It’s a trend that’s shifting the compliance goalposts, and, in doing so is keeping more and more executives and directors up at night. It’s the prospect of being found guilty of a ‘failure to prevent…’
A failure to prevent what? Well, that depends on the regulations of the countries in which you operate and with whom you do business.
Simply put, it’s a trend on the part of governments to:
- Enact new regulations and amend existing ones to place the onus of preventing wrongdoing squarely on the employer.
- Hold both the company, as a legal entity, and its leaders, in their individual capacity, criminally liable where offences take place and reasonable steps to prevent such an offence have not been taken.
Regardless of the regulatory obligations and enforcement (or lack thereof) in your country, it’s a trend that is influencing stakeholder expectations. There is another way of summarising the growing reality: the ‘rogue employee’ defence is all but dead in law and is dying fast in the court of public opinion.
It’s not a new concept. The ‘obligation to prevent’ is already well developed in the application of the US Foreign Corrupt Practices Act and well described in the guidelines for compliance with the UK Bribery Act. In many countries, the prospect of individual criminal responsibility sees many CEOs giving strong support to workplace health and safety compliance regulations.
Today, the increasing application of ‘the duty to prevent’ concept to other forms of wrongdoing is transforming the broader regulatory landscape that leaders need to comply with.
Recent and upcoming examples – from South Africa and the UK
An example of a marked shift that South African employers have recently had to get to grips with is that from needing to comply with a code of practice on ‘the management of harassment in the workplace’, to having to comply with an updated code on the ‘prevention and elimination of harassment’ at work.
It’s a good example because just from the change in title of South Africa’s workplace harassment code, the hugely increased obligation on employers is evident. There’s a world of difference in ‘managing’ something compared to being required to ‘prevent and eliminate’ it.
Less evident, but with enormous implications for South African businesses is the amendment to South Africa’s Prevention and Combating of Corrupt Activities Act (PRECCA) to include Section 34 A. This inclusion places responsibility for corrupt acts squarely on the organisation, even if undertaken by its employees and associates (think agents and intermediaries). Unless that is, the employer can show that it has taken all reasonable measures to prevent such acts from occurring.
What are these ‘reasonable measures’ or ‘adequate procedures’ to prevent wrongdoing in and by an organisation and its associates? Well, that has not been made explicit, and so many South African employers are using The Guidance to the UK Bribery Act (2000) in the development of their updated PRECCA compliance action plans.
A significant development in the UK is the new legislation placing a ‘Duty to Prevent Fraud’ on designated UK organisations, which comes into effect later in 2025. We can all expect to hear a lot more about ‘the duty to prevent fraud’ in the months ahead.
Even if you are not a UK company, the new UK law may have significant implications for your fraud prevention practices. Why? If your business is an associate of a UK company that must comply with the law, you can expect your own compliance with the law to become a condition of your continued ‘association’.
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Whether your country’s laws place an obligation on employers to prevent corruption, fraud or harassment, one thing is clear. Having a compliant and effective whistleblowing policy and system in place is becoming increasingly important. Unless you make it easy for people to report their suspicions or knowledge of wrongdoing, you could mistakenly be sending the message that you are not interested in knowing if breaches are taking place.
Amongst the many other actions, you may need to take as part of your ‘prevent and eliminate’ obligation, is ensuring that fraud awareness and anti-corruption awareness training is treated as a priority as high as your statutory health and safety training.
While your legal counsel will be best placed to advise you on the full implications of changing legislation and conduct a gap analysis between current and required practices, at Whistle Blowers Ethics Hotline we are proud to be playing an important role in our clients’ compliance programmes through the provision of our ethics hotline service and through our suite of fraud and corruption awareness programmes.
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Operating from our base in South Africa since 2000, our multi-channel reporting platforms are now serving organisations in 65 countries and on six continents, and our 24/7 live-call information centre fields calls in an ever-increasing number of languages.
You are invited to learn more about us through our website (https://www.whistleblowing.co.za/) and to write to admin@whistleblowing.co.za should you be interested in discussing our service further.
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