BBA offers insight into Bribery Act

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The British Bankers' Association (BBA) has provided an insight into the industry-specific guidance it will publish for the banking sector to help it to comply with the UK Bribery Act 2010. The guidance, which has been formulated by a special BBA working party, will be released once the Ministry of Justice publishes an update of its long-awaited guiding principles for firms. Richard Cook, director of financial crime at the BBA, was speaking at a City & Financial bribery conference last week. He told delegates that the BBA guidance would be based on a "template" of the government's procedures, although he pointed out that the absence of a definition of "adequate procedures" had created problems for firms. He also revealed that the latest draft of the government guidance expressly stated that firms which failed to follow the Ministry of Justice guidance would not necessarily be automatically found to have "inadequate procedures". He said that the BBA guidance would deal with issues such as governance and corporate culture, with identifying risks to do with geography, markets, products and types of transactions. It would also set out the types of policies firms should have in relation to whistle-blowing, remuneration and hospitality. Cook said that the BBA would also look at due diligence issues and the red flags for which firms needed to remain alert. He said that firms needed to ensure that they established an appropriate "tone from the top". The board should also make a firm commitment that direct and indirect bribery and corruption would not be tolerated. Responsibility for bribery and corruption issues needed to sit at board level and to be replicated within each business area. "Firms must set out clearly the consequences of failure," he said. Governance structure Turning to governance structure, delegates heard that they should consider the following issues: The need to embed bribery risk management in the business. How to ensure that bribery risk covered all activities of the business. How the bank interacted with UK and overseas business. How much autonomy should be devolved. Risk monitoring. The transparency of transactions. The availability of whistle-blowing hotlines. Cook said that the BBA guidance would look at control environments within banks, and said organisations needed to document the controls relevant to bribery risk as well as define their compliance and risk monitoring programmes. Firms would also need to set up approval processes for new business and third-party acquisitions. Cook said that bribery risks should be addressed as part of an organisation's acquisition strategy. Turning to more general areas of risk Cook said that firms needed to look out for the possibility that employees might accept or pay bribes, or that clients would misuse bank facilities to deposit or transfer the proceeds of bribes or misappropriated state assets. He said that this created the potential for significant reputational and financial damage. "It is important that all risk assessments are fully documented and implemented. This is partly to show the Financial Services Authority an audit trail if something goes wrong." The conference heard that firms should involve their human resources departments in the anti-bribery process. Disciplinary procedures needed to be updated to include how bribery was dealt with, while procedures for taking on staff should be reviewed to prevent accusations that roles had been offered to people without due process. One example of where this might be an issue was where the children of wealthy clients were offered internships at firms. Red flags Cook also told delegates that they should be particularly cautious if the following red flags arose: Excessive or disproportionate gifts and hospitality. Involvement with a high-risk jurisdiction, industry, product, transaction, etc. Variations in whistle-blowing reporting trends. Inappropriate payment requests, e.g., payments to a third party. Changes to business partner account details. Business partners who insisted on operating anonymously. Re-location of a business partner to a high-risk jurisdiction. Past allegations or incidents of corruption or illegality. Foreign public officials (including family members) who received compensation from a third party. Business partners recommended by foreign public officials. Parties to the transaction with no substantive commercial role. Cook told the audience that the banking industry did not have a problem with the Bribery Act and was just waiting to see how the legislation would pan out. He added that he had also given up trying to predict when the Ministry of Justice would release its guidance paper. "It is a dark art trying to predict when the guidance is coming out," he quipped.