HK firms face tough UK anti-bribery law

PUBLISHED : Monday, 06 June, 2011, 12:00am
UPDATED : Monday, 06 June, 2011, 12:00am


Thousands of Hong Kong firms will soon be subject to a new British Bribery Act, said to be the strictest anti-corruption law in the world. Yet many are either ignorant of the new law or believe it will not affect them.

But the act, effective from July 1, is considered to be even tougher than the United States Foreign Corrupt Practices Act and its reach is far broader than its name suggests.

The law prohibits the crimes of bribery, being bribed, bribery of foreign public officials and failure to adequately prevent bribery by company employees or clients.

Penalties include a maximum 10 years' imprisonment, no limit on fines, confiscation of property and the disqualification of individuals to sit as directors. The law has almost universal jurisdiction, allowing prosecution of individuals or companies with links to Britain, regardless of where the crime occurred.

Ruth Cowley, a partner at law firm Norton Rose, said the act applied to all British citizens and British-registered businesses, and those that did business for British companies.

'Therefore, a UK citizen who lives in Hong Kong or mainland China and pays a bribe in Hong Kong or mainland China will commit an offence under the act,'' Cowley said.

The anti-bribery act not only covers companies operating in Britain but also their operations or branches overseas. For example, the conduct of the Hong Kong or mainland branches of British lenders HSBC Holdings and Standard Chartered will be subject to the new law.

Other Hong Kong or mainland companies can subject to the law if they act or serve as agents for British-based firms.

Gary Seib, a co-head of Baker & McKenzie's Asia-Pacific compliance group, said many Hong Kong and mainland firms were working to upgrade their compliance systems. But not everyone.

'I won't be taking any notice of these sections of the anti-bribery act as they aren't legitimate and can't be enforced outside UK territory,' said Mark Fenlon, a Briton living in Hong Kong who founded Markimage, a design firm and audio-products maker. 'I urge all UK non-residents, working in Asia for Asian concerns, to follow the laws of the country or territory in which they live and work.

'Frankly, the UK government is wasting time and resources on matters that belong to other nations. The UK can't impose legislation beyond its borders.'

There is some truth in what Fenlon said. The British government cannot take direct action against a Hong Kong or mainland company.

'The act will not directly impact the anti-corruption laws of Hong Kong,' said a spokesman for the Independent Commission Against Corruption. 'The ICAC is fully committed to supporting all international efforts to combat corruption. The UK Bribery Act is a far-reaching piece of legislation. Any person, who has a close connection with the UK ... should be aware of the wide extra-territorial implications of the act.'

Seib said British-based companies could be fined or prosecuted if their third-party agents overseas paid or accepted a bribe or did not have proper compliance procedures to prevent bribery.

Some British-based firms have asked if mainland or Hong Kong agents have compliance systems and may stop using them if they do not.

'UK companies are expected to be taking a more rigorous process in choosing their agents,' Seib said. 'These include conducting due diligence to check on the backgrounds and internal compliance systems of their joint-venture partners or acquisition targets.'

Kroll, a commercial investigative firm, sees an opportunity.

'This is a dramatic change in corporate liability, which is a huge concern for UK businesses in Hong Kong and China,' said Colum Bancroft, the managing director for financial investigations at Kroll in Hong Kong.

'Indeed our expanded investigative capabilities are a reflection of heightened concern around the impending UK Bribery Act, as well as stepped-up enforcement of the US Foreign Corrupt Practices Act.

'We're working with an increasing number of corporations and private equity firms to screen their vendors, agents and portfolio firms.'

Steve Vickers, the chairman of FTI International Risk, said companies should have detailed policies on gifts, hospitality and promotional payments for staff. 'They should also set up hot lines for employees and vendors to report alleged corruption,' he said.

Ant-Sinova (Hong Kong) serves as a management consultant for many European clients. 'As an agent for these clients, we were asked to fill in a declaration to make sure we have procedures and training for our staff to prevent corruption or bribery,' chief executive Jennifer Chan. 'I don't mind following the new act because it will make local companies aware of the measures needed to prevent corruption, which would establish a good business ethic. And companies that refuse to make the declaration may find it difficult to secure European or British clients.'

For multinationals, Seib said many had to pay attention to whether their internal compliance systems complied with the law. 'They need to be aware of the differences between the US Foreign Corrupt Practices Act and UK Bribery Act,' he said.

For example, the US law does not consider the so-called 'facilitation payment' as bribery but the British act does. The facilitation payment refers to a small fee paid to an official to speed up a clearing process.

'This is not meant to convince the officer to approve goods that should not be imported but just to speed up the process,' Seib said. 'This may be permitted under the US legislation but is not allowed in the UK.'

Another difference is the US law targets government officials, while the British one covers the public and private sectors.


The maximum jail term, in years, under the new British Bribery Act. Offenders also face

- No limit on fines

- Seizure of assets