The British Bankers Association (BBA) has this month published its new guidance, to assist those in the banking sector to comply with the Bribery Act 2010 as well as the anti-corruption regulatory requirements of the Financial Conduct Authority (FCA).

We at the BriberyLibrary commend this report to all organisations (not just banks) who are endeavouring to comply with the Bribery Act, whether in the regulated financial sector or not, as the principles are the same, even though some of the commentary is particularly directed at banks.  Although the report is 51 pages, it is very readable, and it is broken down into useful chapters.  All-in-all this is a very useful and practical resource for anyone serious about undertaking Bribery Act compliance for their own organisation.

Here are a few highlights, which we particularly liked:

In “Box 1” on page 16 of the report “Meeting the Standard” the BBA reports:

“It is not possible to be entirely prescriptive regarding the characteristics of systems and controls that meet the requisite “adequate” standard, but they may include some or all of the following:

  • The active and ongoing sponsorship by senior managers;
  • Adequate resourcing of anti-bribery work;
  • Standardisation and consistency across the entire business;
  • Risk assessment procedures and bribery prevention policies for different project or business areas;
  • Budgetary authorisation and audit controls in relation to all financial transactions with a review of such requirements on a periodic basis and regular “stress testing” including a procedure to govern the response to changes in both the internal and external environment;
  • A new business approvals process that incorporates anti-bribery and corruption considerations;
  • A clear, consistent and practical gifts and corporate hospitality control system;
  • Controls and processes for the authorisation and tracking of non “business as usual”, gratuitous or “non-core business” payments such as sponsorships, corporate hospitality and expenses, and charitable and political donations;
  • Due diligence on associated persons and controls over outsourcing with standard procurement and tendering processes;
  • Governance over associates’ relationships including pre and post contractual agreements;
  • Enforcement and incident management policies and procedures;
  • Whistleblowing policies and procedures;
  • Enhanced controls where “cross border” activity is undertaken, with particular consideration to the risks arising from facilitation payments;
  • Staff code of conduct and incorporation of standards into employment terms and remuneration policies that embed a zero tolerance policy;
  • Staff training for all employees within an organisation, with enhanced training provided for those staff who have been assessed as holding higher risk positions;
  • Recruitment processes that screen staff based on our risk assessment of the role in question;
  • Communication of policies and procedures;
  • Monitoring, review and evaluation.”

Chapter 3 sets out the regulatory obligations and other anti-corruption laws applicable to banks (and indeed other industries which are regulated by the FCA).  The BBA reminds us that: 

  • It is important to note that FCA authorised firms are under a separate, regulatory obligation to identify and assess bribery and corruption risks and put in place and maintain policies and processes to mitigate such risks;
  • The obligations of the FCA’s rules and principles in relation to the Bribery Act are not identical to the Ministry of Justice’s guidance.  Banks will need to bear this in mind when reviewing the adequacy of their anti-bribery policies and procedures.  The BBA points out that the FCA focus is wider than the Bribery Act’s scope and will cover behaviour falling within the definition of “financial crime” referred to in SYSC 3.26R and SYSC 6.1.1R;
  • Banks (and indeed other regulated companies) need to be mindful that the FCA can take regulatory action against an entity – and/or relevant persons performing controlled functions – for failing to adequately address the risk of corruption or bribery;
  • Unlike the Bribery Act the FCA does not need to find evidence of corruption or bribery in order to take action.  If the FCA does find evidence of illicit payments or inducements, it can refer the company to the Serious Fraud Office which can then investigate and prosecute.  This is what we call at the BriberyLibrary the “double whammy” of being investigated and fined by both the FCA and the criminal court. 

Chapter 4 deals with top level commitment and governance.  One useful point drawn to our attention by the BBA is that the Bribery Act places a heavy focus on “tone from the top” whereas the FCA has extended this concept to further down the organisation.  In July 2013 the FCA’s chairman stressed that “tone from the top” will in itself be insufficient for improving ethical and behaviour standards and instead the FCA will be increasingly looking towards “tone in the middle” as a way of translating tone into observable, on the ground, actions. 

There is also a useful section entitled “Responsibilities of the Board” which refers to the Parliamentary Commission on Banking Standards having made several recommendations on whistleblowing and that the FCA has indicated its support to the principals, and that it intends to consult on these during 2014.  These include a recommendation that a non-executive board member should be given specific responsibility under the Senior Managers Regime for the effective operation of the firm’s whistleblowing regime.  The board member responsible for the institution’s whistleblowing procedures should be held personally accountable for protecting whistleblowers against detrimental treatment.  This, if it becomes law, will be a significant new development. 

In Box 2 on page 24 there is a list of practical examples of driving “tone from the top” which includes the recommendation in larger companies of appointing “business line champions” for anti-corruption so that each part of the business has someone in it who understands that part of the business thoroughly but is responsible for ensuring compliance with the Bribery Act and other regulatory requirements. 

Chapter 5 deals with risk assessment.  This is an area of compliance which many companies do not handle very well and we commend everyone to read this section in particular, as this is useful in assisting companies on identifying their own risks.  In our view, risk assessment is best done by the people within the business (rather than third parties), as they understand best how they operate. 

The BBA points out that there is no exact science as to what risk assessment should include or how to do it, and that a range of resources are available for organisations to draw upon including the 2013 Transparency International “Diagnosing Bribery Risks – Guidance For The Conduct of Effective Risk Assessment”. 

We fully concur with the BBA’s recommendation that whatever risk assessment method is ultimately decided upon, the risk assessment should be fully documented and updated on a periodic basis, in order to reflect the risks and risk appetite of the organisation. 

At Box 3 on page 30 there is a useful flow diagram of the various stages of a risk assessment. 

Chapter 6 deals with due diligence on associated persons/third parties.  There is useful guidance about conducting due diligence on third parties prior to entering into any formal relationship with them including: 

  • Identifying the associated person in validating their credentials and background;
  • Confirming the suitability of their specific skills and experience for the role that they will be performing;
  • To confirm the business sector of the associated person or activity;
  • To confirm the nature of the service to be performed and to verify that such service is necessary and that any proposed payments or benefits are commensurate with those services;
  • To ensure as far as possible that there are no legal restrictions from dealing with the associated person;
  • To give reasonable assurance about past conduct;
  • To identify potential or actual conflicts of interest and reputational risks in order that they can be appropriately addressed as part of the decision-making process;
  • To identify networks and/or relationships with entities presenting enhanced risk e.g. foreign public officials or politically exposed persons. 

The whole of this chapter is particularly useful reading and Box 4 on page 37 is another flow diagram which is an example of “end to end” risk assessment process for associated persons/third parties. 

All in all, we at the BriberyLibrary consider that the BBA’s guidance is thorough, commendable, and has some great practical tips.  We cannot properly do it justice in this blog post.  We strongly suspect that the largest institutions will already be on top of most of the issues canvassed in the report, but for smaller organisations which are not so well resourced, and those which are not regulated by the FCA, this is a particularly useful resource to refer to when planning and undertaking the various stages of a compliance program.