John Cassey, Associate Director, Protiviti UK, writes of facilitation payments: that is, demands from foreign public officials.
Any UK business conducting business overseas will be only too aware of facilitation payments: often small payments or other benefits given to foreign public officials (FPOs) to remove artificial barriers that have been deliberately contrived in order to extort bribes, or to encourage or reward them to perform duties they are required to do anyway.
Facilitation payments are a form of extortion that often occurs in countries where there is a high level of systemic political corruption that filters down through all sectors of public service. Extortion by FPOs is more likely to be part of an organised ring within a government department concerned rather than a rogue employee. Indeed, the FPO may be at risk from his own colleagues and superiors if he does not collect facilitation payments for distribution among his colleagues.
Some governments and legislators (and some corporations) claim that when a company is known not to submit to making facilitation payments to foreign public officials (FPOs), the demands will stop. This may be true in some instances, but from our experience the complete opposite can happen and the company may be victimised by officials if payments are not forthcoming. We are aware of at least one case in which an employee was threatened that if his employer (which took a zero tolerance approach to making such payments) did not continue the payments its employees may find some heroin in their bags next time they came through the airport. Despite vociferous representations to the relevant department and local embassy, nothing was done and the extortion continued.
The legal position on bribery under English law is clear, and facilitation payments are not specifically singled out for exceptional treatment as part of the UK Bribery Act. Indeed, when challenged about facilitation payments, legislators and prosecutors have in the past tended to give mixed and confused responses which is unhelpful to businesses. No-one in government has given any clear guidance other than to say that making these payments is prohibited under the Bribery Act. However, there are situations in some parts of the world where refusing to pay can lead to threats of violence and contrived criminal charges.
The problem for UK companies is that withdrawing from corrupt markets is not always an option, as competitors with less scrupulous morals from jurisdictions that turn a blind eye to facilitation payments will fill the void at the expense of British business.
Unfortunately it is not usually the FPO who extorts payments who faces potential prosecution but the UK business deemed to be paying a bribe – even if it is identified as an extortive payment. The question is what UK companies should do when trading overseas and how they should address this very real problem.
UK businesses can mitigate the risks to their organisations from a fiscal and reputational point of view. In particular, they should consider the need to:
-Continue to do business in challenging jurisdictions where corrupt payments are rife
-Build in better protection from threat of prosecution
-Protect employees and local agents and provide clear guidance
-Make authorities more accountable for dealing with extortive demands by FPOs; and
-Deter FPOs from demanding extortive payments.
Where regular facilitation payments have been historically made which are deemed to be systemic, this needs to be carefully managed. Systemic corruption is more likely to be prosecuted than occasional one-off payments; therefore legal advice should be sought. The aim is to reduce and eliminate making any facilitation payments. This is why it is so important to engage officials in the UK and the local jurisdiction in order to bring pressure to bear on corrupt FPOs, but this is unlikely to happen in the short term so having a clear written process for the company and its employees to follow as described above is essential to protect the integrity of the business.
About the author
John Cassey leads Protiviti’s Litigation, Investigations and Fraud Risk Management (LIFRM) practice in London. John has 35 years’ experience in dealing with corruption and bribery in both government and private sectors. Protiviti LIFRM offers practical guidance, training, bribery and corruption risk assessments and investigation services.
