15 March 2017

Presidents topple and executives falter: A refresher on anti-bribery controls

This article was written by Urszula McCormack and Jack Nelson.

Corruption and bribery are live issues. Just last week, South Korea’s President Park Guen-hye was astoundingly removed from office by her country’s Constitutional Court following a corruption scandal. Samsung remains in the news for similar reasons. Closer to home, Hong Kong’s Independent Commission Against Corruption (ICAC) - and its targets - are never far from the headlines.

This article sets out four tips on how you can manage corruption risks.

1. Know your obligations

All businesses, organisations and individuals in Hong Kong are subject to the Prevention of Bribery Ordinance (Cap. 201) (POBO), as well as the common law offence of bribery.

But different sectors have different obligations. Listed companies are required by HKEX to publically disclose their policies and compliance relating to bribery, extortion, fraud and money laundering. Persons licensed by or registered with the Securities and Futures Commission are expected to familiarise themselves with the POBO and follow the guidance issued by the ICAC.

Your employees should also be aware of their obligations. A common area of confusion is whether employees can accept or offer gifts and entertainment from or to people with whom their employer is conducting business. While every case will turn on its own facts, we suggest that the following types of gifts and entertainment are generally ok (green), can be accepted or given with caution (yellow), or should be avoided (red):

 Generally okay      Seminar invitation
Business lunch
Promotional goods
News / client alerts
Social dinner
Low-value courtesy gifts
Drinks at a bar
Free services
Internships, permanent employment and other appointments
High value items, such as jewellery or tickets to a music concert
Cigars and alcohol

Laws and regulations from outside Hong Kong, such as the United States’ Foreign Corrupt Practices Act and the United Kingdom’s Bribery Act, can also apply. Increasingly, we are finding that our clients – particularly in the financial services industry – are adopting very strict rules and, in some cases, a zero-tolerance approach. That is, no gifts or entertainment, irrespective of value, subject to very limited exceptions. Most maintain registers, with or without a monetary threshold, and approval mechanisms for particular scenarios.

Offshore considerations

In a recent alert, our colleagues Justin McDonnell, Jane Menzies and Millie Burnett highlighted how under UK law it is an offence for a business not to have an effective compliance program in place to prevent bribery, while US law imposes criminal liability on businesses that do not accurately maintain their books and records.

Many of these rules (including Hong Kong for that matter) are not limited to businesses domiciled in a particular jurisdiction. Rather, they can be triggered based on business operations, the location in which an advantage is received (or given) etc. This means that extreme care is required before soliciting, accepting, offering or giving any advantage. “Local custom” is generally not a defence.

While not always easy, determining the full range of obligations imposed on your business is essential for meaningful compliance.

2. Know your resources

The ICAC publishes a series of guides, videos and best practice checklists to assist businesses detect and prevent corruption.

Listed companies: The Anti-Corruption Programme - A Guide for Listed Companies is an essential tool for listed companies to comply with Hong Kong’s anti-corruption laws and regulations. Using illustrative examples throughout, the Guide sets out the responsibilities and obligations of directors, management and staff of listed companies.

Businesses dealing with public servants: Businesses that deal with public servants should also refer to the Integrity and Corruption Prevention Guide on Managing Relationship with Public Servants. This guide provides advice on interactions between the public and private sectors, with sections dedicated to navigating potential minefields surrounding the giving of lai see and the cultivation of guan xi, as well as issues concerning customary gifts such as mooncakes.

NGOs and social enterprises: Non-governmental organisations and social enterprises are also covered by ICAC guidance. The Best Practice Checklist on Governance and Internal Control in Non-Governmental Organisations is tailored to such organisations, to ensure that their operations remain above board and that sponsorships and donations are handled correctly.

Free tailor-made advice for all sectors: The ICAC also offers free, tailor-made corruption prevention advisory services and training to companies on request.

Leveraging these resources, alongside professional advice, can help deliver comprehensive anti-corruption programs for your business.

3. Create an effective anti-corruption policy

Every business requires an anti-corruption policy that clearly states the business’ commitment to ethical business practices. But developing an effective anti-corruption policy requires careful consideration.

Off-the-shelf or pro forma policies will rarely be effective. Rather, an effective policy will comprehensively reflect or exceed Hong Kong law and regulations, yet be both accessible and tailored to your specific business.

An effective anti-corruption policy is one that applies across the board to directors, management and staff, as corruption risk can arise at all levels of a business hierarchy. For example, in a recent post on our investigations, financial crime and regulatory insights blog, The Laundromat, we discussed the blowback to Samsung resulting from its Vice-Chairman’s suspicious corporate donations – part of the larger scandal that brought down President Park.

An effective anti-corruption policy should also establish whistle-blowing channels, and clearly provide for the protection of whistle-blowers from any repercussions, including loss of employment.

Businesses that already have an anti-corruption policy in place should review it, internally and externally, on an annual basis to ensure that it remains applicable and relevant.

4. Implement anti-corruption controls

Anti-corruption controls prevent and deter corruption, and should be embedded across your business’s operations.

Implement anti-corruption controls

A common concern is that anti-corruption controls can potentially impede operations. However, through smart design and by focusing on vulnerable operations, these controls can be both efficient and effective.

The South Korean corruption scandal shows how corruption investigations spread, often ensnaring companies, politicians and non-governmental organisations. Proactive compliance is essential to managing the corruption risk to your business – and to avoid becoming a headline when the next scandal breaks.

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