Author: Azizur Rahman
22 December 2016
3 min read
United States prosecutors and regulators recently announced that the bank JP Morgan and its Hong Kong subsidiary is to pay roughly $264 million to settle allegations relating to large-scale bribery.
The allegations related to JP Morgan’s hiring practices in China, where it employed children of Chinese leaders in an attempt to win business. Some of the well-connected candidates employed were unqualified and did the most basic tasks.
It is unlikely that JP Morgan was the only bank hiring children of Chinese decision makers in order to secure deals. The US Securities and Exchange Commission has indicated action against other banks is likely and some have hinted that they may face investigation.
In its defence, JP Morgan had claimed that the hiring of well-connected people was routine in China and that its actions fell into a “grey area’’ regarding bribery.
But prosecutors argued that such employment was linked to concluding deals with Chinese government-run companies; with hired candidates each having a direct link to a business opportunity for the bank.
In dismissing the bank’s “grey area’’ argument, US Attorney in Brooklyn Robert L. Capers, who helped lead the investigation, said: “The common refrain that this is simply how business is done overseas is no defence. This is no longer business as usual; it is corruption.’’
Mr Capers’ statement certainly backs up the widespread belief that practices involving bribery and corruption, which may have been ignored or tolerated in the past, are now likely to lead to prosecution. The authorities worldwide are looking to eradicate bribery – and this is seen no clearer than in the UK’s Bribery Act.
Under the Act, it is an offence for anyone to pay, receive or request a bribe, either directly or indirectly, to have a relevant function performed improperly. There is also an offence of using a bribe to influence a foreign official to gain a business advantage.
A bribe, for the purposes of the Act, does not have to involve money. It can be any kind of advantage, such as a gift, special treatment or favours (which may have applied to what JP Morgan did had the matter been prosecuted by UK authorities).
The bribe can also be in connection with a wide range of activities: to secure or retain a contract, to gain a trading advantage over a competitor or to receive favourable treatment when it comes to the issuing of, for example, a health and safety certificate or permit.
Companies fall foul of the Act if a bribe has been given on its behalf by an employee, agent or other party acting for it.
Under the Act, which came into effect in 2011, a company is liable for the corrupt activities of all its representatives anywhere in the world; from the most senior executives down to lower-level staff, agents and third parties. Its punishments include unlimited fines and up to ten years’ imprisonment for individuals.
The bribery does not have to be carried out in the UK but the person committing it must have a UK connection. Being a British citizen, national, subject or resident or working on behalf of a company that trades in the UK are all classed as a UK connection.
The scope and significance of the Act is huge. The only possible defence to it is to argue to the authorities that you have done all that you could have done to comply with the Act.
But this is not an argument that can be won simply by claiming to have done what you could to prevent bribery. Such a defence is only available to a company that has taken time and effort to introduce the most appropriate compliance procedures. These procedures must take into account the nature of the company’s business, where it carries out its business and all the associated bribery risks.
The geographical areas where it trades, the business sectors in which it operates, its use of third parties and agents, its trading partners and the local laws where it does business must all be considered carefully if a company is to have any chance of recognising all the potential for bribery.
Anti-bribery procedures must reflect all such factors and be implemented, publicised, monitored and reviewed from the top down – they have to be seen as a core part of a company’s way of working by all its staff and associates. Such procedures must also cover all eventualities; for example, the use and payment of extras such as facilitation payments and the scope of corporate hospitality.
Only then can a company argue that it did all it could to prevent bribery.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.