Ben Bruton, Managing Partner UAE, Eversheds international law firm looks at the anti-bribery laws in the UAE.

Few businesses in the Middle East will have failed to notice the steady increase in the number of requests for information, not to mention the sheer amount of documents required by many of their everyday business partners. Increasingly, everything from banking transactions to tender processes require enhanced levels of due diligence.

The cause is the ongoing battle against fraud and financial crime in its various guises.

It is very easy for small and medium sized businesses, as well as their larger counterparts, to underestimate their exposure to this vast legislative and regulatory net. Those that fail to act will increasingly find themselves at risk of sanctions by local and foreign government agencies. Crucially, such formal actions are only half of the story. Financial exposure is likely to lie not only in formal proceedings but in the opportunity cost of business lost in a competitive landscape by failing to adhere to national and
international standards.

In today's global environment, one aspect of financial crime that is particularly relevant to businesses in the Middle East is how anti-bribery compliance procedures operate in a local culture of hospitality. In this regard, it is important to note businesses with international operations or connections will be subject to several different regimes as many countries now have legislation with extraterritorial effect to fight corruption. An act prohibited under national anti-bribery legislation could also violate a number of different anti-bribery laws and the business could run the risk of incurring sanctions from the enforcing authorities of several
different countries.

As an example, although the UAE does not have a standalone anti-bribery law, bribery is prohibited under the Federal Penal Code (the Penal Code). Bribery of a public officer or one in charge of a public service (which may include employees of state-owned and part state-owned companies in addition to conventional government employees) makes the person who receives, offers and facilitates a bribe liable under the Penal Code. The mere acceptance of the bribe by a public servant is a violation, regardless of whether or not the public servant intended to perform the act commissioned by the bribe. Convictions are subject to penalties, including confiscation of the bribe, whether cash or any other benefit, fines and imprisonment.

It is not only the public sector that is covered under law. Any director of a private entity who solicits or accepts a bribe for themselves or another person can be convicted and subject to a fine, confiscation of the bribe and imprisonment.

Additionally in Dubai, there are several laws that complement the Penal Code in prosecuting bribery, alongside the Financial Fraud Law (Dubai Law No. 37 of 2009) that imposes prison sentence of up to 20 years for the receipt of illicit monies gained through, amongst other causes, bribery.

Foreign legislation is often equally important to businesses operating in the Middle East and two relevant examples of countries with extraterritorial enforcement are the United States of America and the United Kingdom.

The UK Bribery Act of 2010 (the Bribery Act) criminalises the promising, offering or giving a financial or other advantage to another person where that person intends that such advantage will bring about an improper performance of a relevant function or an activity by another person or to reward such improper performance. The Bribery Act includes a separate offence for bribing a foreign public official, either directly by an individual or by an entity with a link to the UK, or through a facilitator. The definition of a foreign public official encompasses officers of all branches of government and those which perform governmental functions. Individuals found guilty of violating the Bribery Act can be imprisoned and face a monetary fine. Violating corporate entities can also be subject to an unlimited fine.

Importantly, a new offence has been introduced which makes it an offence for a company to fail to prevent bribery or fail to implement adequate
preventative measures.

In addition to these sanctions, the Proceeds of Crime Act of 2002 can be used to confiscate the bribe and pursuant to the Company Directors Disqualification Act of 1986 any directors of entities who are found guilty risk disqualification and a boardroom ban.

In a similar vein, the US Foreign Corrupt Practices Act (FCPA) of 1977 has a long history of extraterritorial enforcement by both the Department of Justice and the Securities and Exchange Commission (SEC). The FCPA's jurisdiction covers entities (whether US based or foreign) which have registered securities in the US market or which are required to file reports with the SEC under the Securities and Exchange Act of 1934. The FCPA also applies to individuals who are US citizens or residents, entities organised under US law or which have a principal place of business in the US. The FCPA criminalises the bribing of foreign officials, a definition similar to the Bribery Act, as well as political parties and candidates. FCPA enforcement actions have been widely publicised since its inception and a number of cases have originated from violations in the Middle East.

For businesses big and small, the issue of compliance is of increasing importance in the region as various countries continue to developing a legislative framework around the United Nations Convention against Corruption as well as adopting best practice principles from abroad. The UAE is already considered the least corrupt Arab country in the world by Transparency International (the provider of an annual perceived corruption index spanning the globe) and we consider that countries like the UAE are set to continue to benefit from their stricter regimes as companies are more likely to invest and do business in countries where financial crimes are not tolerated.

While the applicable legal framework may differ depending on the exposure to different countries, ignorance of the law is never a defence and prudent managers will take steps to find out which laws apply to their operations, formulate and implement relevant policies and, importantly, ensure that such policies are enforced internally.

© FinanceME 2014