The Financial Services Authority (“FSA”) has clarified its approach to UK Anti-Bribery and Corruption (“ABC”) Enforcement.
The FSA is a Regulator with criminal prosecuting powers. It is not a general fraud prosecutor and does not prosecute bribery. As such, the FSA will investigate bribery cases in order to identify failures in the regulated sector, as a result of which it will either:
take regulatory action, or
refer the case to The Serious Fraud Office (“SFO”) or other investigator.
The FSA has consolidated its expectations with regard to ABC systems in firms which it regulates. These are embodied in Chapter 7 of the publication ‘Financial Crime: a Guide for Firms’. This is consistent with, but separate from, the published Ministry of Justice (“MOJ”) Guidance relating to ‘adequate procedures’ under section 7 of the Bribery Act 2010.
When reviewing the adequacy of their anti-corruption policies and procedures, firms within the regulated sector should bear in mind that the scope of the Bribery Act is different from the FSA Rules and Principles.
Before the Bribery Act came into force on 1 July 2011, the FSA brought two significant bribery cases, (Aon and Willis) under Regulatory Principle 3, which requires regulated entities to take reasonable care to organise and control their affairs responsibly and effectively, with adequate managements systems.
Both cases involved systems and controls and governance issues surrounding payments to third parties, rather than direct evidence of bribery. In each case the conduct was mitigated by settlement at an early stage of the FSA’s investigation.
Thematic Review / Industry Sweep
The FSA has been undertaking a thematic review of a range of randomly selected firms within the regulated banking sector, both large and small.
This review, which commenced in August 2011 and is running through to December 2011, is an intensive programme, which involves interviewing front line sales staff and relationship managers, as well as senior managers. It also involves looking at due diligence conducted on high risk third party payments to people such as introducers and consultants and may include overseas visits to UK authorised firms, in order to establish how procedures are working in a global context.
Should this review uncover questionable behaviour, then action will be taken – either via the FSA regulatory route or by referral to the SFO or the police.
The FSA intends to publish a comprehensive report early next year, which will highlight any failings in the systems and will make recommendations for future compliance action.