Bribery – a potential bolt out of the blue?

In the run up to the London Olympics and other major events like the forthcoming Queen’s Jubilee, business risk experts at Interchange Solutions are advising hotels and hospitality businesses to be mindful of the UK Bribery Act.

With the London Olympics under 100 days away and The Queen’s Jubilee celebrations even sooner, the hotel and hospitality sectors are relishing the prospect of visitor and tourist bookings for accommodation and other corporate hospitality and revenue earning activities. Major sporting events are an opportunity for individuals to part with their money, especially if they have the chance to witness a truly historical event such as Jamaican sprinter Usain Bolt smashing a 100 metres world record. The Queen’s Jubilee is also expected to attract hundreds of thousands of foreign visitors to the UK.

But with the UK Bribery Act now in force and with the Serious Fraud Office on a mission to find and prosecute wrongdoers, many hoteliers and hospitality businesses will be mindful of the need to stay on the right side of the law as they go about their daily business.

The Bribery Act applies to all companies, regardless of their business sector. The particular sting in the tale is the Section 7 offence of a company not having in place procedures to prevent bribery. The Guidance issued with the Act sets out six principles to help companies proportionately and appropriately implement so-called “adequate procedures”.

“B&Bs and small hotels in the UK are no different to any other small business and are operating in a relatively risk free environment,” says John Burbidge-King, business risk expert and CEO of Interchange. “They would not be expected to have volumes of polices, but they might consider a simple ethics policy that makes it clear to staff that accepting bribes (as opposed to normal tips) and other unethical or criminal behaviour is unacceptable.

“Larger hotels and hotel chains are a in a different field. The sort of risk they might face, for example, is a food or fittings buyer taking backhanders or excessive gifts so that the buyer is influenced to place contracts with a particular supplier; perhaps the promise of lavish hospitality from a beverages supplier to market their drinks in the bar? If there was a subsequent allegation – such as from a competing supplier who refused to pay bribes - those individuals might be investigated under the Act for giving or receiving bribes.”

The hotelier would then be investigated to determine whether it had adequate procedures in place to have prevented the buyer accepting bribes. Under the Act, the burden of proof falls on the company to show those procedures were in place.

If convicted, the hotelier faces fines and the potential imprisonment of individuals, even if they were not directly involved in the act of bribery. It is therefore in the interests of the hospitality industry to consider the nature of its exposure and act appropriately.

“Hospitality by its very nature is a grey area,” says Burbidge-King. “People and companies buy hospitality packages and services to nurture business relationships – it’s a sector that has thrived for many years, especially around major sporting events such as football, rugby, horse racing and others.

“As part of normal business relationship building, hospitality and entertainment are not envisaged as immediate grounds for prosecution under the Act, despite some scare stories to the contrary.”

For businesses wishing to remain on the right side of the law, Interchange has set out some simple rules:

- Keep hospitality proportionate, appropriate and sensible

- One to many is better than one to one.

- Lavish, inappropriate and constant entertainment, focused on a single person or entity might be construed as a bribe if the motive is to unreasonably influence a business decision favouring the giver of the hospitality.

- It is also prudent to check the integrity of key subcontractors and suppliers – you need to know whom you are dealing with.

- An important note to UK exhibition companies is where they might be setting up an exhibition stand abroad. Exhibitions are just-in-time delivery businesses and vital materials can become ‘stuck’ in unfriendly foreign customs. Sometimes a small payment (a facilitation payment) may be demanded to resolve the issue. Such payments are illegal under the Bribery Act.

- Subcontractors - particularly for key events where there is greater chance of unethical or criminal behaviour - should be vetted, sensibly and proportionate to the risks, to ensure that the company knows the background of whom they are dealing with.

For further information about bribery, visit: www.interchange-solutions.co.uk