Digital expenses working with the Bribery Act

Digital expenses working with the Bribery Act

By Chloe Middleton
19 July 2018

The UK Bribery Act 2010 introduced a new crime of failure to prevent bribery, which means organisations need to demonstrate they have adequate procedures to prevent corrupt practices. Failure to do so could expose the business and its senior managers to unlimited fines, exclusion from government business or even a jail sentence. The act places real obligations on directors and senior management to demonstrate reasonable and proportionate behaviour particularly around hospitality and entertainment expenses. 

Now, more than ever, Financial Directors need to be implementing systems that ensure employee expense management compliance.

The Serious Fraud Office states "Bona fide hospitality or promotional or other legitimate business expenditure is recognised as an established and important part of doing business. It is also the case, however, that bribes are sometimes disguised as legitimate business expenditure."

The main area in which expenses can suffer a fraud weak spot is around compliance. Manual process can lead to errors and policy enforcement is extremely difficult. 

Five tips for expenses compliance

1. Policy enforcement
You must have a clear and easy to understand policy in place that is accessible to all your claimants at all times. The policy must state what can and what can't be claimed and in what circumstances each item on the policy can and can't be claimed. Enforce limits for corporate entertainment and include a “commitment to bribery prevention” in your online policy information increasing awareness.

The five key criteria set by the SFO (Serious Fraud Office) are that the:
  • company has a clear issued policy regarding gifts and hospitality

  • amount of employee expenditure is within policy limits

  • expenditure is ‘proportionate’

  • company has evidence that all employee expenditures were recorded

  • recipient was entitled to receive the hospitality under the relevant legal jurisdiction.

2. Reporting 
Transparency – powerful reporting on client and customer spend monitors the ethical quality of all expense transactions. An expenses management system supports reporting and auditing and is a cornerstone that demonstrates an organisation has measures in place to support compliance. For legal purposes the use of an expense management system may satisfactorily show that reasonable measures are in place to prevent the funding of bribery from expense accounts.

3. Validation 
How are your claimants evidencing what they've spent and why? You need to evidence a business reason for each and every single line of expense item being reimbursed. Receipts, invoices, PO's, travel bookings are just a few of the hundreds of examples you can show as proof; the important reminders are that these are shown for each and every line that is claimed. It's also a good idea to take a look at the approval process to check that the correct people are viewing and approving the expenses along with validating he supporting document. 
Is your approval process spanning the correct levels of your business? If not, you need to think about who needs to review or simply just have visibility of the expenditure going through expenses. After you've decided your approval sign off route you need to audit this on each expense claim. For example claims for entertainment can be re-routed to senior management for additional validation and increased visibility. 

4. Checks and controls
Mandatory fields for entries relating to entertainment expenditure can be set. Attendee details can be set as required fields on all client entertainment expenditure, ensuring the user stipulates who the user has entertained, why and how much. Each receipt is checked for compliance to your policy, date of claim is checked (not on weekend etc.) and that the mileage claims have been checked against a route planner and that the journey was a legitimate business journey.

5. Secure payment process
Lastly you must show that your payment process can't be tampered with. Think about how many human touch points you have, are people open to bribery/fraud or do you have too many people with access to the export/output?

Sure it's a lot to consider but once you've got on top of the points above you'll be in a much better place to confidently reclaim your business VAT. If you'd like a little help (or a large amount of help) we'd be happy to discuss your processes, weak points or just your day-to-day practices; visit Selenity's managed expenses service Expedite.

Digital expenses guarantees regulatory compliance  whilst reducing corporate vulnerability to human error, fraud and bribery. 

Ensure your organisation and staff are protected by building the six bribery preventions principles into your expenses process. 

The six prevention principles

If your organisation is small or medium sized the application of the principles is likely to suggest procedures that are different from those that may be right for a large multinational organisation. The guidance suggests certain procedures, but they may not all be applicable to your circumstances. Sometimes, you may have alternatives in place that are also adequate. 

1. Proportionate procedures 
A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.

2. Top-level commitment
The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable. 

3. Risk Assessment 
The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented. 

4. Due Diligence 
The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.

5. Communication 
The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.

6. Monitoring and review
The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary

Bribery Act Guidance from the Serious Fraud Office 

Facilitation payments
A facilitation payment is a type of bribe and should be seen as such. A common example is where a government official is given money or goods to perform (or speed up the performance of) an existing duty. Facilitation payments were illegal before the Bribery Act came into force and they are illegal under the Bribery Act, regardless of their size or frequency.

Whether or not the SFO will prosecute in respect of a facilitation payment (or payments) will be governed by the Full Code Test in the Code for Crown Prosecutors and the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. Where relevant, the Joint Guidance on Corporate Prosecutions will also be applied.

If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so. In appropriate cases the SFO may use its powers under proceeds of crime legislation as an alternative (or in addition) to prosecution; see the Attorney General’s guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002.
This statement of policy has immediate effect. It supersedes any statement of policy or practice on facilitation payments previously made by or on behalf of the SFO.

Business expenditure
Bona fide hospitality or promotional or other legitimate business expenditure is recognised as an established and important part of doing business. It is also the case, however, that bribes are sometimes disguised as legitimate business expenditure.

Whether or not the SFO will prosecute in respect of a bribe presented as hospitality or some other business expenditure will be governed by the Full Code Test in the Code for Crown Prosecutors and the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. Where relevant, the Joint Guidance on Corporate Prosecutions will also be applied.

If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so. In appropriate cases the SFO may use its powers under proceeds of crime legislation as an alternative (or in addition) to prosecution; see the Attorney General’s guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002.

This statement of policy has immediate effect. It supersedes any statement of policy or practice on business expenditure previously made by or on behalf of the SFO.

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