Coming to terms with the implementation requirements of the The Bribery Act

Last week I attended the IMLPO Members' meeting. One of the speakers dealt with implementation issues of the new Bribery Act from a practitioner's perspective.

I found some of the aspects of his presentation rather puzzling as his tone seemed to take the stance of '...well this stuff is all so jolly difficult, I don't know how Parliament expects us to successfully implement these requirements...'

I don't doubt that the speaker was truly conscientious in his views and that he was making statements that he believed would be helpful, but I still got the impression that he was trying to find big reasons why implementation of the compliance regime would be very difficult, and thus might take a lot of time!

One of his first issues where was where in the organisation does responsibility for Bribery and Corruption issues lie? Which department should it reside within, Compliance or Financial Crime.

A straw poll identified that delegates were split approximately 50/50 in their organisations between the two departments. I asked why this should cause such a division of opinion, and no-one could provide a realistic answer.

Let me pose an explanation which I suspect gets somewhere near the truth.

First of all, there can be no doubt that the Bribery and Corruption requirement lies firmly within the responsibility of the Compliance Department. While it is a financial crime, it is primarily an issue of culture, and its best practice compliance should be a joint responsibility between the Compliance Department and the HR Department.

It should be one of the first issues that a new entrant to any firm should be fully versed in the company policies regarding its adherence. It goes to the root of the culture within the organisation and should be a primary responsibility of the Compliance Department.

The problem is that over the years since the introduction of these internal responsibilities, many Compliance Departments have become more '...holier than thou...', and have become a repository of acres of written process procedures, and manifesting a box-ticking mentality. Rarely these days do the pure compliance operatives, particularly in big organisations, think out of the box (nor in so many cases are they encouraged so to do), and to have to suddenly become responsible for something as grubby and tacky as enforcing the Bribery and Corruption policy requirement, for many of them is anathema.

So, in all too many cases, it gets dumped on the Financial Crime Department, which again, in so many cases, is beginning to resemble the '...Department of last resort...' for issues that no-one else wants to deal with. Wrong place to put it, I'm afraid, it needs to become an integral aspect of the firm's culture, and that is where the Compliance Department comes into its own.

Other aspects which seemed to cause concern were a number of small, frankly minor issues which seem to have become escalated into major problems. One such was the issue in Hong Kong and China, and perhaps elsewhere in S.E. Asia, of the giving of very small presents of mostly nominal value, usually only a few pounds in local currency, in small boxes, at culturally important times of the year. In this case I think it was the New Year celebrations.

The speaker became very engaged in the legitimacy of such an act, did it constitute a bribe, how should it be handled? I really couldn't understand for the life of me what the problem was.

It is clear that such an activity is a routine act of simple good manners within the local culture, ( a bit akin to the sending of Christmas Cards to clients and friends) and causes no-one the slightest concern. I can't imagine that the success of huge financial deals ride on the back of such minor pleasantries. Yet this single issue caused significant discussion.

If in doubt, practitioners should simply write this small act of good manners into their compliance policy document, stating that it intends to continue to follow local custom and practice of exchanging a minimum sum of money in this issue, and leave it at that. I can assure anyone that the Director of the SFO is not looking to prosecute people for these kind of de minimis issues, and they should not be causing the level of discussion, concern and debate they seem to be causing some major banks.

However, such discussions are par for the course in these institutions, because it enables them to drag their feet and spend a lot of time debating these minor issues, all the while seeking to persuade the Regulator that they are doing their best to provide compliance.

We saw exactly the same kind of conduct in the aftermath of the introduction of the anti-money laundering legislation, where vast amounts of time were wasted in trying to define an approach to the new Regulations.

The Bribery Act requirements are sensibly enunciated and well written and should not be causing these problems. If you believe that by dragging your heels over implementation of the regulatory requirements, that you are buying yourself time and saving money, think again! Practitioners would do well to read the story in the Daily Telegraph of 11th July which indicates that the US Justice Department is considering prosecuting News International, in the USA, for paying corrupt sums in London to corrupt British policemen.

Take this as an important lesson, if the Brits don't get you for bribery or corruption, it is almost certain that the Americans will, if you are on their radar, or you facilitate bribery payments in dollars.

A morality tale for our times !

The sudden demise of the News of the World is a modern morality tale. It possesses all the necessary ingredients for a great fable of today. News International is an organisation that had begun to believe in its own invincibility, that it was '...too big to fail...' and that if it should ever face a threat to its hegemony, it could always look to its friends (and camp followers) in politics, to keep it out of harm's way. It incited a once-proud journalistic tradition to become sullied with a 'get a story, any story, at any costs' mentality, and it encouraged some of its employees to cut any corner, break any rule of 'best practice', avoid any of the checks and balances, which most decent journalists recognise as being integral to their trade. It dirtied its hands by associating itself with the grubby, dirty rain-coat brigade, men who would stoop to any level to get the information their paymasters wanted. So they would hack the message-boxes of the mobile phones of bereaved parents, murder victims, or the families of the victims of terror, to get scoops and stories which might earn them a few more quid. As one journo recently stated, '...at Wapping you were only as good as your next story...'

Now, it seems that the entire public is up in arms at the degree of the scandals which are emerging from the outcome of this shameful tale. Police investigations are being promised, although many of the most shameful elements, certainly to those of us who were proper police officers in the past, will involve investigating the police themselves, for their part in accepting corrupt payments. We are advised that the watchdog put in place to oversee the activities of the Press will be given more powers, and that a number of people will be sent to gaol, for the part they have played in these scandals.

This story still has a long way to run and we should not be unduly surprised by other revelations that may emerge.

The underlying influence that has marked out this whole sorry saga, is the degree to which, the News of the World had jettisoned any semblance of integrity it might have once claimed to hold. Integrity is the mortar by which we cement together the ethical bricks in the moral walls with which we surround and protect our basic values and norms. Integrity or its absence, is what underpins all our actions and decisions, and determines how we will behave in any given set of circumstances.

In these modern times, where in the world of commerce and business, it seems that anything goes, and should be allowed to happen, as long as the end result is acquisition of a new story, at whatever cost in terms of the erosion of public taste, or the creation of yet more money, even in the most dubious of circumstances, integrity has become a much maligned concept.

It is instructive to observe how, as the standards of journalistic integrity have been undermined by a culture of 'anything goes', the same diminution of banking integrity has become more apparent. Where once, basic rules of conduct ruled the way in which journalists pursued their trade, the same went for bankers.

When every community of any size had at least one if not two financial services providers, each branch manager was required to take responsibility for the money he loaned, and to ensure its return, with interest, in due course. Once the real distinction between retail and wholesale banking disappeared after the 'Big Bang', and banks became the purveyors of financial products of largely dubious value, ignoring their fiduciary duties owed to their customers, then money merely became another commodity to be disposed of at will, regardless of the ability of the recipient to re-pay, because it no longer mattered. Banks had found marvellous new ways of packaging debt so that it could be sold on as investment-grade paper.

When you then paid bonuses of obscene proportions to young salespeople as an incentive for them to deliver even more loan activity, coupled with flaky insurance policy sales, and you had a recipe for disaster. Anyone with half an ounce of common sense could see the likely outcome, everyone that is apart from Gordon Brown and his cronies, who instead of reining in the banks, believed their snake-oil stories and allowed them a 'light-touch' regulatory regime.

During this time, anything remotely resembling integrity was jettisoned, as more and more greedy bastards piled in to the bonus culture offered by the banking sector, and more and more fraud and financial wrong-doing was practised, market prices were manipulated, insider dealing flourished, while the bankers paid themselves bigger and bigger bonuses for operating a failing market.

We are now all paying the price and it will be a millstone round our necks for years to come.

This is what happens when integrity, best practice, sound principles and downright fraud are allowed to become the leitmotif of the market concerned.

Whether in Wapping or Lombard Street, once you jettison the basic principles of integrity and best practice, you open yourselves up to levels of wrong-doing you would once have thought impossible. Wherever you look in our business culture, the '...get the money at all costs...' mentality prevails, and the damage it does to our reputation is immeasurable.

Whether this lesson will get through to the upper floors of the banks is a question no-one can answer!