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U.K. Regulator Hits Besso Ltd. With £315,000 Fine for Anti-Bribery Lapses

Roberta Holland | April 2, 2014

The Financial Conduct Authority (FCA) has fined insurance broker Besso Limited £315,000 for lapses in its anti-bribery and corruption systems, the United Kingdom regulator announced recently.

In its final notice released 19 March, the FCA said the London-based firm failed to take reasonable care in setting up and maintaining adequate systems to counter risks of anti-bribery and corruption, and “operated a weak control environment” regarding its dealings with third parties. The FCA said the infractions occurred between 14 January 2005 and 31 August 2011. The regulator also noted the fines were imposed after Besso received both general warnings and warnings specific to the firm itself.

“Despite receiving two visits from us, and numerous industry-wide warnings, Besso failed to ensure that they had proper systems and controls in place to counter the risks of bribery and corruption in their business activities,” Tracey McDermott, FCA director of enforcement and financial crime, said in a statement. “Firms must play their part in preserving the integrity of the U.K. financial system, including taking all steps necessary to prevent financial crime. Where we find firms failing to do so, we will take action.”

Specifically, the FCA cited Besso for having limited bribery and corruption policies and procedures in place from January 2005 to October 2009. The regulator said the firm introduced written anti-bribery and corruption (ABC) policies and procedures in November 2009, but those failed to measure up in terms of content and implementation.

Besso also did not adequately consider bribery and corruption risks before making payments to third parties, the FCA said.

According to the FCA, Besso failed to conduct adequate risk assessment of third parties before starting business relationships, or conduct adequate due diligence to assess the risks involved in doing business with third parties. The firm was cited for failing to establish and record sufficient commercial rationales to support payments to third parties, or monitor staff  to ensure that each new third party had been subject to the recording of an adequate commercial rationale or adequate due diligence. The firm failed to regularly review its relationships with third parties in sufficient detail to justify an ongoing business relationship. Lastly, Besso failed to keep adequate records of the ABC measures taken in its third party account files.

The regulator said the lapses surrounding the dealings with third parties, with whom Besso shared commissions or helped Besso win or retain business, “gave rise to an unacceptable risk that (payments) could be used for corrupt purposes.”

The FCA said in its statement that it is in the midst of a thematic review of the anti-bribery and corruption systems and controls in place at smaller general insurance brokers. Although some improvements have been made when compared to previous assessments, the regulator said it continues to find weaknesses.

Besso brought its fine down by 30 percent, from an initial £450,000, because it agreed to a settlement early in the investigation, the FCA said.

While the FCA acknowledged Besso took actions to correct the shortcomings, the steps were not effective enough. Actions taken by the firm, according to the FCA final notice, included buying an online risk screening tool, introducing formal policies, and having a law firm review its ABC systems and controls.

The FCA noted that the mid-sized broker did not face high bribery and corruption risks overall, and any measures put into place could have been commensurate with that lower risk. However, the firm failed to meet even that standard, the FCA said.

The lesson from the Besso case is clear, according to the legal experts behind, a blog hosted by Pinsent Masons.

Besso had controls and “even paid solicitors to advise it on them. The FCA view. Not good enough,” wrote attorneys Barry Vitou and Richard Kovalevsky QC. They also pointed to the FCA's cataloguing of the warnings the firm was given. “Its failure to heed those warnings ultimately led to the fine for a system and control failure,” they wrote.