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FSA Scolds Financial Firms for Lacking Anti-Bribery Controls

Jaclyn Jaeger | March 29, 2012

Despite a long-standing regulatory requirement to mitigate financial crime risk, most firms still have more work to do to implement effective anti-bribery and corruption systems and controls, according to a recent survey by the Financial Services Authority. 

Since August 2011, the FSA has visited 15 firms, including eight major global investment banks and a number of smaller operations, to examine how they mitigate bribery and corruption risk. Overall, the findings revealed, most firms had not properly taken into account FSA rules covering bribery and corruption, either before or after implementation of the draconian U.K. Bribery Act, which prohibits any act of bribery anywhere in the world that involves a British citizen, a company doing business in Britain, or a company listed on British stock exchanges.

“It is imperative that firms have adequate arrangements to control the risks of financial crime,” said Tracey McDermott, FSA's acting director of enforcement and financial crime. “Overall, despite the high profile of the issue, the investment banking sector has been too slow and too reactive in managing bribery and corruption risks.”

The survey also found that nearly half the firms in the sample did not have an adequate risk assessment. The FSA also warned about “significant issues” found in firms' dealings with third parties used to win or retain business.

Additionally, even though many firms had recently tightened up their gifts, hospitality and expenses policies, the FSA found few had processes to ensure gifts and expenses in relation to particular clients or projects were reasonable on a cumulative basis.

Only two firms visited had either started or carried out specific anti-bribery and corruption audits, the FSA noted.

In response to the findings, the FSA will consult on proposed amendments to the FSA's regulatory guidance, Financial Crime: A Guide for Firms, revisions which would apply to all firms within scope of the FSA's financial crime rules, not just investment banks. The FSA is considering whether further regulatory action is required in relation to certain firms in its review.

“Firms across all sectors must have appropriate controls to manage their financial crime risks, whether related to bribery and corruption or otherwise,” said McDermott. She added that the FSA and the Financial Conduct Authority will continue to focus on financial crime risks in this sector and beyond to ensure firms are meeting their legal and regulatory obligations.