Fraud and bribery

Fraud and bribery are distinct yet interconnected issues that necessitate proactive measures. It is vital to ensure compliance with the law, prevent staff from engaging in offenses, and effectively manage conflicts of interest. Failing to disclose interests can lead to fraud, bribery, or both, which must be avoided. In this article, we will help you understand fraud and bribery, and offer some tips to tackle them. We will explore the definitions of fraud and bribery, explore preventive steps for protecting your service or company, and highlight key compliance behaviour for both people and organisations.

Contents

1. What is Fraud?

2. What is Bribery?

3. The Bribery Act 2010

4. Ensuring Compliance: The Test of Reasonableness

5. Examples of Fraud and Bribery Offenses

6. Top Tips for Improving Compliance

What is Fraud?

Fraud involves utilising deception to gain an unfair advantage over others, even without financial gain. Examples include falsifying qualifications during job applications, misrepresenting product features, and failing to disclose personal or business relationships that could influence decision-making. Fraud can also occur through acts of omission, such as intentionally withholding information or evading obligations. The defining characteristic of fraud is deliberate dishonesty for personal or competitive gain.

Fraud does not stop with the theft of money. It does not have to involve material gain. To be fraud a person must initiate a process of deception to gain an unfair advantage over others.

What is Bribery?

Bribery refers to offering a financial or other advantage to individuals, both domestically and internationally, to improperly influence their functions or activities. Unlike fraud, bribery typically involves financial incentives but again it doesn’t have to involve money. A bribe could include gifts, access to products or services of value, or some other inducement. Bribery is closely associated with corruption and aims to sway someone’s actions. For instance, offering a bribe to persuade someone to promote one organisation’s product over a competitor’s, thereby depriving others of a fair choice. While fraud and bribery can occur simultaneously, bribery is more commonly linked to corruption, while fraud is akin to embezzlement.

The Bribery Act 2010

The Bribery Act 2010 serves as the regulatory framework for bribery in the UK, encompassing various offenses and defining different types of bribery. It is a key piece of anti-corruption legislation, aligning with the requirements of the 1997 OECD Anti-Bribery Convention. The act criminalises seeking, offering, accepting, paying, or being associated with bribery. Section 7 of the Bribery Act establishes that companies must have adequate procedures in place to prevent bribery, providing a defence against associated persons engaging in such conduct.

Ensuring Compliance: The Test of Reasonableness

Preventing fraud and bribery involves managing conflicts of interest and adopting measures that pass the test of reasonableness. This entails addressing potential issues regarding gifts, sponsorship, and hospitality, which can be perceived as bribery, regardless of intent. Organisations must implement clear systems for declaring interests, ensuring individuals understand their responsibilities and the expected standards of behaviour. A strong organisational culture should emphasise ethical standards from top to bottom.

Examples of Fraud and Bribery

To illustrate the distinction between fraud and bribery, here are examples of both:

Fraud

John, while applying for a job, falsely claims to have a university degree he does not possess. Here John is using dishonesty to gain an unfair advantage. If he got the job and was caught he would be at very real risk of losing the job and finding it difficult to find employment again.

A company advertises a product or service with certain features that it does not actually possess. By providing false information the company is seeking an unfair commercial advantage over competitors and being dishonest with its customers. This could have severe financial and reputational repercussions if this ever became public. The Advertising Standards Authority could also make a public ruling against the company and restrict its advertisements in the future

Sarah, an employee, fails to disclose her personal relationship with a supplier, which could influence her decision-making regarding contracts. This is an example of a conflict of interest because her loyalties may be torn. Sarah should disclose the relationship to her employer so they can make an appropriate decision about how to manage the conflict going forward.

Bribery

James wants to extend the warehouse of his wholesale business and offers money to a local government official to secure planning permission that might not otherwise have been given. This is a crime as offering bribes is illegal under Section 1 of the UK Bribery Act 2010. James could be sentenced to up to seven years’ imprisonment and/or an unlimited fine. There are also unlimited fines for organisations committing the same offence.

Emma, a purchasing manager in the NHS, accepts a financial gift from a supplier in return for awarding them a contract. Emma has committed a crime under Section 2 of the UK Bribery Act 2010, by accepting a bribe. As above the penalty is up to seven years imprisonment and/or an unlimited fine. Companies that offer bribes can also be subject to unlimited fines. In addition there may be counter fraud action related to the misuse of public funds.

Laura, a company executive, pays an oversees custom official to overlook a lack of paperwork for some of her export consignments. Here Laura has committed the crime of bribery of a foreign public official (a breach of Section 6 of the Bribery Act 2010). Similar to the previous cases she could face up to seven years imprisonment and/or an unlimited fine.

It’s important to note that penalties may vary based on the specifics of each case and the discretion of the court. The mentioned penalties represent the maximum penalties allowed under the Bribery Act 2010.

Top Tips for Improving Compliance

To enhance compliance efforts, consider the following tips:

• Regularly conduct conflicts of interest declaration exercises, involving contractors, suppliers, and relevant parties.

• Establish comprehensive counter fraud, bribery, and corruption policies, along with procedures for communicating expectations and handling declared interests.

• Define clear steps for reporting concerns, including whistleblowing arrangements, and ensure accessibility for all employees.

• Include fraud and bribery risks in the corporate risk register, and consider publishing policies on your website to inform potential business partners.

• Consider appointing a Conflicts of Interests Guardian to oversee counter-fraud and anti-bribery systems and act as a point of contact for staff with concerns.

• Provide thorough training to ensure staff understand their legal obligations and expected conduct.

Overall you must have: the right policy framework in place; ways for people to raise a concern about fraud or bribery they may have; protection for those who raise a concern; and ways of tackling bad behaviour that risk undermining the health of your business.

If you want to know more about managing conflicts of interests, and how tackling fraud and bribery form part of that, try one of these courses on Conflicts of Interests. These expert led, five star rated courses will give you this skills and knowledge you need in this important area.

Conclusion

By understanding the distinctions between fraud and bribery, implementing preventive measures, and fostering a culture of compliance, organisations can effectively combat these issues. Compliance with the Bribery Act 2010, along with robust policies and training programs, is crucial for mitigating risks and protecting both reputation and legal standing.