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Missing the point on facilitation payments

Written by Guest on Wednesday, 12 June 2013

There needs to be full understanding of the damage caused by facilitation payments on companies and societies. This understanding is lacking in the current debate on a revision of the Bribery Act.


There needs to be full understanding of the damage caused by facilitation payments on companies and societies. This understanding is lacking in the current debate on a revision of the Bribery Act.

There are reports that the Government is considering a review of the UK Bribery Act – in particular the section on facilitation payments – because small and medium-sized resources-resources-businesses are concerned that the costs of compliance are too high. The argument is made that UK resources-resources-businesses should not be disadvantaged when other countries allow facilitation payments to be made, such as the US which allows payments to secure the performance of non-discretionary ‘routine government action’.

If this review is indeed taking place then the Government needs to recognise the corrosive and insidious nature of small bribes. They should not be viewed as isolated minor payments to officials. It is time to understand the damaging effects they have not only on societies but on the ability of companies to instil cultures of integrity and clarity regarding how boards and employees should behave. The Libor scandal has shown the severe consequences of confused approaches to integrity.

Facilitation payments have always been illegal under UK legislation. The Bribery Act has simply raised the attention that companies have to give to them.

The corrosive nature of facilitation payments on societies should alone be enough to warrant companies working hard to eliminate them. Often these payments are not made in isolation but are part of a pyramid of small bribes with systematic collection – at each layer the official takes a share before passing the bribe upwards. The payments feed a culture of bribery at all levels, culminating in large bribes demanded for public projects. Bribery can cost UK companies the chance to win contracts on merit.

For companies, ambivalence on facilitation payments leads to mixed messages to employees and confusion over sanctions by the authorities. At what point does a facilitation payment become a bribe? In Kenya, $2 might be a day’s wage. For a company, $50 is a small payment. In a US case, SEC v. Summers, the defendant settled FCPA allegations stemming from, among other things, a $30,000 payment to an employee of a Venezuelan state-owned oil company to secure overdue payments for services already rendered, because the payment arguably qualified as a ‘routine government action’.

Small bribes may be used to pave the way for larger bribes. In a case in 2008, Westinghouse Air Brake Technologies Corp was found to have made small bribes totalling more than $40,000 over one year. As part of a non-prosecution agreement with the US Department of Justice, the company committed to take remedial steps for the elimination of facilitation payments.

Facilitation payments can also be a major cost for companies, but without commitment to eliminating the payments, who knows what the scale of the activity truly is? One company I spoke to had investigated the issue and found that they were spending some £900,000 a year on small bribes.

Thus, it is time that facilitation payments are addressed properly, not law weakened, recognising their integral role for wider bribery and ultimate impact on the ability of UK companies to compete in fair markets.

What should be done?

For small and medium enterprises, the focus should be on providing better guidance. Prosecutors might have more sympathy about genuinely isolated cases, but systemic payments certainly should not be tolerated.

Provide a way for all companies to report such payments using the AML methods and technology applied for SARs. This would allow companies to know that they were reporting in the spirit of the Bribery Act but more importantly enable the UK authorities to monitor and develop solutions and support for companies to tackle the pervasive ill of facilitation payments.

Peter Wilkinson is an adviser on corporate anti-corruption and has had a long association with Transparency International. He was involved in the development of the Business Principles for Countering Bribery as well as various tools and guidance for the private sector including TI-UK’s guidance to the UK Bribery Act and good practice procedures for corporate anti-bribery programmes.

 

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Read 11280 times Last modified on Tuesday, 24 November 2015 11:47

Guest

The TI-UK blog features thought and opinion from guest writers as well as TI staff. Any opinions expressed by external contributors do not necessarily reflect the views of Transparency International UK.

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