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SFO concerned at complaints over gift incentives, lawyer tells Out-Law.com

The Serious Fraud Office (SFO) has received complaints from "ethical corporates" claiming rivals have rewarded client employees with expensive gifts, according to information obtained by an anti-corruption law expert.07 Oct 2011

The companies claim that they have been left at a competitive disadvantage by UK and non-UK firm who have rewarded employees of foreign clients with gifts such as laptops and iPads, according to Barry Vitou, anti-corruption law expert at Pinsent Masons, the law firm behind Out-Law.com. The gifts have been issued without the workers' employers knowing about it, Vitou said his source told him. 

The SFO are "concerned" at the allegations, the source said, according to Vitou. 

Under newly-introduced UK bribery laws companies can be found responsible for bribery carried out by its employees without its knowledge or consent. UK companies and partnerships can be found to be breaking the law no matter where alleged acts of bribery take place. Foreign companies which operate in the UK could also face prosecution regardless of where the alleged bribery has taken place, unless the suspect activities are permitted locally. 

The Bribery Act, which came into effect on 1 July, makes it an offence for businesses to fail to prevent bribery by people working for or on behalf of a business. Companies can escape liability if they show that they have 'adequate procedures' designed to prevent bribery in place. 

Under section two of the Act it is an offence if a person requests, agrees to receive, or accepts an advantage, financial or otherwise, with the intention that they or someone else perform a "relevant function or activity" improperly. Under the Act, the maximum penalty for individuals found guilty of bribery is 10 years' imprisonment and an unlimited fine. 

The SFO is an independent Government department that investigates and prosecutes serious or complex fraud and corruption and is the lead agency for investigating and prosecuting offences under the Bribery Act. It has the power to investigate and prosecute individuals for corrupt or fraudulent activity in England, Wales and Northern Ireland. 

Vitou said that it was "key" that business make "fully transparent" any incentive arrangements. Richard Alderman, SFO director, has previously stated that giving incentives can be justified but that businesses should declare what they issue. 

"Incentive payments are normally designed for commercial reasons and are commercially justifiable," Alderman said in a speech in May. 

"There are risks though. What we have been talking about with corporates is the need for transparency and, in particular, the need to know where the money goes and the fact that it is justifiable. We also talk about the need for a senior person at the corporate's head office to have visibility of what is happening and to be satisfied that what is happening is justifiable," he said. 

Alderman has also previously encouraged 'whistle-blowing' by corporates. 

Vitou said that businesses issuing 'special payment incentive for fast sales' (SPIFFS) or similar incentives should only do so if the gifts or payments are made transparently in writing and with the knowledge of the employer of those receiving the incentive. 

Vitou also recommended that businesses should record the details of any incentive arrangements in line with their corporate policy and should make sure that this complies with the SFO's guidance on corporate hospitality. The SFO has previously said that corporate hospitality is acceptable if it is reasonable and proportionate. 

The SFO has previously told thebriberyact.com, a website operated by Vitou and other anti-corruption lawyers, that when considering if corporate hospitality is reasonable and proportionate it will evaluate company's polices on gifts and hospitality and whether the scale of expenditure was permitted by the company's policy or whether special permission had been sought among senior management.

 The SFO will also consider whether the expenditure was proportionate for the recipient to benefit from, whether the company recorded the expenditure and whether the recipient had been entitled to the hospitality under laws in his/her country, according to thebriberyact.com. 

Evidence of any "unjustifiable" expenses on 'add-ons' for the recipient, such as with regard to travel or accommodation, or that the expenditure "could be related in time to some actual or anticipated business with the recipient, particularly in a competitive context" would strengthen inferences that the corporate hospitality gift was intended as a bribe, the SFO said, according to thebriberyact.com. 

"The incentive policy should set out the details of the SPIFF/incentive programmes including appropriate values and when it is appropriate to give them. Getting it wrong can be expensive," Vitou said.

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