partner at TLT Solicitors
Social landlords could be unwittingly exposing themselves to unlimited fines by misunderstanding what is required of them under the Bribery Act 2010.
While many landlords have an anti-corruption policy in place, the six principles required to ensure compliance with the act - proportionate procedures; top-level commitment; assessment of risk; due diligence; communication; and monitoring and review - are frequently overlooked. As a result, organisations are signing legal warranties stating that they have ‘adequate procedures’ in place to prevent corruption when, in fact, they don’t.
The right defence
Under the Bribery Act, which came into force on 1 July this year, organisations could be liable if someone associated with the business pays a bribe specifically to get, to keep or to gain a business advantage for the organisation. The term ‘associated person’ has a wide definition and may include employees, agents, subsidiaries and even joint venture partners. Organisations will only have a defence if they can show they have ‘adequate procedures’ in place to prevent bribery.
While there is no actual definition of ‘adequate procedures’ within the Bribery Act, the government has published guidance to help organisations understand what constitutes adequate procedures and which outlines in detail the six principles of compliance.
Vet your partners
One of the most important, and often neglected, principles is due diligence. Landlords must vet their business partners to ensure they are genuine; that they will not take or receive bribes and that they can be trusted to act within the law. Depending on the organisation’s risk assessment of that particular ‘associated person’, this could involve verifying identity and professional conduct by doing internet research; making enquiries through known third parties; and by requesting documentary evidence such as client references and professional membership certificates.
When commencing new business relationships, it is likely that organisations will now require contracting parties to warrant they have ‘adequate procedures’ in place, as well as requiring indemnities to back this up, in order to satisfy their own anti-corruption procedures.
Landlords, before committing to such clauses in contracts with their suppliers and business partners, should carefully review their anti-corruption procedures to ensure they take all six principles into account. Organisations are placing themselves at risk of receiving an unlimited fine if they do not and cannot warrant that they have ‘adequate procedures’ in place because an anti-corruption policy, by itself, is simply not sufficient.
So far, there have been no prosecutions brought against social landlords, but the act is still very new and the details of it are easily misunderstood and misinterpreted. Landlords would be wise to quickly get to grips with the act and what it means for their organisation so that they don’t fall foul of the law.