Last summer, the FCPA world was treated to its first Princeling hiring prosecution action when the SEC brought an enforcement action against Bank of New York Mellon. BNY Mellon paid a fine of $14.8 million for the hiring of sons and a nephew of two representatives of an un-named sovereign wealth fund. While JPMorgan Chase has garnered the most attention around this issue, probably because of its notorious spreadsheet tracking of son and daughter hires to develop business in China, there are multiple U.S. companies under scrutiny for similar conduct. The FCPA Blog has reported that Credit Suisse, Goldman Sachs, Morgan Stanley, Citigroup, and UBS are all under investigation by the SEC for their hiring practices around the sons and daughters of foreign government officials. BNY Mellon has the honor of being the first company to reach resolution on this issue.

Now it appears U.K.-based HSBC bank is also under scrutiny by U.S. regulators. Last week the Financial Times reported that the bank is “being investigated by the U.S. Securities and Exchange Commission over its Asian hiring practices.” While there was no specific information provided as to the HSBC hiring practices under review, generally the FCPA prohibits companies from improperly influencing foreign officials with “anything of value,” and therefore cash payments, gifts, internships, or anything else used in corrupt attempts to win business can expose companies to an SEC enforcement action.

Financial services providers are recognized to face unique corruption risks when seeking to win business in international markets. Unfortunately, these include the rather traditional form of back scratching: the hiring of children or other close family members of prominent foreign officials. JPMorgan Chase may have received the most press about this practices, with its spreadsheet tying the hiring of family members to specific business opportunities, but this practice is well-entrenched in a large number of companies. The SEC has made clear that it will continue to scrutinize industries that have not been vigilant about complying with the FCPA.

Topics