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When is a gift not a gift ?

The imminent arrival of the UK Bribery Act has set heads spinning, not least because of how far-reaching it might be. Dave Waller looks closely at the Act to see how Channel Island firms might be affected

W Under scrutiny

Given that the Channel Islands suffer little domestic corruption of their own, the biggest danger will come from third parties. “There’s a real risk of getting caught,” says Jon Barclay, a Partner at Guernsey law firm AO Hall. “It could come down to a sales agent in Indonesia, working for a subsidiary, or someone wishing to use your trust structures. Companies will have to be clued up to the risk that someone they have little control over may land them in trouble.” The Serious Fraud Office (SFO) is threatening a zero-tolerance approach to enforcement, with penalties of unlimited fines for companies, and the same plus up to 10 years’ imprisonment for individuals.

Good, you may say. Bribery needs stamping out. Yet the UK has been accused of getting carried away. Not only has it taken the aggressive step of meddling in meetings between, say, a Guernsey

12 December 2010/January 2011 ➔

HEN NEPAL’S government faced a flood of corruption at its main airport last year, it found an innovative solution – clothing the employees in trousers without pockets, so they had nowhere to stuff the bribes.

On a global scale, the bribery issue is going to require more extreme measures – the World Bank says it’s worth $1trn a year. Even the UK is hardly

a bastion of virtue, dropping to 20th place in Transparency International’s latest annual Corruption Perceptions Index. That makes it more crooked than Qatar, apparently.

The UK’s anti-corruption legislation is currently a hodgepodge of laws, some dating back to the 1880s. But the government has been hit recently – by both the credit crunch and the controversy over BAE Systems’ £43bn Saudi arms deal in 2006 – forcing it to drag its laws into the 21st century. The Bribery Act 2010 is law and comes into effect in April 2011. It’s a biggie. The Act scrutinises corporate behaviour in everything from multi-million-dollar government contracts to what qualifies as corporate hospitality – it’s an all-singing, all-dancing attempt to make business accountable. Most controversially, it stretches across borders, defining how any firm with UK ties is expected to do business anywhere in the world. The Act introduces penalties for failing to prevent bribery: so any company with a UK connection whose overseas agents, suppliers or joint venture partners are involved in any form of bribery, anywhere in the world, will be held accountable. So if a third party acting on behalf of a Channel Island company (that has a UK operation) is involved in bribes, then the Channel Island company, and possibly its management, could be held accountable, unless bribery-prevention systems are put in place.

No surprise then that the Act has been labelled Draconian (it is tougher than its US equivalent) or that its practical effects could send businesses into a spin – and not just in the UK. Some say the Act won’t make much difference to the Channel Islands, which already have their own stringent corruption laws, but others fear its application (which extends for the first time into the private sector) is so extreme that even reputable parties will get flayed just for going overboard on a business lunch if the intention of such lunch is to build relationships with a view to garner business. Whatever it brings, the Act is sure to function as a wake-up call to many Channel Island companies.

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