Friday, July 15, 2011

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.

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